Diary

House GOP's Health Care Plan - HR 3400

Did you know that the GOP has a health care bill?   Amazingly, it does.  A fellow RedStater pointed it out to me on another forum.

It’s HR 3400, has been proposed in the House, and goes by the name Empowering Patients First Act. You can find the bill summary on Tom Price’s site or read the full text of it at gov track linked above.

I’ve provided an extremely brief overview below, but I’m confused, and hope some of you can help me understand this a bit better.

I’m not a fan of the Democrat’s health care bills. It seems that I’m not alone.  Like many, I firmly believe that people who can not afford health insurance need some sort of help and with Medicare and Medicaid on the brink of bankruptcy, we’ve got to do something.  I fear that that something will be the Democrats plan, which it seems increasingly will be forced through under the nuclear option.

That’s why I’m at a loss to explain why I’ve only just learned of the Republican’s plan.

The GOP’s bill seems to do what I’d believed was necessary to address the problems in the health care industry, but no one is talking about it. I know watching the Democrats self destruct is good fun, but I can’t help but wonder why the GOP hasn’t pushed this alternative to give us something to root for. By rooting for this bill we could give our elected officials an out from the Democrats plan for the federal government to assume control of virtually every health care plan sold in the US.

I just really don’t understand why we’re not hearing more about the plan.  I hope some of you can explain it.

Anyway, the links are above and my extremely brief overview is below, as well as a few very basic examples of the impact of each plan. If you’re so inclined, please take the time to read the bill. It’s not that long and a much easier read than the Democrats bill.

Please note: I’m just a Mom and not an expert in reading and interpreting legislation. If I’ve misinterpreted anything, please let me know. If my assumptions or math are wrong, please let me know. I’m not an expert, I’m just a Mom trying to sort this all out.

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In summary, the act provides the following:

An enhanced individual market

To bring costs down in the individual market for health coverage, the act allows membership organizations to offer health insurance to their members. The bill also makes money spent on purchasing an individual health care plan deductible from your federal income taxes.  The bill provides qualifying low income individuals and families who may not pay any taxes the option of receiving a refundable federal tax credit of $2000 for an individual, $4000 for a couple, and $5000 for a family.

Increased Affordability for Small Businesses

To bring costs down for small businesses, the plan allows associations – professional, trade, industry – and Chambers of Commerce to provide health insurance to their member groups.

Coverage for those with High Risk Conditions or Pre-Existing Conditions

The bill provides credits and funding to states which create a high risk pool for individuals whose pre-existing medical conditions preclude them for obtaining affordable health coverage.

Other Benefits

The bill also allows individuals and small businesses to shop across state lines for insurance if the insurance in their state is prohibitively expensive (more than 10% above the national average).

The bill allows individuals to opt out of Medicare or their employer sponsored health benefit plan, and gives them a credit to purchase a plan on the individual market should they so desire.

The bill provides for tort reform, physician payment reform, and increased fraud prevention, investigation, and enforcement.

The bill provides loans and repayment options to make medical school a bit more affordable.

The bill requires states to enroll at least 90% of the CHIP eligible children before expanding eligibility to 3 times the poverty level.

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With it’s reliance on expanding pools and tax deductions and refundable credits to provide a public option, Democrats will argue that the bill benefits the rich at the expense of the poor. So I thought a few examples using the overall benefits spelled out in HR 3200, the Democrats plan, and HR 3400, the Republicans plan, might add a bit of clarity.

Any individual or family living at or below 1.33 times the federal poverty level qualifies for Medicaid / SCHIP coverage. That doesn’t change in either bill, so the benefit for those families under either bill is the same.

Children living in a family at or below 2 times the federal poverty level qualify for SCHIP coverage (for a single parent with 2 kids that’s below $36,620; for a Mom and Dad with 2 kids that’s $44,100). Their parents, however, do not. What benefit will be available to Mom and Dad under either plan depends on how much they make, how much their insurance premiums cost, and how much they pay in taxes.

What benefit would a Mom with 2 kids making $30,000 a year receive under both plans?

At $30,000 a year her income is below 2 times the federal poverty level for a family of 3, so her children would qualify for coverage under SCHIP. Because her income is more than 1.33 times the federal poverty level, she would not qualify for Medicaid.

Under HR 3200, the Democrats plan, if her employer provides a health benefit which costs her less than 1/12 her annual income (or $2,500) she gets nothing. If the premiums paid for a health insurance plan provided by her employer or purchased from the federally controlled Health Insurance Exchange exceeded 1/12 of her annual income, she will be eligible to receive additional taxpayer assistance. The benefit would be the extent to which the average of the three lowest costing basic plans exceeded 1/12 of her annual income.

So she’d get a benefit if the average cost of premiums for a basic plan exceeded $2,500 a year, or $208 a month. If her employer offered a less expensive plan or she found a less expensive plan from the Exchange, she’d get nothing. Note that the benefit isn’t calculated from the plan she chooses, but rather the average cost of the three lowest costing basic plans.

