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Jon Greenberg
By Jon Greenberg March 1, 2017

Taxes on wealthy pay for Obamacare? DNC's Perez overshoots

The morning after President Donald Trump promised to "repeal and replace Obamacare," Democratic party chief Tom Perez took a dig at Republicans for ignoring the good that the health care law does.

"It's a lifesaver," Perez said. "If they had come in good faith during the Obama administration, we would have been more than open to fixing it. But that's not what they're about. They want it repealed. And here is why: the primary financing mechanism of the Affordable Care Act is a tax on wealthy people. They want to repeal the Affordable Care Act so that you can provide a big giveaway to the wealthy."

Perez was focused on the GOP’s political motives, but our focus is on his assertion that taxing the wealthy is the primary means of paying for the Affordable Care Act.

Perez is correct that tax hikes on individuals making over $200,000 per year and couples making over $250,000 are the largest single source of revenues under the law. But that ignores a larger piece of the financial picture: the spending reductions in Medicare.

According to the Congressional Budget Office, the impartial analytic arm of Congress, savings from Medicare are projected to provide about $228 billion to offset the costs of the sweeping health care law. The tax on higher-income households delivers about $136 billion, between 2016 and  2020.

Melinda Buntin, formerly at the CBO and now a health policy professor at Vanderbilt University, took issue with Perez’s summary.

"I would say that the primary financing mechanism of the Affordable Care Act was Medicare changes," Buntin told us.

Under the law, Medicare, the government health insurance program for seniors, is slated to grow more slowly than it otherwise would. It largely does that by limiting payments to doctors, hospitals, and other health care providers. Over time, those limits add up.

Joe Antos, a health care analyst at the American Enterprise Institute,  a free-market oriented think tank, cautioned that there’s a lot of guess work in counting those dollars.

"In terms of financing it's not just the revenue you collect, but it’s the reduction in other spending to offset your expansion in other areas," Antos said.

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The Medicare savings, for example, helped pay for the expansion of Medicaid, the government insurance program to help the working poor.

Marc Goldwein at the Committee for a Responsible Federal Budget put taxes on wealthier Americans into the context of the many pieces that go into the total package that is the Affordable Care Act. On top of the dollars from Medicare and taxes on the well-to-do, there are taxes on drug and medical equipment makers.

"Taxes on high-earners cover one-fifth or maybe one-quarter of the ACA’s costs," Goldwein said. "That’s large, but I wouldn’t call it the primary financing mechanism."

Antos said that Republicans seem to be fine with the trims in Medicare spending.

"You can’t find anybody who says they want to get rid of those Medicare cuts," Antos said. "If Republicans were to eliminate those, they would have to go elsewhere to find those billions of dollars. In health care, there is no other place to go."

If the Medicare spending trajectory is off the table, then the next big item would be the taxes on higher-income earners.

We reached out to Perez’s office and did not hear back.

Our ruling

Perez said that "the primary financing mechanism of the Affordable Care Act is a tax on wealthy people." According to CBO estimates, those taxes are the largest single revenue source, but trims in future Medicare spending growth do much more to keep the Affordable Care Act in balance.

Every analyst we reached said that the complete fiscal package includes both revenues and spending cuts and it is misleading to say that the taxes are the main means of financing the health care program.

Perez gave only half the picture. Accordingly, we rate this claim Half True.

Our Sources

CNN, New Day, March 1, 2017

Congressional Budget Office, Budgetary and Economic Effects of Repealing the Affordable Care Act, June 2015

Kaiser Family Foundation, Summary of the Affordable Care Act, April 25, 2013

Email interview, Melinda Buntin, Chair, Department of Health Policy, Vanderbilt University School of Medicine, March 1, 2017

Email interview, Marc Goldwein, senior vice president and senior policy director, Committee for a Responsible Federal Budget, March 1, 2017

Interview, Joe Antos, scholar in health care and retirement policy, American Enterprise Institute, March 1, 2017

Email interview, Harold Pollack, professor, School of Social Service Administration, University of Chicago, March 1, 2017


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