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Scott Walker's proposed health care plan misses the point

Scott Walker's new replacement plan for the Affordable Care Act is already coming under fire. Here is why many feel it won't help the people who need it most.

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    Republican presidential candidate, Wisconsin Gov. Scott Walker, speaks at the Inaugural Basque Fry.
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GOP presidential hopeful Scott Walker’s plan to replace the Affordable Care Act is built on a controversial framework of tax subsidies that Walker estimates would cost about $1 trillion over 10 years.

The plan is already drawing heat from fellow GOP candidate Bobby Jindal, who called it “a new entitlement program” that he says would add $400 billion-a-year to the budget deficit. But the real problem is that Walker’s tax subsidies are too small and too poorly targeted to help low income people, who were most likely to be uninsured prior to the ACA and who would lose coverage if the law is repealed.

The Wisconsin governor says he’d help make insurance affordable with refundable tax credits and expanded health savings accounts. Unlike many credits, Walker’s would be based on age, not income, presumably because insurance premiums rise with age. The credits would increase from $900 for those up to age 17 to $3,000 for those 50-64. They’d be available for anyone without employer-sponsored health insurance

The problem is that someone like Bill Gates (who is 59) would be eligible for a $3,000 credit while a 25-year-old fry cook would get just $1,200. For Gates, the credit would be pure windfall. For the fry-cook, $100-a-month would subsidize a bit less than half the cost of a middle-of-the-road insurance policy (assuming premiums under a Walker plan would be similar to what they are in the ACA’s marketplace).

For context, the Obama Administration estimates the average premium subsidy for those buying on the exchange this year was about $3,100. Thus, Walker’s highest credit would be lower than the average ACA subsidy.

Of course, the credit can’t help with deductibles, which average more than $2,500 for middling insurance. And, like most credits, they come with a cash flow problem. That fry-cook has to pay his premiums monthly, but won’t see cash from the credit until after he files his tax return. In addition, Walker does not say whether his credits would be indexed for medical inflation. If not, their value would decline rapidly as premiums rise with health costs.

Low income people would be better off with a refundable credit than without one. But that’s what has Jindal’s goat. To him, refundable subsidies=aid for all=entitlement, no matter how insufficient.

Walker would also raise contribution limits for HSAs (and allow unused funds to pass to surviving children, parents, or grandparents). But it’s hard to see how more generous HSAs would help that low-wage worker. He’s unlikely to have discretionary income to fund a tax-advantaged health account and would not benefit from the exclusion from taxable income since he already owes no income taxes.

Walker has one more problem: How to make his plan square with his support for base-broadening, rate-cutting tax reform. While Walker has not yet proposed a tax plan, he has said repeatedly that he favors such a rewrite built on the Reagan-era 1986 tax reform. (Here’s an interview he did with Bloomberg TV—the tax bit starts at about 2 minutes)

Trouble is: Walker’s health plan would add hundreds of billions of dollars in new tax preferences to the Code. Not exactly Reaganesque.

Walker does not say how he’d pay for the credits and expanded HSAs. The Congressional Budget Office estimates that repealing the ACA alone would increase budget deficits by $137 billion over 10 years.

There are many other elements of his plan, but I’ll leave those provisions to the health experts. All I can say is that Walker’s main subsidy tool is not likely to help those who most need assistance buying insurance, many of whom would lose coverage following his promised repeal of the ACA.

The post Scott Walker’s Replacement for the ACA Would Leave Many Uninsured appeared first on TaxVox.

The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on taxvox.taxpolicycenter.org.

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