Under HR 3400, the Republican’s plan, that Mom would be able to deduct either the cost of any premiums she paid when determining her taxable income or would receive a refundable tax credit equal to the lesser of the premiums she paid or $2,000. She could even split the premiums and use part to reduce her taxable income to 0 and then use the rest as a refundable credit. If her employer offered a plan which she couldn’t afford, she could opt out of her employers plan and enroll in an individual plan and receive the benefit described above.

If this Mom’s premiums are less than $4,500 then the Republican’s plan offers her the greatest financial benefit.

For the Democrats plan to provide this Mom with a greater benefit, because she will be eligible to receive a $2000 refundable tax credit under the Republican plan, the cost of the premiums she pays will have to be at least $4,500 ($2000 more than 1/12 of her annual income).

What about a Mom with 2 kids who makes $60,000 a year – how much would she get?

This Mom makes more than 2 times the federal poverty level, so her kids don’t qualify for SCHIP and she doesn’t qualify for Medicaid.

Under HR 3200, the Democrat’s plan, because her income is less than 4 times the federal poverty level for a family of 3, she may qualify for additional taxpayer assistance, depending on the cost of the premiums she pays.

If her employer provides health insurance and the cost of the premiums she pays for that insurance is less than 1/12 of her income, which is $5,000, then she will not be eligible to receive any taxpayer assistance.  If her employer does not provide health insurance, or the cost of her employer sponsored coverage is more than $5000, then she’d be eligible to receive additional taxpayer assistance.

That assistance will be equal to the excess of the premiums she pays for her employer sponsored plan or a plan she purchased from the Exchange over $5000.  If she purchases a plan from the Exchange, the cost of the premiums used to calculate her benefit is the average cost of the three lowest costing basic plans offered through the Exchange.

Under HR 3400, the Republican’s plan, because her income is more than 3 times the federal poverty level, she is not eligible to receive the refundable credit. If her employer sponsors a plan and she opts out of it, she can purchase health insurance from the individual pool and deduct the cost of premiums for that plan from her federal income taxes. If her employer does not sponsor a plan, she can purchase health insurance from the individual pool and will be able to deduct the cost of premiums for that plan from her federal income taxes.

For this Mom, which plan offers the biggest benefit depends on how much the premiums on her insurance plan are and her tax bracket. According to the Tax Foundation, the average federal income tax paid by families with $60,000 annual income is about 16%.

If her premiums are less than $5,000, no matter what federal income tax rate she pays, the Republican plan provides her with a greater financial benefit.

Assuming she pays 16% in federal income taxes, and her premiums are less than $5,952 a year, then the Republican’s plan provides her with the greatest financial benefit.  If her premiums exceed $5,952, then the Democrats plan provides her with the greatest financial benefit.

What about a Mom with 2 kids who makes $300,000 a year – how much would she get?

Under HR 3200, the Democrat’s plan, she’d pay an additional tax.

Under HR 3400, the Republican’s plan, if her families coverage coverage came from her employer, then she’d get nothing. If she purchased her families coverage from the individual market, then she’d get to deduct the cost of premiums paid on their plan, to the extent of the national average paid for premiums by employers.

For this Mom, the Republican’s plan nets the most benefit. But that benefit is limited to the national average paid for premiums by employers. According to this 2007 survey by AHIP, the average cost of premiums for a non-employer sponsored family plan in 2007 was $5,800. Assuming that $5,800 is still the average cost of premiums for a family plan, then the amount she could deduct when determining her taxable income would be $5,800. Her net benefit, assuming she pay 23% of her income as taxes, would be about $1,300.

What about people with really high premiums?

Just based on the additional assistance provided as reduced taxes or other credits, for people’s whose income is below 4 times the federal poverty level and who have really high insurance premiums, the Democrats plan seems to offer more financial assistance.

But, the benefit provided under the Democrats plan is limited to those making less than 4 times the federal poverty level. For individual making over $44,000 a year or families making over $88,000 a year, under the Democrats plan there will be no additional assistance in purchasing health coverage for them or their children, and cancer or other high cost medical conditions don’t just affect the poor.

Additionally, the Republican’s plan calls for states to create high risk pools for people whose premiums exceed 1.5 times the standard rate for equivalent coverage. I don’t know what benefit these high risk pools will offer in terms of reduced premiums or competition relating to increased availability of high risk plans, but, the benefit in the Republican’s plan isn’t limited based on income level – it’s available to any person and their dependents whose family health conditions result in higher than average premiums irregardless of income level.

Because I can’t put a dollar amount on the Republican’s plan, I can’t say with any degree of certainty which plan offers a greater benefit or at what levels those benefits are offered.  I can say that the Democrats plan will offer you no benefit if you make more than 4 times the federal poverty level and you have high premiums.