Governing is hard

The Republican Party has an ACA problem.  The ACA is deficit reducing.  Most of that was because it raised taxes on upper income families and cut back Medicare reimbursement rates for Medicare Advantage.  The Republicans are ideologically indifferent to cutting back Medicare Advantage reimbursement rates especially as Medicare Advantage has continued to grow in popularity so it has not harmed core Republican votes or donors.  But the Republican Party is ideologically committed to lower taxes on high income families.

The Republican Party has a policy problem.  It needs to offer something that is close enough to coverage to minimize blowback of sympathetic figures crying on camera that the Republican health policy bill will kill them.  So that means some type of coverage.  And that means spending some money.  That money has to be found from somewhere.  It can either be found from raising a different set of taxes after the taxes that hit high income individuals are cut or borrowing.

So here is what the Republican Party’s wonks are proposing:

Republicans are considering capping the U.S.’s tax break on job-provided health insurance, a major change to the tax system that could be used to finance their efforts to repeal and replace Obamacare.

This is a big pool of money.  The CBO believes the ESI tax exclusion is worth a quarter trillion dollars a year.  It is regressive tax benefit where the benefits mostly accrue to upper income individuals.  There is a good economic argument that the tax incentive favors one form of compensation (health insurance) over another (cash) when the efficient incentive structure is to be indifferent where both forms are treated the same by the tax code.  Most liberal wonks (myself included) will agree that building a system from scratch, ESI tax exclusion would never be part of an ideal package.

BUT HERE IS THE PROBLEM.  It pisses off voters who receive coverage through work.  And we already sort of tried this route before:

A similar idea was proposed by Senator Ron Wyden, a Democrat, during debate over the Affordable Care Act, and went nowhere. Obamacare already includes a levy on high-cost health insurance plans, known as the Cadillac tax, that begins in 2020. Republicans didn’t say where they would set the cap.

The Cadilliac tax set a fairly high rate (40%) excise tax on a fairly high exclusion limit.  It was supposed to have gone into play for 2018 but a large, bi-partisan coalition (including union friendly Democrats) pushed to force it back another two years.  There is still a large blocking coalition in place to continue to push the Cadillac tax back.  It will become the health care tax equivalent to the AMT re-indexing.

If the Republicans need to raise serious money from this exclusion being rolled back ($50 to $100 billion a year is serious), it means the tax hits most employer sponsored health plans to some degree.  If they don’t raise serious money because they fear blowback, it is a high income earner only tax and it still leaves their plan with a massive hole.

The easiest solution for Republicans looking for money to paper over their plan is to do what they did for Medicare Part D.  Just borrow it as that means no hard choices are needed.

But I can’t see how this proposal would get 150 votes in the House or 40 in the Senate.

Share On Facebook
Share On Twitter
Share On Google Plus
Share On Pinterest
Share On Reddit

24 replies
  1. 1
    🌷 Martin says:

    Yeah, the real problem is that the House potentially has the majority they need for repeal and replace, but the Senate only has the 50 they need for repeal, but not the 60 for replace. I think the old plan was to repeal and rely on the Democrats to cross over rather than watch Americans suffer without healthcare. I think the last month has steeled the resolve of the Democrats to hang this disaster on the GOP as the more valuable long-term benefit. I’m not sure that reality has passed the congress commisure from the Senate to the House, but the Senate seems to have largely given up at this point.

    Maybe the GOP can try sabotaging ACA and then blaming its failure on Obama, but its hard to remember how bad stubbing your toe hurt when you’re literally on fire, so I’m not thinking that strategy will work.

    ReplyReply
  2. 2
    Baud says:

    So the same political dynamic that prevented the Dems from making Obamacare simpler are now hampering the Republican efforts to repeal it.

    ReplyReply
  3. 3
    jl says:

    Economists may have over-estimated the importantce of the supposedly horrible and dystopian tax induced distortions in encouraging employer group based health insurance, and underestimated the advantages of it as containing an automatic screening device that reduced the asymmetric info problem. For Stiglitz: another WIN!!

