Tax Credits Are No Substitute for Medicaid Expansion

The American Health Care Act (AHCA) passed by the House of Representatives last month would dramatically increase health insurance costs for low-income New Jerseyans who would lose coverage under the Medicaid expansion, according to a new report by the D.C.-based Center on Budget and Policy Priorities.

The new estimates of increased costs – which would be most pronounced for older low-income New Jerseyans – clearly show that the refundable tax credit included in the House bill is a terribly inadequate substitute for the Medicaid expansion, which assists over half a million New Jerseyans and would be effectively ended by the AHCA.

Here are the estimated insurance premiums – after tax credits – for different New Jerseyans at the federal poverty line (annual income of about $12,600 for a single adult).

A 60-year-old

  • Net premium under AHCA: $8,642
  • Net premium as share of income: 69%
  • Net ACA premium as share of income: 0%

A 45-year-old

  • Net premium under AHCA: $2,390
  • Net premium as share of income: 19%
  • Net ACA premium as share of income: 0%

A 30-year-old

  • Net premium under AHCA: $1,126
  • Net premium as share of income: 9%
  • Net ACA premium as share of income: 0%

The situation would be even worse for poorer New Jerseyans; for residents at 50 percent of the federal poverty line, net premiums under AHCA would represent 137 percent of annual income for a 60-year-old, 38 percent for a 45-year-old and 18 percent for a 30-year-old.

It’s worth noting that these estimates are conservative, as they project premiums before any state waiver of Affordable Care Act (ACA) protections for people with pre-existing conditions and ACA requirements for what health insurance plans must cover. The consequences for low-income adults with serious health needs in states that choose to waive these protections would be even more dire. The study also does not take into account the higher cost of living in New Jersey, which leaves the poor no disposable income left to pay for health care.

As the Senate considers changes to the House GOP health bill, some have claimed that phasing the repeal out more slowly or delaying it by two years would avoid these harms. But neither of these proposals change the ultimate outcome: a huge cost-shift to states ending the Medicaid expansion and causing millions to lose affordable coverage.