Summary of the House Republican Plan – “A Better Way”? Part 4: Financing

Summary of the House Republican Plan – “A Better Way”? Part 4: Financing


In most ways, the new plan is same old, same old. It proposes block grants of the Medicaid program to the states, creates Medicare vouchers, adds in a Cadillac benefits tax for employer plans, repeals most but not all of the Obamacare consumer protections and payment reforms. It adds in a flat refundable tax credit for the uninsured. It keeps some consumer protections for those who maintain continuous and uninterrupted coverage and repeals them for most every one else.

Here are the summaries on the financing provisions. I would urge you to read the full 37 pages of text, so you are well-educated in these times of electoral confusion and potential tumult.

Financing: fewer taxes, and much higher deficits

Under Obamacare, half the cost was paid for with increased taxes and half with reductions in plan and provider reimbursements.  Large and small employers were required to offer coverage for their employees or pay a penalty into the Exchanges to help pay for their uninsured employees. Individuals were required to purchase coverage or pay a tax penalty to help finance care and coverage for the uninsured. Taxes included a surcharge on high income individuals, a tax on high cost health plans (Cadillac benefits tax), a tax on health plans, a tax on drug manufacturers and medical equipment manufacturers. Spending reductions included a reduction in the rate of increase in hospital reimbursements and in hospitals’ DSH payments for their care to the uninsured. The growth in Medicare spending would be capped by IPAB.

1.    The House Republican proposal would repeal the employer and individual mandates (shared responsibility).

2.   It would repeal the tax credits for the uninsured.

3.   It would repeal almost all the taxes.

4.   It would retain and modify the Cadillac benefits tax on the most costly employer plans. The modifications include exemption of employee HSA contributions from the tax.

5.    The spending reductions for health plans would be restored.

6.   The spending reductions for DSH would be delayed and modified.  

7.   The growth in Medicaid spending would be capped either through the block grant or per capita cap.

8.   The cost of the optional Medicaid expansion would be shifted to the states.

9.   The future growth in Medicare spending would be capped via vouchers.

The House Republican plan includes refundable tax credits for the uninsured and private individually insured. They do not specify the amount of the tax credit. Assuming the tax credits were $2,500 per person and $5,000 per family (the McCain proposal of 2008 not updated for any inflation in health costs over the last eight years), the proposal would cost $125,000,000,000 annually ($125 billion) for the uninsured and private individually insured (estimated at 50 million individuals together). In other words, this component of their proposal would cost more than Obamacare but with no revenues to cover its costs.

By comparison, the Obamacare legislation as implemented is well under budget as the overall rise in health spending has slowed and Medicaid enrollment has been less than projected due in large measure to large Southern states like Texas and Florida with lots of low income uninsured individuals who have refused to implement the expansion.


Prepared by Lucien Wulsin

Date: July 7, 2016


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Summary of the House Republican Plan – “A Better Way”? Part 3: Employment Based Coverage and Cost Containment