Blog » Regardless Of “Trumpcare” Outcome, “Obamacare” Being Starved To Death

March 9, 2017Tax & Financial News

Obamacare Vs. Trumpcare

At R&G Brenner, one of our cardinal rules is that we try to remain apolitical. Simply put, the acrimony and division exhibited these last few elections cycles has clearly increased in frequency & intensity. R&G Brenner services thousands of clients across all political spectrums, and it is simply not good business to potentially upset even one of our clients.  However, when speaking about a subject like health care, it is impossible not to dive into politics; and this is really is the crux of the problem:  How did health care become such a political lightning rod?  Furthermore, is a “for profit” health care system sustainable or doomed for failure regardless if one thinks “Obamacare” or “Trumpcare” is better?  These questions are all made exponentially more difficult living in a time when “fake news” has distorted fact from fiction.  Nevertheless, here is an attempt at answering these questions, and why the conclusion will show that regardless of the ultimate outcome of “Trumpcare”, “Obamacare” is under attack from many different angles & being starved; all but ensuring it’s failure.

Obamacare

A quick trip down memory lane:  The year was 2009.  President Obama was greeted with the worst recession the U.S. ever experienced.  Stocks plunged. Banks & Financial firms disappeared. Savings evaporated. Millions lost their jobs. Hundreds of thousands walked away from their homes.  It’s easy to forget how serious the state of the global economy was in.  On the surface, it was puzzling to many pundits and pols alike why Obama’s first order of business would be health care reform as opposed to focusing on the economy.  However, when you look at the data that health care expenditures made up a whopping 16.5% of the U.S. GDP in 2009, health care premiums were skyrocketing every year, millions of Americans could not obtain health care due to preexisting conditions, millions more used the hospital emergency room as their primary health care provider (and many didn’t or couldn’t pay the bills) contributing to the rise in overall costs, it’s not hard to see that health Care reform was not only an economic issue, but also a moral one.  I think everyone would agree that no American should ever have to decide between living under crippling debt…or dying.  Obama decided that he would expend his political capital on Health Care reform; and expend it he did:  Political incitement & fear created a growing chorus of socialism, death panels, birther conspiracy theories, Obama negotiating in “secret”, “ramming it down the American people’s throat” & “keep the government out of my Medicare” (Medicare is government run) which eventually gave rise to the Tea Party movement and ultimately cost the Democrats majorities in both the House & Senate. While the truth of these claims can (and have been) debated ad nausea, what can not be debated is that these were clearly politically effective tactics.  Nevertheless, the Affordable Care Act (ACA) became law and was subsequently upheld by the Supreme Court.  It has been a political lightning rod ever since.

Trumpcare

Fast forward 8 years and enter “Trumpcare”; currently known as the American Health Care Act (AHCA).   On the campaign trail and throughout the early days of his administration, President Trump has called Obamacare a “disaster” and promised to replace it with something “terrific“: more choices, cheaper plans, greater coverage & “insurance for everybody”.  These lofty promises would be considered extremely difficult even with a unified party. However, not much is known about Trumpcare. Why?  Well, because nobody really knows what in it yet as it was negotiated in secret and rammed through committees in the dead of night; all before the non-partisan Congressional Budget Office (CBO) assesses the bill.  This irony is not lost on Democrats or anyone who is watching the GOP engage in the very tactics they howled about when the Democrats were the majority party in power.  But, this type of hypocrisy has become the norm in today’s political landscape. Besides, it is no guarantee that Trump will be able to garner the support he needs from his his own party to pass an Obamacare replacement (and its foolhardy to believe he can rely on any Democratic votes).  Simply put, the steady diet of questionable fear-based claims that were fed to GOP/Tea Party constituents essentially amounted to Obamacare destroying the fabric of American values.  This type of absolutist rhetoric makes compromise not only a dirty word, but down right impossible; not only with bipartisanship, but within the Republican party.  What the recent town halls in Republican districts have shown, is that the fear surrounding an Obamacare repeal and losing health insurance is very real.  While it’s not wise to judge a bill before it’s final form it is very hard to see how Trump will be able to keep his promises of a “terrific” health care plan when his own party is unable to agree & unify behind a legitimate alternative; especially when estimates show up to 10 million may lose their insurance coverage under the AHCA.  This puts the GOP is in a very tenuous position; will they be able to overcome all the roadblocks they have created for Democrats which they now find in their own way and deliver on their promises?  Or will the chickens come home to roost?

