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GOP Bill Would Repeal Obamacare Taxes And Penalties, Keep Some Subsidies

House Speaker Paul Ryan is leading efforts to repeal and replace the Affordable Care Act.
Allison Shelley/Getty Images
House Speaker Paul Ryan is leading efforts to repeal and replace the Affordable Care Act.

GOP Bill Would Repeal Obamacare Taxes And Penalties, Keep Some Subsidies
GOP Bill Would Repeal Obamacare Taxes And Penalties, Keep Some Subsidies GUEST: Susan Channick, co-director, Institute for Health Law Studies at California Western School of Law

Our top story on midday edition the Republican Congress got a big step closer to their vowed to repeal and replace the affordable care act with the rollout yesterday of their American health care act the Republican plan does not dismantle the ACA also known as Obamacare, all at once, but it does among other things do away with the individual mandate and transforms the government subsidies to help pay insurance premiums with tax credits. Joining the is Susan Channick codirector of the Institute for health law studies at the California school of Law. Welcome. Thank you. Arts healthcare exchanges like covered California going away under this proposal? There will have to be away. I am guessing the exchanges will go away. The health exchange is just a method for people to purchase health insurance. I believe will change is what is available to them, what kind of policies are now available to them, and how these tax credits are going to work. Many people have said the individual mandate -- that part of Obamacare that compelled everybody to be insured that that was the linchpin of the health care plan. How does the Republican plan say it will work without an individual mandate? If you have a health care plan that allows everyone to purchase health insurance regardless of their health status you need some way to bring everybody into the pool otherwise you get the kind of problem of people who are sick buying health insurance and people who are healthy refraining from buying health insurance. The individual mandate was supposed to be cash it was planned as the mechanism for bringing the young and healthy into the healthcare pool in order to sort of cut the risk that only sick people would bring to the pool. The individual mandate has not been as successful as I think was hoped. So the current will probably is not as healthy as it ought to be. Now that it is being eliminated the question is how do we bring the young and healthy into the pool and the Republicans have come up with this idea of really a surcharge on the first year of the cost of a plan of 30% of premium costs. That applies to people coming into the pool late but that also applies to people who do have health insurance and then for some reason have an interruption in their health insurance. They also can be subject to this 30% surcharge that lasts up to one year. That is the idea. We allow people to come in for a 30% surcharge. They will either come in early to avoid the surcharge or perhaps because the surcharge is not that onerous they will come in anyway. Instead of the subsidies, insurance buyers would get refundable tax credits for coverage under the Republican plan. How different is that from the ACA? Actually with the ACA provides for its tax credits. We talk about the mess subsidies but they are premium tax credits. They are refundable and advanced above. We are really replacing tax credits with tax credits. The difference is that the Republican plan tax credits are based on age where as the ACA tax credits are based on income. So there is a rather small range of credits that will be available under the Republican plan starting at $2000 annually for people who are 30 and under and increasing incrementally to $4000 is the maximum for people 60 and older. The credits will work basically the same except for the fact that at least as far as I have seen this credits are not going to be nearly as valuable to particularly older people. People in their 60s who tend to be sicker and therefore for him insurance can be more expensive. They will not be as valuable for those people. They will not be as valuable to people who are not older but who are -- who really have low incomes. From what I understand the Republican plan includes lock grants to states for Medicaid expansion. Could a state like California with a strong healthcare exchanges block like that to help fund a single healthcare system in the state? The Medicaid block grant -- this is a change for Medicaid as an entitlement program to Medicaid as a fixed cost to the federal government type program. Under an entitlement program anybody who is eligible for Medicaid will be covered by Medicaid and the federal government will pay for their portion of the care. Under a block grant type idea the state receives a certain amount of money -- a fixed amount of money based on the number of Medicaid beneficiaries in that state and that is the amount that they will get regardless of what the actual cost of care is. So this is a way for the federal government to shift to the states kind of both the design of Medicaid in their state and the -- bearing any extra cost. So I suppose the states will be incentivized to try to come up with the most efficient Medicaid program possible and some states may actually be good at that. I've been speaking with Susan Channick codirector for the health law studies. Thank you. Thank you.

