This week, the U.S. Senate and then the U.S. House of Representatives will consider a budget resolution for FY 2017. It has no purpose whatsoever except to create a vehicle for the repeal of Obamacare.
Congress should pass this budget resolution. It doesn’t commit anyone to any policy choices at this point. All it does is create reconciliation instructions for the chambers to pass Obamacare repeal shortly after President Trump is inaugurated.
This budget resolution has nothing to do with the actual budget, unlike any budget resolution in memory. All it does is create reconciliation instructions for the chambers to pass Obamacare repeal shortly after President Trump is inaugurated.
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My colleague Avik Roy has suggested that passing a full Obamacare replacement (as opposed to a partial replacement passed via reconciliation) might be possible even though it would require Democratic votes to obtain the 60-vote threshold in the Senate, and that a pre-condition to achieving that would require the Congressional Budget Office (CBO) score the replacement as covering at least as many people as the Obamacare does.
As if to give a warning shot across the Republican bow, the officially non-partisan CBO warned that it “would not count those people with limited health benefits as having coverage” when evaluating changes to the health care law, and that changes to the “essential health benefits” required under the ACA could result in people receiving tax credits to help pay for health insurance under a new law, but being counted as not having health insurance according to the CBO, if the coverage they have doesn’t meet the CBO’s requirements. At issue, basically, is “What is health insurance?”
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As Congress readies legislation to repeal and replace the Affordable Care Act (ACA), Congressional Budget Office (CBO) estimates will play an important and respected role as they did in the passage of the law in 2010. We now know that many of CBO’s projections of important aspects of the ACA have significantly differed from actual outcomes. In this piece, I highlight CBO’s key past errors in projecting effects of the ACA. They can largely be grouped into two categories. First, CBO projected that the exchanges would be stable by now with more than twice as many enrollees as they currently have, rather than suffering from severe adverse selection in most states as they now are. Second, CBO projected that the ACA Medicaid expansion would be much smaller and less expensive than it has turned out to be.
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AEI’s Improving Health And Health Care Plan, developed by a group of scholars affiliated with the American Enterprise Institute and released on December 9, 2015, only partially repeals Obamacare. The replacement consists of three broad components:
1. Private Health Insurance Reform. This would consist of 4 parts:
- Age-Adjusted Tax Credits. Obamacare’s income-related subsidies are replaced with less expensive advanceable and refundable tax credits that vary only by age (0-17, 18 to 34, 35 to 49, and 50 and over).
- Automatic Enrollment. Any household that does not take the tax credit they receive and purchase insurance of their choice will automatically be enrolled in a catastrophic plan equal to the value of the credit for which that household is eligible. States have the option to decline to implement default enrollment.
- Capped Tax Exclusion. The long-standing tax exclusion for employer-provided health insurance coverage is retained, but the ACA’s Cadillac tax is replaced by a functionally-equivalent cap on the amount of the exclusion ($8,000 for single and $20,000 for family coverage).
- Expanded Use of Health Savings Accounts. All households become eligible to open an HSA account regardless of enrolled health plan. Those that open an HSA can make tax preferred contributions of up to $2,000 for individuals and $4,000 for families. Beneficiaries enrolled in HDHPs would be allowed to make contributions up to the allowable amounts under current law in addition to the $2,000/$4,000 contributions allowed for all. As well, a one-time HSA credit for up to $1,000 for those that are enrolled in an HSA-compatible plan in 2017.
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The Alternative to Obamacare, originally developed by Jeffrey Anderson and released by the 2017 Project as A Winning Alternative to Obamacare, first released on February 10, 2014, starts by fully repealing Obamacare. The replacement consists of three major components:
- Obamacare’s income-related subsidies are replaced with less expensive tax credits that vary only by age (0-17, 18-34, 35-49 and 50-64).
