Scott Walker's proposed health care plan misses the point
GOP presidential hopeful Scott Walker鈥檚聽聽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聽聽鈥渁 new entitlement program鈥� that he says would add $400 billion-a-year to the budget deficit. But the real problem is that Walker鈥檚 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help low income people, who were most likely to be uninsured prior to the ACA and who would lose coverage if the law is repealed.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鈥檇 help make insurance affordable with refundable tax credits and expanded health savings accounts. Unlike many credits, Walker鈥檚 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鈥檇 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聽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聽聽(assuming premiums under a Walker plan would be similar to what they are in the ACA鈥檚 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鈥檚 highest credit would be lower than the average ACA subsidy.
Of course, the credit can鈥檛 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鈥檛 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鈥檚 what has Jindal鈥檚 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鈥檚 hard to see how more generous HSAs would help that low-wage聽worker. He鈥檚 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鈥檚 an聽聽with Bloomberg TV鈥攖he tax bit starts at about 2 minutes)
Trouble is: Walker鈥檚 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鈥檇 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鈥檒l leave those provisions to the health experts. All I can say is that Walker鈥檚 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.
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