A Dangerous Game

Regardless of the fate of an Obamacare replacement, this much is clear:  Republicans are playing a very dangerous game.  “Death panels” never were a real thing.  But if the GOP passes a bill that takes away or makes it impossible for someone previously covered under Obamacare to get insurance, that is playing politics with American’s lives. Trump appears to be discovering that Health Care reform is very complex.  Obamacare is a huge piece of legislation that took months to complete. It became clear after the ACA was implemented, that improvements were needed as the flaws began to reveal themselves.  But at this point, bipartisanship changes to a a law that passed with a single Republican vote was a fantasy.  Rather, Republicans dug in their heals and tried & failed to get Obamacare repealed…62 times.  Republican resistance centered around a) making Democrats own Obamacare entirely; something they proclaimed would be an immediate failure and b) accepted dogma that everything the government does is bad and everything the private sector does is good.  While there are certainly valid reasons to pare down government, the notion that EVERYTHING the government does is bad has proven to be false: Police & Firemen do not ask if you paid your taxes before running into a burning building or replying to a distress call…and nor should they.  But this is the corner the GOP has painted themselves into.  As a result, since Obamacare’s inception, more and more insurance companies have left the insurance exchange markets.  Those that railed against Obamacare have warned for years of a “Death Spiral”; that costs and care would spiral out of control and lead to Obamacare’s demise.  However, doing nothing to improve the law and making it unattractive for insurers to stay in the exchanges was also good way to ensure this self-fulfilling prophesy.  Nevertheless, the “death spiral” didn’t occur; even with this methodical chipping at the foundation which the ACA was built upon, Obamacare still survives…that is until now.

One of the most contentious (and very important) aspects of the ACA is the individual mandate; that those of a certain age must obtain health insurance or pay a penalty on their tax returns for failing to carry insurance.  These penalties gradually increased and maxed out this tax year at $2,085 per family.  This negative-incentive was essential to a) ensuring the pool of insured was large enough and comprised of younger & healthy individuals to make it attractive for health insurance companies to cover higher risk individuals (i.e. those with preexisting conditions) and b) for those that opted to forego insurance, the assessed penalties (which would be reflected on their annual tax returns) would cover the subsides issued to lower-income taxpayers.  Without the individual mandate a “death spiral” would be inevitable.  As such, the IRS very quietly announced the following a few weeks ago:

“…The individual shared responsibility provision requires you and each member of your family to do at least one of the following:

  • Have qualifying health coverage called minimum essential coverage
  • Qualify for a health coverage exemption
  • Make a shared responsibility payment with your federal income tax return for the months that you did not have coverage or an exemption…

This year, the IRS put in place system changes that would reject tax returns during processing in instances where the taxpayer didn’t provide information related to health coverage….However, the Jan. 20, 2017, executive order directed federal agencies to exercise authority and discretion available to them to reduce potential burden.‎ Consistent with that, the IRS has decided to make changes that would continue to allow electronic and paper returns to be accepted for processing in instances where a taxpayer doesn’t indicate their coverage status…”

In other words, the IRS has interpreted Trump’s executive order and will no longer reject tax returns that do not indicate their insurance coverage status.  Furthermore, Trump has indicated he may not to enforce the individual mandate. Critically, the decision to Repeal, Replace or do nothing to Obamacare is irrelevant. Coupled with the insurance companies fleeing the exchange markets, failure to enforce the individual mandate will surely spell the death knell of Obamacare.

Why is this so dangerous?  Well, In the 7 years of fighting tooth & nail against anything short of repeal, Republicans did not offer a single alternative plan until they were forced to a couple of weeks ago.  Trump & the GOP has already set the doomsday clock in motion on Obamacare; all without a viable & workable alternative in sight.  Furthermore,  Trump doesn’t seem troubled by this. During a recent meeting with Conservatives, Trump’s nonchalant message was thus: Don’t worry, if our bill fails, we’ll just blame the Democrats.  Not only is this an extremely cynical approach, its extremely irresponsible.

Regardless of political affiliation, as a human being, this should not feel right. Being in the minority “opposition party” has proven to be politically beneficial; its easy to criticize when you are not expected to offer alternatives. However, now that the GOP is in power, will they bare the level of responsibility expected of the majority party.  Early returns suggest they will not.  Will the GOP be able to shirk the blame for destroying Obamacare and pretending it “failed on it’s own”?  Will the GOP decide it is better to let Obamacare fail then to take the political risk of owning their own replacement?  Is it even possible to sustain a “for profit” health insurance system?  Is the only viable solution a single-payer or “Medicare-for-all” system?  Absent a congressional “Kumbaya” moment of coming together for the greater good of the country (which does not seem possible for the foreseeable future), we may soon get the answers to all of these questions.  The only remaining question is: will the majority party in power risk the lives of thousands—even millions—of Americans to reveal these answers?  This is the most frightening question of all.

  • Ask Your Tax Question

  • This field is for validation purposes and should be left unchanged.
Got A Tax Question? Just Ask!
Special Promotions For You

You Can't Miss This Promotion!

Client Cash Rewards

Get $50 CASH for every new client you refer to R&G Brenner.

View full promotion details.