- The long-standing tax exclusion for employer-provided health insurance coverage is retained, but the ACA’s Cadillac tax is replaced by a functionally-equivalent cap on the amount of the exclusion (set at the 75th percentile of annual employer sponsored insurance premiums); workers in firms with fewer than 50 full-time-equivalent workers would be allowed to purchase non-group coverage with tax credits.
- Annual contribution limits for health savings accounts are increased to $6,250 for individuals and $12,500 for families. As well, enrollees in health savings accounts are eligible to receive a one-time, refundable tax credit of $1,000 to be deposited directly into the account.
The Patient CARE Act, introduced on February 4, 2015 and sponsored by Senators Burr (R-NC) and Hatch (R-UT) and Rep. Fred Upton (R-MI), starts by fully repealing Obamacare “except for the changes to Medicare”. The replacement consists of three major components:
- Medicaid is reformed by imposing a capped per-beneficiary allotment adjusted for inflation (a less stringent form of block-granting Medicaid insofar as it automatically adjusts for changes in the number of Medicaid eligibles);
- Obamacare’s income-related subsidies are replaced with less expensive tax credits that vary by age, family status and income (disappearing above 300 percent of federal poverty level).
- The long-standing tax exclusion for employer-provided health insurance coverage is retained, but the ACA’s Cadillac tax is replaced by a functionally-equivalent cap on the amount of the exclusion ($12,000 for single and $30,000 for family coverage); workers in firms with fewer than 100+ workers would be allowed to purchase non-group coverage with tax credits.
Influential members of Congress are supporting reenacting a health care bill that passed Congress last January called the Restoring Americans’ Healthcare Freedom Reconciliation Act of 2015, or H.R. 3762. That bill would have repealed Obamacare’s tax hikes, Medicaid expansion, and insurance exchange subsidies. But critically, this partial repeal bill does not get rid of Obamacare’s tens of thousands of pages of insurance regulations, which are responsible for the law’s drastic premium hikes. If Republicans pass a replica of H.R. 3762 in the first quarter of 2017, they will be making a potentially catastrophic mistake that might make it impossible for them to replace Obamacare later on. To avoid those pitfalls, they need to wipe out Obamacare’s costliest insurance regulations in the new partial repeal bill and retain about three-fifths of Obamacare’s tax hikes to create fiscal room for the replacement.
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The news is all full of supporters of the Affordable Care Act warning about how the health insurance system will collapse if, as various Republican repeal programs propose, the “individual mandate” is immediately gutted while parts of the ACA briefly solider on. It’s not that the people issuing the warning aren’t correct. Repeal of the individual mandate without some immediate replacement will clearly reduce the stability of whatever markets would otherwise remain as the ACA continues its death march. It’s just that many of them are hypocrites.
It was the Obama administration and supporters of the ACA who essentially gutted the individual mandate.
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Do you think it is a bit strange that after 7 years, Republicans in Congress still don’t have a replacement plan for Obamacare? Or that they now tell us that developing one will take 3 or 4 more years. And of course, once they have a plan it will take state governments and insurance companies two or three more years to phase it in. So, we are looking at a decade’s delay. That’s if we are lucky.
Suppose the tables were turned. If Obamacare were a Republican reform and Democrats controlled Congress, how long would it take the Democrats to come up with a better plan? They’d do it in a heartbeat. They would do it by doing what Democrats are traditionally good at: putting ideology aside and finding solutions that make all the major stakeholders better off.
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Health and Human Services Secretary-nominee Tom Price has a radical idea: Let Medicaid recipients choose their own health insurance plan just as millions of Americans do every year.
Both House Speaker Paul Ryan and Price want to replace Obamacare subsidies with refundable tax credits—which would essentially function like a federal subsidy—for people who do not have access to employer-provided health insurance, Medicare, Medicaid or VA coverage.
But under legislation introduced by Price in 2015 (see section 102), a person in a government-run program such as Medicaid could opt out and take the tax credit instead.
That’s exactly the right thing to do.
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