Declaring Independence From Obamacare


Republican senators are hashing out their health reform bill over the July 4 recess. When they return on July 10, let’s hope they’ve written a bill that looks less like Obamacare Lite and more like a genuine market-based alternative to repeal and replace the failing health law.

Anyone who believes that the Senate’s previous draft would dismantle Obamacare clearly didn’t read it. Consider the bill’s proposed insurance subsidies.

Conservatives have argued for years that subsidizing insurance through age-based tax credits is superior to Obamacare’s income-based approach for two reasons. First, health expenses are correlated with age, not income, so it makes more sense to tie the tax credits to age as well. Second, income-based credits decrease when people earn more. The effective marginal tax rate for these benefits is extraordinarily high. So they disincentivize people from working more and moving up the income ladder.

Yet the Senate bill adopts a slightly modified version of the status quo, subsidizing insurance for those earning less than 350 percent of the federal poverty level beginning in 2020, as opposed to Obamacare’s 400-percent cutoff.

The Senate proposal also continues Obamacare’s cost-sharing reduction subsidies — which reimburse insurers for slashing out-of-pocket costs for low-income patients — at approximately $7 billion per year through 2019.

In 2015, House Republicans took the Obama administration to court to end this very program, arguing that the insurance-company payments were unconstitutional. Judge Rosemary Collyer of the U.S. District Court for the District of Columbia sided with the GOP, marking a major win in the fight to undo Obamacare. The ruling is currently on hold.

The Senate bill would nullify this victory — and spend a projected $28 billion of taxpayers’ money to stabilize the health law’s failing insurance exchanges.

As for Obamacare’s Medicaid expansion, the Senate proposal maintains current funding levels until 2021, and waits until 2025 to cap the program’s spending growth at the general rate of inflation.

Put differently, the bill promises to address Medicaid’s out-of-control costs at a later date. Republicans could lose control of Congress, the White House, or both before the time comes to implement such restraints. Or they may just lose their nerve.

The July 4 recess is the last chance for GOP lawmakers to come to their senses and deliver the principled, market-based Obamacare replacement that they’ve promised voters for over seven years.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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