By Jonathan Easley - 02/14/14 11:28 AM EST
The alternative to ObamaCare proposed by Senate Republicans would raise taxes on the middle class and create similar disincentives to work as President Obama’s law, according to a new analysis.
Writing in Forbes magazine, economist John Graham said The CARE Act, released by Republican Sens. Richard Burr (N.C.), Tom Coburn (Okla.) and Orrin Hatch (Utah) last month, “has many merits,” but suffers from “some of the same drawbacks as ObamaCare.”
“The CARE Act would institute changes to marginal-income tax rates that would increase disincentives to work for many, especially those in prime earning years,” Graham wrote.
Last week, the Congressional Budget Office (CBO) dropped a political bombshell with a report that found ObamaCare would cost the nation the equivalent of 2.5 million full-time workers over the next decade.
The nonpartisan CBO found that, under ObamaCare, the equivalent of 2.3 million workers would be lost by 2021, compared to its previous estimate of 800,000, and that 2.5 million workers would be lost by 2024.
Republicans argued the report was evidence of their long-standing claim that the Affordable Care Act would “kill” jobs and create disincentives to work.
Democrats argued the reduction in worker hours was almost entirely because of people choosing to work less, and said it’s a positive thing for people to have the option of leaving the workforce or retiring early.
Graham’s analysis found the Republican framework, which has not been turned into legislative language, would produce similar disincentives to work.
“This is not unique to the CARE Act,” Graham said. “It is a characteristic of the American welfare state.”
The CARE Act would eliminate all of the healthcare law’s federal mandates in favor of a voluntary system led by the states.
While the Republican alternative offers a host of tax credits and subsidies that would be available to more people, they are scaled back considerably from the financial aid available under ObamaCare.
However, Graham said the way these subsidies are applied “wreaks havoc with marginal income-tax rates,” and that those in late middle age would “suffer a significant disincentive to increase their employment earnings.”
Still, Graham blasted ObamaCare for having these same affects.
“Obamacare is a nasty tangle of tax hikes, as well as subsidies for premiums, co-pays, and deductibles,” he wrote.
“On balance, I expect effects of marginal income-tax hikes would be much less harmful under the Senate Republicans’ CARE Act than under ObamaCare,” he continued. “However, it does contain significant disincentives to increasing household income, especially for those in late middle age.”
The GOP plan fared better in a report released last month by the The Center for Health & Economy. While the analysis was focused on different aspects of the CARE Act, it found the proposal would lower premium prices and save $1.4 trillion while covering roughly the same number of people as ObamaCare.
The Center for Health & Economy, formed by conservative economist Douglas Holtz-Eakin, found that the GOP proposal would lower premiums by 2 percent to 11 percent for single policies by 2023, primarily because of its pledges to end "junk lawsuits” and “defensive medicine.”
It also said the government would spend less because of the fewer number of people covered by Medicaid.
The report found tax credits and subsidies in the CARE Act would be smaller, but more widely available, and would provoke a “significant increase in individual market participation,” but that enrollment under these plans would be offset by the large reduction in those eligible for Medicaid under ObamaCare.
Consumers would have about the same access to providers under both laws, the center found.