While celebrating passage of a $1.5 trillion tax cut, President Donald Trump pivoted to what the bill did for another one of his major goals, getting rid of the Affordable Care Act. He said eliminating the requirement to buy insurance “essentially repealed” the law called Obamacare.
That requirement, the “individual mandate,” fines people who might afford health insurance but choose not to buy it. The new tax measure reduces the fine to zero.
How far does ending the penalty go toward repealing the Affordable Care Act? And, did revenues from the fines represent its primary source of money?
The money part is simple. In 2016, about 6.5 million households paid $3 billion in penalties. The Congressional Budget Office, the nonpartisan number crunchers for Congress, reported that in 2017 government costs for the Affordable Care Act totalled nearly $120 billion.
Other revenue sources are more significant, including taxes on wealthy households, about $16 billion; and health insurance companies, about $12 billion.
So Trump was wrong when he called the penalty money a primary source of funding.
Experts we reached generally agreed that repealing the mandate would undermine the law, but key elements would remain intact.
Without the penalty, fewer healthy people will buy insurance, which will make it more expensive to cover those who do. (This mainly affects the individual insurance market, which covers about 7 percent of the people with insurance.)
The Congressional Budget Office estimated that repealing the mandate would drive up premiums by 10 percent and decrease the number insured by 13 million over 10 years. But even the CBO stressed how mushy any prediction is, noting the actual impacts "would probably be smaller than the numbers reported in this document."
The greatest coverage gains under the Affordable Care Act came through expanding Medicaid to all low-income adults. Overall, about 20 million people became insured. Of that, the CBO says Medicaid expansion reached 13 million people at a cost of about $70 billion in 2017.
Even though Medicaid coverage is either free or very low-cost, eliminating the mandate would have some effect on the growth of that group. Many only discover they’re eligible for Medicaid when fear of the fine spurs them to apply for insurance.
Whatever the scale of that effect, Medicaid expansion remains intact.
Studies point in both directions on the impact the mandate alone has on the individual market.
When an earlier and similar law took effect in Massachusetts, enrollment jumped among healthy people. On the other hand, research based on the first few years of the national law through 2015 concluded "the individual mandate's exemptions and penalties had little impact on coverage rates." The big drivers were the hefty premium subsidies for private insurance and the expansion of Medicaid to low-income adults.
Christine Eibner at the RAND Corporation emphasized that the effect of repealing the mandate is “highly uncertain.”
She said, “on balance, I think the evidence suggests that the mandate is having some impact on enrollment, but it may be small relative to other factors such as the tax credits and subsidies.”
Martin Gaynor, economist at Carnegie Mellon University, said, “We don’t really know what the impact will be.” He went on to warn that “if the mandate is important, then eliminating it will create big problems in the exchange marketplaces, which would likely prove difficult to reverse.”
Our ruling
Eliminating the mandate undercuts the Affordable Care Act, but hardly repeals it. Major pieces of the law remain in place. On the money side, the penalties represent less than 3 percent of the program’s cost, and other taxes directly tied to paying for Obamacare are four and five times larger. This change will be disruptive, but it does not “essentially repeal” Obamacare.
We rate Trump's claim False.
“We essentially repealed Obamacare because we got rid of the individual mandate … and that was a primary source of funding of Obamacare.”
— President Donald Trump on Wednesday, Dec. 20, 2017 in a speech
