The Rich to the Senate: ‘Thanks Billions!’
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The Rich to the Senate: ‘Thanks Billions!’

The Healthcare Bill Is Harsh to Millions of Americans but Hugely Generous to a Few

David Cay Johnston

The Senate version of the Obamacare repeal and replace shows extraordinary compassion for some Americans.

The Better Care Reconciliation Act of 2017 was drafted in such extreme secrecy that most Republican senators were not allowed to see it until Thursday. But now that the 142-page bill is in the sunlight, I see that the bill is filled with generosity toward four basic groups:

  • Investors so wealthy their annual capital gains and dividends combined are more than $125,000 (for married couples $250,000), a group composed almost entirely of people with incomes of $1 million or more.
  • Photo illustration by David Pybas for

    The top 5% or so of workers, those making more than $125,000, double that for married couples.

  • People who get their tans artificially by relaxing in tanning beds.
  • Health insurance companies, which would be freed to use pricing to discourage people with preexisting conditions from buying insurance. That reduces the risk of paying medical bills for people and thus should increase profits.

The first two groups now pay a surtax to finance the Patient Protection and Affordable Care Act, a.k.a. Obamacare. The revenue pays for healthcare for the millions of Americans who previously lacked insurance or were not eligible for Medicaid.

Repeal of those taxes is worth at least $590 billion and perhaps much more in the next 10 years to these high-income taxpayers. Because the tax cuts would be financed with cuts in health benefits to the poor, this is what Republicans often call a socialist redistribution scheme–though in this case, the redistribution is from the poor and sick to the rich and mostly healthy.

For investors, the Obamacare tax is 3.8 percent on top of other taxes for investment income above the thresholds. This tax is paid almost entirely by people making more than $1 million per year, my analysis of the latest IRS Table 1.4 shows. Roughly one in 500 taxpayers is affected, with most of the burden born by the one 8,900 taxpayers whose income averages $30 million annually.  The investment tax can raise their tax burdens by as much as 25 percent (3.8 percentage points on top of 15 percentage points).

For workers, there is an Obamacare surtax of nine-tenths of one percent on wages above the threshold of more than $10,000 in monthly gross earnings.

Not only would those two taxes be repealed, but they would be wiped out retroactive to the start of 2017.

That is a curious and uselessly generous provision because current and future changes in tax law cannot change past behavior. The wealthiest investors knew when they sold shares at a profit (capital gains) or bought stock paying dividends that they would owe the surtax. That makes the retroactive appeal a pure gift, an act of tax compassion rarely seen in a Congress focused on cutting spending in children, the disabled, the elderly, the poor and the sick.

The tanning bed tax would also be repealed, but not until next January. A study of how many white people let their skin go pale until next January just to avoid the tax would be illuminating.

There is a price to be paid for these tax cuts, of course. The burden would fall on more than 20 million Americans who would be kicked out of Medicaid or face health insurance premiums so high that they cannot afford coverage.

Outside the Senate office of Mitch McConnell, the Kentucky Republican in charge of drafting the bill in secret, several dozen disabled people showed up Thursday to plead for their Medicaid to be kept intact. People in wheelchairs were pushed out of sight and those on crutches carried away by Capitol security. There were no reports of insurance industry lobbyists suffering a similar fate, but of course, they don’t have to demonstrate outside McConnell’s office because he invites them in.

The McConnell bill would instantly cut funding for Medicaid subsidies under Obamacare. States would get $15 billion a year to “fund arrangements with insurers to address coverage and access disruption and respond to urgent health care needs” in the states.

That’s legalese for cutting the nation’s largest health care program by so much that it sends a clear signal to those not well enough or educated enough or diligent enough to fight for coverage: get sicker until you die.

Then in 2020 and 2021 this drop-in-the-bucket funding would be cut a by a third to just $10 billion. Of course, by then there will be more Americans and more of them will need Medicaid. And no one expects healthcare costs to fall.

But when you just put drop in a large bucket who’s going to notice the drop at all, much less if the drop gets a third smaller?

The bill offers a compassionate solution, however, to inadequate government funding for Medicaid. Insurers would be freed under the bill to sell people health insurance policies that cover some conditions, but not others. And they could sell catastrophic-only coverage. That means a falling tree like that paralyzes you from the waist down might be covered, but not if it’s a falling ceiling fan or if your legs remain sturdy enough to walk with crutches. Then you might get zip.

Under the bill knowing just which medical conditions are insured and which are not would be a matter of personal responsibility. People who fail to read the legalese in their insurance contracts or do not know medical terminology would be held responsible for their failure to discern the fine print.

The bill would also charge insurance premiums based on age. People in their late 50 through 64 might have to pay every sixth dollar of their income for health insurance or go without.

The bill’s predictable result, if enacted, would be more appeals for charity. By the way, this kind of charity — gifts to individuals – is not tax deductible.

Half of GoFundMe campaigns are pleas for help pay medical bills, according to David Himmelstein and Steffie Woolhandler, health policy experts who are physicians.

Now remember this: Candidate Trump promised in 2015 to “save Medicare, Medicaid, and Social Security without cuts.” He made that promise over and over and over for two years.  Trump said people had taxes for the benefits and deserved them.

But then the House version of Obamacare repeal passed, Trump called the Republicans who voted for it up to the White House for a photo op and called the bill “terrific.”

Later, after someone explained to Trump that the bill lashed Medicaid, he turned on the House GOP, calling their bill “mean.”

The Senate bill is even meaner than the House bill, though it delays some of the meanness until 2020 and beyond. Will Trump sign it?

Featured video grab by Jordan Uhl.

June 23, 2017