Congress must act before the end of the year to prevent an automatic 27 percent rate cut for Medicare doctors (the “doc-fix”, as it is generally known in DC). To pay for it, some Republican Members of Congress are floating the idea of further eroding health insurance affordability protections for low- and middle-income people under the Affordable Care Act (ACA). While averting a pay cut for Medicare’s doctors is an important priority, the costs of this adjustment should not come directly from the pockets of struggling families.

What’s the Proposal? When the Exchanges are running in 2014, individuals can receive premium tax credits in advance to help pay for their health insurance coverage. But if their income rises during the year, they may no longer be eligible for those tax credits, or they may be eligible for a smaller tax credit than they were receiving.

In that case, they will have to pay back some of their subsidy when they file their taxes at the end of the year. To strike a balance between recapturing subsidies and not hitting working families too hard, the ACA capped how much an individual would have to pay back.

Congress has already increased this cap twice – once to pay for last year’s “doc-fix” and then again to pay to repeal enhanced tax reporting requirements on small businesses. Some in Congress are now proposing increasing that cap a third time, or even eliminating the cap altogether, to pay for this year’s doc-fix.

This proposal would hurt low-income people and the long-term success of the ACA by:

  • Imposing financial hardship on low- and moderate-income families. It could force them to pay thousands’ of dollars in penalties for having found a better job or gotten a raise.
  • Increasing the number of uninsured. Fearing this type of unexpected cost, fewer people will enroll in the advanced tax credits. In fact, when the CBO scored similar provisions in the past, most of the savings came from lower take-up of tax credits not from increased revenues.
  • Jeopardizing public support for the ACA. The prospect that families will have a large unexpected cost at the end of the year is likely to undermine public support for the law.
Just Say “No” The Republicans floating this proposal are well aware of its potential to undermine the ACA by reducing the number of insured and generating backlash against the law. This policy is a poison pill for health reform, and Democrats and President Obama should think twice before swallowing it again.

But the case against this proposal is broader than that. In his recent speech, President Obama spoke out forcefully about the need to address income inequality. Paying for physicians’ higher reimbursements by taking money from low- and moderate-income families is hardly a step in the right direction.

-Katherine Howitt, Senior Policy Analyst