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The Common Sense Blog: From Healthcare to Wealthcare

by William J. Limón last modified May 31, 2017 11:09 PM
Republicans, headed by self-described billionaire Donald Trump, talk big about saving the little guy from government overreach through healthcare mandated by Obamacare. Yet, if you examine their proposals both for healthcare and tax reform, it becomes apparent that they are much more interested in saving money for the rich. Centrists, on the other hand, aim to create programs that work for the nation as a whole.
The Common Sense Blog: From Healthcare to Wealthcare

Trump's plan to take America from Healthcare to Wealthcare. Not smart.

The typical shell games in Washington have taken a new spin. Try, if you can, to keep your eye on the shell with the pea under it as the Republicans keep switching the shells around.

                                   HEALTHCARE

The newly-minted Republican American Health Care Act (AHCA) passed by the House is an attempt to change healthcare as we know it, and, as Trump trumpets, at a lower price than Obamacare.

What’s behind the fine print? According to a report by Margot Sanger-Katz (NY Times: 5/4/2017) there are distinct winners and losers.

WINNERS

  1. Those with high income (over $200k individual/$250k couple). They won’t have to pay the 0.9% increased Medicare payroll tax or the 3.8% tax on investments. (Remember this, as these taxes pay for the Medicaid money for the poor.)
  2. Upper-middle-class without pre-existing health issues: the AHCA raises the income limit for tax subsidies from $48,000 to $150,000. 
  3. Middle-class who are young and have no pre-existing conditions. They would get cheaper insurance and a subsidy from the government.
  4. Those who want no insurance. No individual mandate, not forced to buy.
  5. Those who want more choice. This means buyers won’t have to pay for what is now mandated coverage, and they can get lower premiums with higher deductibles and copay.
  6. Large employers. They won’t be required to provide healthcare for their workers.

LOSERS

  1. The poor. With the cuts in Medicaid (remember the high-income folks get cut taxes) and the reduced subsidies, these citizens are the most likely to lose coverage or to pay more for insurance and copays. In fact, the Congressional Budget Office estimates that 14 million people would become uninsured in 2018, rising to 21 million in 2020, and 24 million in 2026. While some of this change would come from those who decide not to get insurance, most of it would come from those who could not keep insurance because of decreased Medicaid assistance. (CBO Cost Estimate: 3/13/17)
  2. Older citizens. Under AHCA, insurance companies could charge someone age 64 up to 5 times more than someone age 18. Also, lower subsidies would make health insurance costlier for older, middle-class people.
  3. Those with pre-existing conditions. The AHCA will let states waive minimum benefits, and unlike Obamacare, it allows insurance companies to charge these folks higher prices, and this could mean less services. Future federal funding to help out is uncertain.
  4. State governments. States would have to shoulder the burden of Medicaid, and some may balk at doing so further endangering coverage for the most vulnerable in society.
  5. Hospitals. Under Obamacare, hospitals got less Medicaid money because more folks had insurance to pay. Under AHCA, these cuts remain, Medicaid shrinks, and more people will come to the hospital without insurance. Hospitals will be stressed to provide services, especially in poorer communities.

IMPACTS

  1. The rich get richer and, of course, get better healthcare anyway.
  2. The poor get poorer, less healthcare, and pay more. 
  3. Average taxpayers end up paying for the uninsured who need healthcare, and even this is not likely to hurt the rich people, of course.

Do you see the pattern here? The rich and healthier folks do better with lowered taxes and no insurance mandate. The poor and sicker folks do much worse, likely losing their insurance or having to do without other necessities to afford it. Unseen are the higher taxes needed to reimburse states and hospitals for the emergency care of the uninsured. This pattern is repeated in Trump’s tax "reform.”

                                   TAX REFORM

What Trump proposes with his tax reform only expands the distance between the standard of living for the rich and everybody else.

In addition to repealing the Obamacare taxes for high-income earners, Trump and the Republicans want to:

  1. Cut the top individual tax rate from 39.6% to 35% while cutting the business tax to 15%. (BIG PROBLEM HERE as business owners can easily reframe their individual income to be employees of their own company and get the 15% rate.)
  2. Get rid of the Alternative Minimum Tax which is almost entirely meant to ensure the rich pay their fair share by eliminating many deductions.
  3. Eliminate the Estate Tax which applies only to estates over $5.5 million. The Tax Policy Center says this affects only 0.2% of all estates. (CNNMoney, New York, 4/26/17)
Centrists want to do what makes “sense”, not just what makes “cents” either for Big Business or Big Government.

If this plan goes through, "it could exacerbate inequality," said Steven Rosenthal, a senior fellow at the Tax Policy Center. (CNNMoney, New York, 4/26/17) In other words, take from the poor and give to the rich. Robin Hood would roll over in his grave. Trump claims his tax proposals would spur economic growth and that would offset the loss in federal revenue and the increase in the national debt. What it would likely give us is summed up by Edward J. McCaffery, the Robert C. Packard trustee chair in law and a professor of law, economics, and political science at the University of Southern California: “All in, and roughly, this would be a $2 trillion loss (over 10 years) for the lower classes, . . . . It would also be roughly a $2 trillion win for the upper classes, . . . . Voodoo economics, welcome back!” (CNN: 4/26/17)

THE CENTRIST VIEW

Simply put, Centrism is based on what works, not on any set-in-concrete ideology like the two major parties. Republicans always seek to cut government spending, privatize everything, and lower taxes on the rich, believing that it will spark economic growth. This “trickle-down economics” didn’t work when Reagan was president. It didn’t work with the George W. Bush tax cuts (remember the Great Recession?). And, it won’t work now. Why? Because rich people spend money where they can make the most money. Since corporations have a fiduciary duty to benefit shareholders, their commitment to the bottom line of their businesses must be stronger than any patriotism for the country as a whole. Therefore, they will send jobs overseas if manufacturing costs are cheaper. Cutting their taxes will only lead to the loss of healthcare for poor Americans and less support for the middle class. Democrats believe that raising taxes and expanding government services will always help. But that often leads to a huge federal deficit that affects jobs and the economy.

Centrists can take a different view, such as recognizing that 'private sector' vs. 'government control' may be a false choice. What about a better hybrid version of both? In healthcare, where is the real competition for consumers? Why has no one explored a public/private partnership that allows for healthcare services to benefit patients and providers before investors? As for taxes, “wealthcare” needs to be an effort that protects the financial prospects of all Americans not just the rich. 70% of our economy is based on consumer spending. Are the affluent so short-sighted that they cannot see how the wealth of Main Street guarantees the wealth of Wall Street? Tax reform must reflect this imperative and not just lower corporate taxes in the hope that new jobs will be created.

We must have different approaches to both healthcare and taxes than what the Republicans and Democrats propose. Centrists want to do what makes “sense”, not just what makes “cents” either for Big Business or Big Government.

 

 

 

 

 

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