House Speaker Paul Ryan walks to his office on March 23, 2017 ahead of an expected House vote the same day on the Republican plan to replace Obamacare. (Associated Press) House Speaker Paul Ryan walks to his office on March 23, 2017 ahead of an expected House vote the same day on the Republican plan to replace Obamacare. (Associated Press)

House Speaker Paul Ryan walks to his office on March 23, 2017 ahead of an expected House vote the same day on the Republican plan to replace Obamacare. (Associated Press)

Tom Kertscher
By Tom Kertscher March 23, 2017

GOP Obamacare replacement cuts aid for lower-income people, makes more higher-income people eligible

Two days before a showdown in the U.S. House of Representatives, with House Speaker Paul Ryan lobbying his colleagues hard to vote yes, a fellow Wisconsin Republican dumped on the GOP plan to replace Obamacare.

"I’ve got a lot of problems with the House bill as it’s written right now," U.S. Sen. Ron Johnson said March 21, 2017 at a WisPolitics event in Washington, D.C. -- highlighting concerns over whether a top priority for Ryan and President Donald Trump can pass.

Afterward, Johnson complained to a reporter about what he sees as a paradox:

The replacement, he said, would reduce subsidies that help lower-income people buy health insurance, but also "expand the entitlement" by giving subsidies to higher-income people "that Obamacare never helped."

Let’s see if Johnson’s right.

Note: We’re fact checking Johnson’s claim based on the original GOP legislation, not on any changes that might have been made after his statement. The expected House vote on March 23, 2017 was postponed a few hours after this fact check was posted.

Tax credits

Johnson’s claim alludes to what are known as refundable tax credits that help people who buy their own health insurance.

How they work: If a person has a federal tax bill of $2,500 and receives a $1,000 tax credit, the tax bill is reduced to $1,500. A refundable tax credit means that if the amount of the tax credit is greater than the amount of taxes owed, the taxpayer receives a refund for the difference.

Both Obamacare and the GOP plan, referred to by Democrats as "Trumpcare," offer the credits. But, as Johnson indicated, they take different approaches.

Obamacare: Tax credits are based on a person’s income and the cost of health insurance in the area where they live. The subsidies are available to people whose income is between 100 percent and 400 percent of the federal poverty level (in 2017, 400 percent is about $47,000 per year for an individual). The subsidies are larger for people with lower incomes and for those who live in areas where health care costs are higher.

GOP plan: The credits vary by age -- people in their 20s would get $2,000 a year, with credits rising to $4,000 for people in their 60s. The eligibility extends to individuals who earn up to $75,000 a year -- a significantly higher income than under Obamacare.

So, what’s the upshot?

The effect on people

An expert nonprofit organization in health care, the Kaiser Family Foundation, summarizes the differences this way:

Under the GOP plan, lower-income people generally will get reduced tax credits compared to Obamacare -- especially those who are older and live in areas where health care costs more. Meanwhile, more people with higher incomes would become eligible for tax credits.

Here are the average tax credits for a 40-year-old, according to Kaiser:

Annual income in 2020

Obamacare tax credits

GOP plan tax credits

$20,000

$4,143

$3,000

$40,000*

$1,021

$3,000

$75,000

0

$3,000

$100,000

0

$500

 

(In Milwaukee, the estimate is that the credit would be $1,280 with Obamacare and $3,000 with the GOP plan.)

Our rating

Johnson says the GOP’s Obamacare replacement would reduce subsidies that help lower-income people buy health insurance, but also "expand the entitlement" by giving subsidies to higher-income people "that Obamacare never helped."

The Republican plan does offer subsidies, known as refundable tax credits, that are smaller for lower-income people than they are under Obamacare. And it does offer the credits to people with higher incomes than Obamacare does.

We rate Johnson’s statement True.

 

Other fact checks on the GOP replacement for Obamacare:

Mark Pocan: Gives $600 billion in tax breaks "the wealthiest" -- Half True

Tammy Baldwin: Will let insurance executives "make millions off your health care" -- Mostly False

Paul Ryan: Will lower premiums, report "confirms" -- Half True  

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The GOP’s Obamacare replacement would reduce subsidies that help lower-income people buy health insurance, but also "expand the entitlement" by giving subsidies to higher-income people "that Obamacare never helped."
In an interview
Tuesday, March 21, 2017

Our Sources

Milwaukee Journal Sentinel, "Wisconsin Sen. Ron Johnson skeptical House GOP health care bill can pass in 2017," March 21, 2017

Email, Ron Johnson senior communications and policy adviser Patrick McIlheran, March 22, 2017

Kaiser Family Foundation, "How Affordable Care Act Repeal and Replace Plans Might Shift Health Insurance Tax Credits," March 10, 2017

Kaiser Family Foundation, "Tax Credits under the Affordable Care Act vs. the American Health Care Act: An Interactive Map," March 7, 2017

Kaiser Family Foundation, "Premiums and Tax Credits Under the Affordable Care Act vs. the American Health Care Act: Interactive Maps," March 21, 2017

Email, Paul Ryan press secretary Ian Martorana, March 21, 2017

Congressional Budget Office, American Health Care Act cost estimate, March 13, 2017

Axios, "Winners & losers if Obamacare subsidies become GOP tax credits," March 8, 2017

Associated Press, "Tax credits work differently in ‘Obamacare’ and GOP plan," March 11, 2017

New York Times The Upshot, "Who Wins and Who Loses Under Republicans’ Health Care Plan," March 8, 2017

Email, Center for Sustainable Health Spending co-director Paul Hughes-Cromwick, March 23, 2017

Email, Tax Policy Center senior fellow Howard Gleckman, March 23, 2017

PolitiFact National, "PolitiFact's guide to the Republican health care bill," March 22, 2017

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GOP Obamacare replacement cuts aid for lower-income people, makes more higher-income people eligible

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