The GOP’s Strategy for Killing Obamacare Now Looks Like This


https://www.bloomberg.com/news/articles/2017-11-22/the-gop-s-strategy-for-killing-obamacare-now-looks-like-this

The mandate to buy health insurance is the broccoli of Obamacare—the part you have to accept if you want the goodies, like affordable coverage of people with costly pre-existing conditions. Now Senate Republicans are saying you don’t have to eat your broccoli anymore. They eliminate the penalty for lack of coverage in their version of the $1.5 trillion tax cut bill, which they aim to vote on after Thanksgiving.

Could removing the penalty, which effectively kills the individual mandate, possibly make sense? Health-care economists describe the mandate as a necessary evil. Without it, they say, healthy people will roll the dice and choose to go uncovered, leaving insurance pools made up of sicker, older people who are costlier to cover. But the impact of the requirement is regressive. Well-off families generally get health insurance through their employers, so those who pay the tax for noncoverage tend to be poorer, some working two or three jobs to make ends meet.

For Senate Republicans, killing the individual mandate is a beautiful twofer. First, it’s a way to limit the red ink from their tax package. The Joint Committee on Taxation estimates ending the mandate would save $318 billion over 10 years, because the people who dropped coverage wouldn’t get subsidies. Savings would continue after 2027. That’s crucial because under the Byrd rule, a measure can pass the Senate with a simple majority only if it doesn’t add to deficits beyond 10 years. Second, gutting the mandate would partially fulfill Republicans’ long-standing objective of getting rid of Obamacare entirely.

The downside for Republicans is that the repeal gambit has breathed new life into the pro-Obamacare coalition, which argues that Republicans are financing tax cuts for the rich by reducing the number of people with health insurance. “Adding ACA repeal to the corporate tax giveaway has fanned the flames of resistance into a roaring inferno,” says Ben Wikler, the Washington director of MoveOn.org, a liberal activist group. The Congressional Budget Office said on Nov. 8 that repealing the mandate would increase the number of uninsured Americans by 13 million and raise premiums by 10 percent “in most years” of the next decade.

Within hours of Senate Republicans’ announcing their intentions to kill the mandate, a coalition of trade groups for doctors, hospitals, and insurers urged them not to, warning that doing so would raise premiums. In Virginia, a CNN exit poll showed health care was voters’ top issue by more than 2 to 1. Democrat Ralph Northam won voters most concerned about health care 77 percent to 23 percent en route to his decisive election as their next governor.

This leaves Republicans in an awkward spot. While they crave the savings that come from repealing the mandate, they don’t love the reason why—namely, millions fewer people would be insured. That’s something they’ve always insisted wouldn’t happen. As recently as July, two White House officials wrote a Washington Post op-ed ridiculing the notion that millions of people “value their insurance so little that they will simply drop coverage next year following the repeal of the individual and employer mandates.”

Republicans are trying to have it both ways. Utah Senator Orrin Hatch, chairman of the Senate Finance Committee, said that dropping the mandate wouldn’t cut Medicaid. The CBO predicts that of the 13 million people who drop coverage, 5 million will be current Medicaid recipients. Senator Claire McCaskill, a Missouri Democrat, balked. “Where do you think the $300 billion is coming from?” she asked Hatch. “Is there a fairy that’s dropping it on the Senate?”

It’s not just the Republicans who have a complicated relationship with the mandate. Democrats need it to make Obamacare hang together, yet they know it’s unpopular and regressive. Seventy-nine percent of the 6.7 million households that paid the mandate tax for 2015 had incomes under $50,000, and 37 percent made below $25,000, according to Internal Revenue Service data. Republicans tweak Obamacare’s defenders by arguing that if financially hard-pressed families want to drop their policies—and lose the government subsidies that go with them—that’s their right.

Democrats say the mandate gets people to do something that’s in their best interest and keeps emergency rooms from being swamped by uninsured sick people. (Republicans used to make this argument.) But the mandate is also a way to get healthy families to subsidize less-healthy ones, rather than just cover their own risks. That’s what makes it unpopular. “That’s sort of the trap,” says Christopher Pope, a senior fellow at the conservative Manhattan Institute.

Also, the mandate probably isn’t as effective as Democrats have argued. In its Nov. 8 report, the CBO said that for its next estimate, it’s changing its model for how people behave. While results won’t be ready until after Congress wants to finish the tax bill, it said, the effects “would probably be smaller than the numbers reported in this document.” In other words, it won’t reduce coverage as much—or save as much money. It could be that Obamacare needs to rely less on the stick (mandates) and more on the carrot (subsidies that hold down the cost of premiums).

A new CBO estimate that played down the impact of mandate repeal could work out quite nicely for the Republicans. They could point to the Joint Committee on Taxation’s current high estimate for savings to pay for the tax cut, and then next year’s lower estimate of coverage losses from the CBO to claim that eliminating the mandate wasn’t so harmful after all. “Politics is a funny business,” says Pope. “You use whatever weapon you can grab hold of.”

BOTTOM LINE – By dropping Obamacare’s individual mandate, Senate Republicans can raise billions to pay for their tax cuts—and undercut a key part of the health-care law.

 

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