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February 23, 2017

Delving Into ACA Repeal and Replace: Taxes and Medicare

Since President Trump signed the executive order last month to delay implementation of the ACA, ag and ag-related businesses have been concerned with how the repeal and replacement of ACA will affect their businesses, employees and families. My last entry on ACA touched on some of the bigger changes you can expect to see; today, I’d like to delve deeper into the topics of ACA-related taxes and changes to Medicaid and Medicare.

The proposed ACA replacement plans still need to be firmed up, but there are still some commonalities among the plans that would be helpful for you to know. Let’s start with tax credits and tax deductions. Several proposals offer tax credits to individuals and families to offset the cost of individual policies similar to the ACA. However, two proposals skip the tax credits altogether. Rather, they rely on tax deductions that will not likely significantly decrease the cost of coverage for individuals who need it most: lower income individuals who would not benefit from a tax deduction.

Moving on to Medicaid and Medicare. Though these may sound similar, they are very different. Medicare is a federal program that provides health coverage if you are 65 or older or have a severe disability (no matter your income). Medicaid is joint federal-state program that provides health coverage to low-income individuals (no matter your age). Please note that California calls its Medicaid program Medi-Cal.

Most proposals eliminate the ACA’s Medicaid expansion that currently covers tens of millions of individuals in California and throughout the nation. In its place, Medicaid block granting has been proposed as a solution. Under block granting, states receive fixed grants based on the state and federal Medicaid spending in that state. The grant would be indexed to inflation. 

The problem here is that the annual medical costs growth will far outpace the inflation rate. To address that concern and preserve funds, states are given the flexibility to determine the types of services provided and who qualifies for coverage. Block grants are similar to but differ from per capita caps that at least one replacement proposal touts. With per capita caps, states get a fixed sum of money each year that is based upon the number of participants in their Medicaid programs; as those numbers fluctuate so does funding.

The last thing I want to highlight are the changes to Medicare. Several proposals introduce serious changes to Medicare including introducing private plans to compete with overhauled Medicare plans on newly-created Medicare exchanges. Other proposals allow Medicare enrollees to contribute to HSAs (health savings account) and medical saving accounts, enter into contracts to pay providers more than Medicare’s reimbursement, or opt-out of Medicare to receive a tax credit to purchase a personal plan instead. 

As I mentioned before, I’m interested in hearing how you feel the ACA Executive Order will affect you and your business. Any questions or concerns? Let me know at [email protected].