Pharmaceutical companies and the wealthy would enjoy a massive tax break if federal courts strike down the Affordable Care Act (ACA), according to a new analysis released on Monday. The report comes as Democratic presidential contenders debate Medicare for All proposals that would raise taxes on the wealthier earners and big businesses to pay for universal health coverage.
Any day now, the Fifth Circuit Court of Appeals is set to rule on Texas v. United States, a broad challenge to the ACA brought by Texas and 17 other GOP-led states and backed by the Trump administration. More than 20 million people stand to lose health coverage if the lawsuit ultimately succeeds, eliminating billions in health care spending that currently expands coverage for lower- and middle-income people and patients with pre-existing conditions.
Striking down the ACA would also eliminate certain taxes paid by pharmaceutical companies and the wealthy, according to the Center for Budget and Policy Priorities. A majority of the tax cuts would go to households with yearly incomes over $1 million, to the tune of $46,000 apiece, for a total of roughly $34 billion. The top 1,400 highest-earning taxpayers — who enjoy incomes exceeding $53 million — would benefit from tax cuts totaling roughly $3.8 billion.
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Tossing out the ACA would also be a boon for pharmaceutical companies, which would collectively pay $2.8 billion less in taxes each year. Seniors would pay more for drugs because reforms to Medicare’s prescription drug benefit program would be reversed. Drug prices in the U.S. are already the highest in the developed world.
In other words, overturning the ACA would effectively create a massive wealth transfer from the bottom of the economic ladder to the top. Federal health programs would lose funding in 33 states, causing about 4.5 million people to lose health insurance, according to the analysis. Thirteen million more could lose coverage provided by the ACA’s expansion of Medicaid, the federal insurance program for low-income people.
“While the Affordable Care Act is not the final goal, it was a step that did expand coverage to millions of people who didn’t have it before,” said Karen Dolan, director of the Criminalization of Race and Poverty Project at the Institute for Policy Studies, to Truthout in an email.
“State expansion of Medicaid was crucial to partially bringing down high poverty rates.”
Taxes and Universal Health Care
Taxes are also central to the debate over Medicare For All, the proposed universal health care system championed by Democratic presidential frontrunners Bernie Sanders and Elizabeth Warren. Both candidates have been challenged by rival Democrats to explain how they would pay for the program, and both have promised that Medicare For All would represent a wealth transfer from the top of the economic ladder to the bottom, where many people struggle to afford health care, even if they are employed. Recent polling shows about 51 percent of the public supports a national health care plan like Medicare for All.
“Not only is ending the Affordable Care Act, without a Medicare for All system in place, going in the wrong direction, but it is inhumane,” Dolan told Truthout. “It would devastate the health and well-being of millions of Americans, including children, by further lining the pockets of the already wealthy.”
Removing the ACA would be unpopular; the Trump administration and the GOP abandoned legislative efforts to do so in 2017 when Republicans controlled both houses of Congress. However, their sweeping tax cut law did effectively eliminate the ACA’s individual mandate, the now-defunct tax penalty for people who do not have health coverage. In its lawsuit, Texas argues the individual mandate was central to the ACA and without it the entire law is unconstitutional.
The bulwark of this argument rests on congressional intent, and experts say it’s unlikely to succeed in court (had Republicans intended to dismantle the entire ACA with their tax reform legislation, they would have said so). Even if the Fifth Circuit agrees with the plaintiffs, Democrats would likely appeal the case to the Supreme Court. Still, the massive tax breaks that would be created by eliminating the ACA reveal how any attempt to reverse the progress the government has made on expanding health coverage would benefit the rich and pull the rug out from under lower-income families.
Medicare for All would push the system in the opposite direction and ensure that everyone in the U.S. has generous health coverage, without making premiums and copayments to for-profit insurance companies. Both Sanders and Warren have been dogged by questions about how they would pay for such a system, which would require increases in federal spending, but would also create savings by reducing administrative overhead costs and generally keeping people healthier.
“The choice is a clear one: continue to increase the wealth of the wealthy at the expense of the rest of us, or restructure our moral, economic and political priorities and provide quality health care to everyone,” Dolan said.
Opponents of a single-payer system are attempting to frame the health care debate by questioning whether Medicare for All would raise taxes on the middle class. Sanders has been upfront and admitted that it could, but working families would save much more than the tax increase because out-of-pocket costs they currently pay would be virtually eliminated. Warren was criticized for dodging the question before releasing a plan to pay for Medicare for All that her team claims would not raise taxes on the middle class or force most businesses to pay more than they already do on private plans for employees.
Warren’s plan has been criticized by Democratic rivals and some experts as unrealistic but is still finding support among progressive analysts. Meanwhile, Sanders has not produced a specific plan, but has concrete ideas for paying for Medicare for All, including a more progressive income tax and a wealth tax on the top 0.1 percent of earners. Generally, both Democrats want to close tax loopholes and raise taxes on the very wealthy so everyone can have health care.
A “Moral” Budget Goes Beyond Health Care
Grassroots activists and progressive economists have other ideas. Earlier this year, the Institute for Policy Studies, the Poor People’s Campaign and other groups released a Poor People’s Moral Budget that would pay for programs like Medicare for All by shifting the federal government’s spending toward infrastructure, social programs and climate investments while restoring “fair taxes” on corporations and the rich.
“Our proposals, some of which you see in Elizabeth Warren’s and Bernie Sanders’s and Rep. Pramila Jayapal’s health care plans, save money in the long run, increase our health and security as a nation, work to eliminate racial, class and gender disparities in the current health care system and ensure that everyone has access to affordable quality healthcare,” Dolan said.
Lindsay Koshgarian, director of the National Priorities Project and co-editor of the moral budget (as well as a contributor to Truthout), argued in a recent New York Times op-ed that Medicare for All could be paid for with an annual $350 billion transferred from military budgets if the U.S. were to change its foreign policy. This would require closing half of U.S. overseas military bases, reducing U.S. military support for foreign governments, and ending the wars in Iraq and Afghanistan that have cost $4.9 trillion over the past 18 years — policies Koshgarian argues would make the world a safer place.
Billions more could be saved if the U.S committed to ending mass incarceration, rebuilding the social safety net and raising the minimum wage — all actions that would either save the government money or stimulate the economy and tax revenues, according to the moral budget. Such progressive priorities are currently stalled or yet to be introduced in Congress, although some are reflected in Warren and Sanders’s agendas. Meanwhile, conservatives are pushing in the exact opposite direction by attempting to kill the ACA and undermine what’s left of the social safety net. Doing so would further enrich the rich and harm the poor.
“There are many options to pay for the expense of a Medicare for All health system,” said Dolan, who co-authored the moral budget. “All it requires is the political will. Our nation has more than sufficient resources to pay for it.”