GOP’s Obamacare Replacement Will Funnel Money from Poor to Rich


Republicans have been working on a plan to repeal and replace Obamacare for years, and this year, they have agreed on a replacement. But according to a leaked draft, the latest version of the plan would funnel federal money away from the poor and toward the wealthy.

Currently it is no longer a matter of “if” the new proposal passes. It is a matter of “when,” since the replacement could be easily passed via a special budget procedure designed to dodge a filibuster. Moreover, president Donald Trump who is poised to repeal the law, said he would reverse and replace the law “simultaneously.”

High-Income Earners Benefiting the Most

The new healthcare proposal will likely change the way health care is funded for patients who don’t receive coverage from their employers. It would also boost the number of people that will benefit from federal subsidies to offset rising premiums. However, it would make the rich benefit the most from federal support.

Obamacare enabled 20 million more Americans to afford health coverage and it did this in two ways. First, it expanded Medicaid to people living just above or under the poverty line. Second, it offered tax credits to middle-income earners to help them purchase insurance. In other words, Obama’s signature healthcare overhaul was a redistributive law, meaning that it took money from the rich and gave it to the poor.

The GOP’s new plan however would change both these mechanisms as it would cut federal funding that states use to provide free insurance to the poor through Medicaid. In addition, tax credits would no longer be income-based. They would morph into a flat credit which the federal government will distribute to all Americans depending on their age, but regardless of their income.

Yet the plan doesn’t stop here in redistributing resources from the lower-income earners to higher-income earners. The federal government would allow people to save money for their health expenditure in tax-exempt savings accounts. And the ones to benefit the most from this will be obviously the rich as they pay more in taxes. A recent report shows that higher-income households are the ones to hold the most health savings accounts, for obvious reasons.

Premiums Would be Still Up

The GOP’s plan doesn’t say a word about a couple of Obamacare taxes on the wealthy but several prior proposals had suggested eliminating them. However, the new health proposal does remove some taxes on the healthcare industry.

Surprisingly, the new GOP plan to replace Obamacare does not alter regulations that Republicans said pushed premiums up. For instance, the requirement for every plan to provide a set package of benefits and the requirement that health insurers charge healthy and sick enrollees the same will remain.

Republicans explained these rules cannot be altered through the budget procedure. Changing these rules require new legislation and 60 Senate votes. This means that Republicans will need at least eight Democratic Senators to approve their plan.

The GOP on the other hand pledged to amend the law after it has passed, as the new bill will have to go through numerous committee hearings in both chambers. But it is highly likely the Obamacare replacement won’t offer insurance for everybody as the president and other Republicans had envisioned.