After years of waiting, it's finally here.

The Republican plan to reshape the Affordable Care Act — what they call "repeal and replace" — kills the requirement that everyone buy health insurance by eliminating the tax penalty for those who don't have coverage. It also makes significant changes in the financial assistance people can receive to buy a health plan.


"Our legislation transfers power from Washington back to the states," said House Ways and Means Committee Chairman Kevin Brady, in a statement. "We dismantle Obamacare's damaging taxes and mandates so states can deliver quality affordable options."

The bill would offer tax credits, refundable in advance, to people with incomes below $75,000. But those credits will be lower in many cases than the subsidies now offered in the ACA.

The bill, which will go through many revisions and challenges, was released late Monday by two House committees, Ways and Means and Energy and Commerce. Members are expected to start voting on parts of the bill Wednesday.

Rep. Frank Pallone, D-N.J., and Richard Neal, D-Mass., the ranking Democrats on the Energy and Commerce and Ways and Means committee issued a joint statement saying the bill would "rip healthcare away from millions of Americans, ration care for working families and put insurance companies back in charge."

The legislation will ultimately need approval by the full House and the Senate before it goes to President Trump for his signature. Until then, most of what is known as "Obamacare" will stay in place.


But it's far from clear that Republicans in the House are unified in their support of the bill. Members of the far-right Freedom Caucus have said they oppose giving tax credits to people who don't pay any federal income tax.

And with only a slim majority in the Senate, only a few Republican defections could defeat the bill there.

Four Republican senators wrote a letter to Majority Leader Mitch McConnell saying they were concerned an early draft of the House plan would not adequately protect people who have insurance through Obamacare's Medicaid expansion. And Sen. Rand Paul was among three conservative Republicans who criticized an earlier version of the bill as "Obamacare lite."

Under the proposed bill, tax credits would start at $2,000 a year for individuals under age 30, rising to $4,000 for those over 60. The proposal, first seen in a Feb. 10 draft of the bill, has been criticized as too meager to cover the full cost of a health insurance plan that provides full benefits.

But the proposed tax credits could potentially pay for insurance that protects only against a catastrophic health event.

They would begin to be phased out at incomes of $75,000 for individuals and $150,000 for families.

To encourage people to buy coverage, the plan allows insurers to charge a 30 percent penalty to people who let their insurance lapse, and then try to buy a new policy.

In states that expanded Medicaid, people who are eligible can continue to enroll until Jan. 1, 2020, and those states would continue to benefit from the federal government paying a greater share of the health costs of those beneficiaries.

The bill includes a couple of provisions to please abortion rights opponents. Tax credits won't be available to pay for insurance policies if they include abortion coverage.

And the bill "defunds" Planned Parenthood, meaning it bars Medicaid from paying for health services provided at the clinics. Medicaid is already barred by federal law from paying for abortions and women's health advocates say the provision will likely make it harder for low-income women to get birth control, screenings for cervical cancer and mammograms, which Planned Parenthood provides.

Several taxes contained in the ACA would be repealed at the end of this year. These include taxes on health insurers, pharmaceutical and medical device manufacturers and a tax on high-cost employer-sponsored group health plans (aka Cadillac plans).

An analysis by Avalere Health and McKinsey of an earlier draft of the bill, which contained many of the same provisions, concluded that it would lead to millions of people losing coverage.

The plan offered by the House Republicans falls short of the outright repeal that has been demanded by more conservative members, including those in the House Freedom Caucus.

That could be due to the shift in public attitudes toward the ACA in recent weeks.

Public opinion has grown more favorable as major changes appeared imminent. A Kaiser Family Foundation tracking poll in late February found 48 percent having a favorable opinion versus 42 percent viewing the law unfavorably. Kaiser says the shift is due largely to a change in the view of political independents, among which 50 percent now view the law favorably.

We will have more on this story as it develops.

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