The Republican-led Senate is rushing to enact President Trump’s tax reform goals this week. On November 16, 2017, the House approved a tax overhaul bill providing $1.5 B in tax cuts, with the largest proportion of those cuts benefiting the nation’s wealthiest individuals. While large corporations also benefit, small businesses are primarily excluded. Called “the most sweeping tax overhaul in three decades” by the New York Times, its impact is reduced federal tax revenues to fund federally-operated “safety net” programs (1).
Meanwhile, the Senate version additionally nullifies the requirement of the Affordable Care Act (ACA) that all Americans purchase health insurance (which is the reason that health insurance companies agreed to participate in the ACA’s insurance marketplace).
Budget Deficit Increase Resulting from Tax Cuts
An analysis by the Congressional Budget Office (CBO) calculated that the House tax cut plan would increase the federal deficit between 2018-2027 by $1.4 T (2). While the Senate version differs from the House-approved plan—in that it preserves existing tax breaks for mortgage interest and medical expenses—the current plan does not alter the likely increase in the overall federal deficit (already totaling $666 B).
Federal tax revenues are utilized to fund emergency public health responses (such as the national response to the Ebola virus outbreak and natural disasters). Federal dollars are also necessary for the following three critical federally-funded programs:
- Social Security – described by the National Academy of Social Insurance as the “foundation of economic security for millions of Americans” (3).
- Medicare – federal health insurance program for people aged 65 and older (and younger people who are disabled and/or have end-stage renal disease [ESRD]).
- Medicaid – a federal-state cooperatively-funded health insurance program for low-income people.
The result of an increased federal deficit will undoubtedly be more pressure to cut federal expenditures, and many Republican legislators have already expressed their desire to eliminate “safety net” programs. Indeed, reducing the deficit has been the chief rationale for supported federal budget cuts by Republican members of Congress. Consequently, passage of the Senate’s tax reform plan will likely lead to an increased effort to de-fund public health and social welfare programs.
Why the “Individual Mandate” Matters
Annual premiums and deductibles are set by private insurers based on the probability of insurance utilization by the health plan’s enrollees. This includes adults covered by Medicare Advantage (Plan C) health plans—and 33 percent of all Medicare beneficiaries choose enrollment in Medicare Advantage, per the Kaiser Family Foundation ).
The sicker the insurance plan’s pool of members, the more likely that these enrollees will decrease the revenue stream of the insurer. Therefore, a broad pool of enrollees—including healthy people who are unlikely to utilize insurance at all—are needed by insurers to maintain financial stability.
While Trump’s recent refusal to pay the ACA-mandated insurer subsidies has caused many insurance companies to raise premiums and deductibles in 2018, an undoing of the individual mandate will likely have profound insurance repercussions.
According to an Urban Institute report, 40 percent of ACA exchange enrollees would not have enrolled if the ACA’s “individual mandate” had not existed (5). This report also concluded that repeal of the “individual mandate” would likewise lead to a mass exodus of insurers from the ACA’s marketplace. Aetna and Humana announced their intentions in 2017 not to participate in the ACA marketplace in 2018; Anthem announced its pull-out from the Ohio marketplace for 2018 in June of 2017 (per the National Public Radio [NPR] website) (6).
Uncertainty among insurance companies is a major factor contributing to their withdrawal from the ACA marketplace. Of course, this withdrawal is just what the Trump Administration and conservative Republicans want in order to justify another attempt at ACA repeal!
Wealth Redistribution through Republican Tax Reform
Huge corporations will undoubtedly benefit from the Republican-proposed tax cuts if they pass. Akin to the industrial monopolies in the early twentieth century, the infusion of even more money into the wealthiest corporations will provide them with greater political clout on the national stage. We have already seen it before to our national detriment.
In tandem with the skewing of wealth even more toward the richest Americans, the interests of millionaires will further influence federal tax and budget policies into the future. However, that does not bode well for small businesses and the middle-class—never mind impoverished people who rely on “safety net” programs to survive.
How Can Public Health be Preserved without Federal Funds?
The real answer is that it can’t. Funds that derive from state and federal taxes pay for the public health infrastructure that protects the US population as a whole from preventable health conditions. The annual FEMA budget is around $13 Million. Prior to Hurricane Irma (that struck Florida in September of 2017), FEMA was almost out of money, and Trump had to request additional funds for FEMA from Congress. Whether disaster aid, community health education, or flu immunizations, public health relies on government funding.
Overall, the tax reform plan supported by Trump and the Republican-dominated Congress reduces the ability of the federal government to generate federal revenue, while simultaneously limiting the government’s financial ability to meet the US population’s future public health needs. It is essentially a plan for federal impoverishment that will hurt us all in the long run.
- Kaplan T, and Rappeport A. (November 16, 2017). House passes tax bill, as does Senate panel. New York Times Webpage: https://www.nytimes.com/2017/11/16/us/politics/house-tax-overhaul-bill.html
- Congressional Budget Office (CBO). (November 8, 2017). Estimated deficits and debt under the Chairman’s amendment in the nature of a substitute to H.R. 1, the Tax Cuts and Jobs Act. Webpage: https://www.cbo.gov/publication/53297
- National Academy of Social Insurance. What is Social Security? Webpage: https://www.nasi.org/learn/socialsecurity/overview
- Henry J. Kaiser Family Foundation. (October 10, 2017). Medicare Advantage. Webpage: https://www.kff.org/medicare/fact-sheet/medicare-advantage/
- Corlette S, Lucia K, Giovanelli J, and Palanker D. (January, 2017). ACA implementation and tracking – Uncertain future for Affordable Care Act leads insurers to rethink participation, prices. Robert Wood Johson Foundation and Urban Institute Webpage: https://www.urban.org/sites/default/files/publication/87816/2001126-uncertain-future-for-affordable-care-act-leads-insurers-to-rethink-participation-prices.pdf
- Rovner, J. (June 7, 2017). Shots; Health News from NPR: If the individual insurance market crashes, can people still get coverage? National Public Radio (NPR) Webpage: https://www.npr.org/sections/health-shots/2017/06/07/531885293/if-the-individual-insurance-market-crashes-can-people-still-get-coverage