This week, the Republicans finally revealed their new health care plan meant to replace the Affordable Care Act (ACA). Already branded “Trumpcare,” the new plan repeals some bad parts of the ACA, leaves the worst part, and replaces the bad parts with worse solutions.
Earlier this week, Peter Schiff released a podcast explaining the differences and offering scathing criticism of the plan, which he says, is just another big-government program with Republican wrapping paper. I will summarize his points here, attach his podcast below, and offer my commentary.
Under Trumpcare, the worst mechanism of the ACA, the prevention of discrimination based on pre-existing conditions, will remain. This prevention presents a significant moral hazard that completely undermines the point of selling insurance.
What if we allowed drivers to purchase car insurance to fix their car after they had been in an accident? What if we allowed customers to purchase and collect life insurance after they were already dead, or had contracted a life-threatening illness? Not only is this immoral, it is completely illogical. This extreme intervention in the free market is the main mechanism driving premiums up. Under Trumpcare, this blunder will remain.
The new plan will, however, remove the ACA’s individual mandate, which penalizes those who do not purchase insurance. The ACA attempted to force young, healthy people to buy insurance they didn’t need in order to subsidize older, more unhealthy consumers. Under the ACA, it was cheaper to pay the tax penalty than it was to buy health insurance, therefore preventing young, healthy people from buying insurance and making premiums rise for those who did buy insurance.
Under the new plan, neither individuals, nor companies will be forced to buy insurance. This is a step in the right direction. However, the Republicans aren’t just repealing this aspect and letting the free market work, they have to “fix” it with more government interventionism.
In order to try and “fix” the problem with the ACA’s individual mandate and encourage individuals to buy insurance, Trumpcare will force insurance companies to charge a 30% increase in premiums for any customer whose healthcare coverage has been allowed to lapse for a period greater than 63 days.
Again, because of the moral hazard inherent in preventing insurance companies from discriminating based on pre-exising conditions, premiums will be so high that it will be cheaper for young, healthy people not to buy insurance, and to pay the 30% increase on insurance after they get sick.
In fact, Peter Schiff jokes that, under Trumpcare, a new insurance product will develop in which customers will buy insurance to reimburse them for their healthcare insurance premiums once they get sick and have to pay the 30% increase, plus the high premiums from the moral hazard. They will basically be buying insurance for their insurance payments.
Additionally, Trumpcare will be removing Obama’s 3.9% tax on capital gains and dividends that were meant to help subsidize the ACA. As a replacement, Trumpcare offers an advance tax credit for purchasing health insurance. Peter Schiff explains that this really is just a welfare program, because you get the credit even if you don’t owe any taxes. He elaborates this point at 15:26 of his podcast:
So the government is giving out these welfare payments. This is a brand new entitlement, every American is entitled to get a check from the government that they can use to buy insurance. Now, one good part of it is, if you don’t spend all the money, right, if you are a family of four and you get $14,000 to buy insurance–if you can find the insurance for $12,000 you can pocket the difference, you can put the $2,000 into a health savings account. So that, in theory, should help Americans to try to bargain for better insurance coverage, cause they can get the money they save . . . Of course these subsidies are only for people who do not get insurance through their employer.
You can listen to the rest of his podcast in the video below:
Now, there are many reasons that healthcare in America is so expensive, but explaining them all would divert from the purpose of this article. Suffice to say, pretty much all of them have to do with government intervention in the free market. We need to let the market function!
Until the idiots in Washington realize this, we are all in for a bad time. Thankfully, Rand Paul, Justin Amash, and Thomas Massie, are spearheading the Republican Liberty Caucus’ resistance to any and all big government healthcare proposals. Let’s hope they are successful.
Thanks for stopping by Liberty Weekly for today! I hope that you now have a better understanding of how Trumpcare and the ACA are working to make healthcare even more expensive for us all.