Repeal of Obamacare Helps Ryan’s Plan to Privatize Medicare

Back in 2014, Zachary Goldfarb made the case for why President Obama should be given credit for reducing income inequality.

The key policies Obama introduced include: higher tax rates on the wealthy, new levies on upper-income Americans in the Affordable Care Act and expanded refundable tax credits for the poor. They also include a more generous program of health insurance for low- and moderate-income Americans, achieved through subsidies and expanded Medicaid.

In addition to getting rid of the Bush tax cuts for the wealthy, Obamacare had a redistributive effect: it levied additional taxes on upper-income Americans and provided health insurance to those with lower incomes via Medicaid expansion and subsidies to purchase insurance on the exchanges.

The Republican plan to repeal Obamacare eliminates that redistribution. As I noted yesterday, Howard Gleckman crunched the numbers on how that would affect people at various income levels.

As many have been noting, the impetus to repeal Obamacare could be primarily related to giving the one-percenters a tax break. But for people like House Speaker Paul Ryan, that would be a feature rather than a bug. Those taxes include an additional Medicare payroll tax on high-income individuals and surtax on net investment income. That’s why you see the spike in benefits to the one-percenters on the right side of the chart above.

But both Republican and Democratic observers say the ACA’s taxes on high-income Americans are the GOP’s top target. Repealing the investment tax alone would give a $154,000 average annual tax cut to people in the top 0.1% of income, according to the nonpartisan Tax Policy Center.

Tierney Sneed has documented how the repeal of these (and other) sources of revenue for Obamacare will likely doom any real plan from Republicans for replacement. But that is where this little tidbit from Harris Meyer probably captures what someone like Speaker Ryan is thinking:

Republican experts say the lost revenue from repealing the ACA taxes could be made up by restructuring Medicare into a defined-contribution, premium-support model and turning Medicaid into a capped program of federal block grants or per-capita payments to the states, as Ryan and HHS secretary nominee Dr. Tom Price have proposed. That could pay for whatever tax credits Republicans offer as a replacement for the ACA’s premium subsidies and Medicaid expansion.

If that is the thinking, here’s what the process would look like:

  1. Give the one-percenters a big tax break by eliminating the funding mechanism for Obamacare – thus causing the whole system to collapse.
  2. In the process, Medicare’s trust fund is robbed of the savings included in Obamacare, expediting it’s insolvency.
  3. Promise to fix all of that by privatizing Medicare and block-granting Medicaid to the states.

Of course the whole thing would be based on lies about how it would affect low-income Americans and the elderly. But that is something Speaker Ryan has been doing for a long time now.

Nancy LeTourneau

Nancy LeTourneau is a contributing writer for the Washington Monthly. Follow her on Twitter @Smartypants60 .