    What thinks this Anderson guy? Who I have no idea who he is. The oligarch Mayhew off on an epic hookers and blow binge, or what?

    Did I miss your thoughts on Humana exit, on this here miserable lefty almost top 10,000 blog?

    ReplyReply
  4. 4
  5. 5
    jl says:

    @Major Major Major Major: Thanks. I missed that somehow. I am emulating my leader Drumpf these days. Somebody told me something and.. things are running like a finely tuned machine. And why didn’t you tell me already, huh?

    ReplyReply
  6. 6
    aimai says:

    Am I wrong for having absolute hysterics at the thought of them trying to raise money by taxing the cadillac plans–like that of Cruz and his goldman sachs wife?

    ReplyReply
  7. 7
    Mike J says:

    Harward turned down Flynn’s spot.

    ReplyReply
  8. 8
    rikyrah says:

    The Dems need to be on this; telling folks that the GOP wants to bother employer given healthcare

    ReplyReply
  9. 9
    Mike in NC says:

    The actual GOP “repeal and replace” plan is simply to repeal PPACA and replace it with juicy tax cuts for the 1%ers. The serfs are on their own.

    ReplyReply
  10. 10
    Baud says:

    @Mike J: Wow.

    ReplyReply
  11. 11
    jl says:

    @Mike in NC: A few House GOPers have already admitted that whatever the ACA replacement plan, or non-plan, is, they need to keep what it will actually do very quiet because it will be very unpopular. Main outlines of the disaster, whatever it is, seem to be set.

    ReplyReply
  12. 12

    CNN alert informs me the FBI is not expected to pursue charges against Flynn and believe he was not intentionally misleading them. That was quick.

    I presume Comey will now drag it out for years and then give a big press conference laying out the case against Flynn while he announces this.

    ReplyReply
  13. 13
    Baud says:

    @Major Major Major Major: That would be unethical.

    ReplyReply
  14. 14
    WereBear says:

    @aimai: Go ahead. We need to get our chuckles anywhere we can :)

    ReplyReply
  15. 15
    Jay S says:

    @🌷 Martin:

    I think the old plan was to repeal and rely on the Democrats to cross over rather than watch Americans suffer without healthcare. I think the last month has steeled the resolve of the Democrats to hang this disaster on the GOP as the more valuable long-term benefit.

    I doubt steely resolve has much to do with it. It’s sinking in to the R leadership that any replacement plan will seriously disrupt the industry and anger their base.

    ReplyReply
  16. 16
    WereBear says:

    @Jay S: It’s sinking in to the R leadership that any replacement plan will seriously disrupt the industry and anger their base.

    They’ve had years to figure this out. But that is not common for either them or their base.

    ReplyReply
  17. 17
    PaulW says:

    The easiest solution for Republicans looking for money to paper over their plan is to do what they did for Medicare Part D. Just borrow it as that means no hard choices are needed.

    there’s an even easier solution than that.

    tell their upper income buddies to man up and take their tax hikes as part of their nobliesse oblige.

    those billionaires can still freaking afford their overseas summer homes and twenty yachts.

    ReplyReply
  18. 18
    dr. bloor says:

    @Mike J:

    Harward turned down Flynn’s spot.

    Thereby confirming the notion that he was probably fit for it.

    We’re going to loathe anyone corrupt enough to accept a job offer from that tangerine shitstain.

    ReplyReply
  19. 19
    Jay S says:

    @WereBear: I expect plan B is to let the uncertainty they have injected disrupt the markets so that they can be seen as salvaging it from the wreckage. AKA “We told you so, it was all Obama’s fault.”

    ReplyReply
  20. 20
    WereBear says:

    @Jay S: Probably, but they also seem to have not noticed the automatic ass kissing they used to get has been partially suspended. Due to the sheer outrageous idiocy that is now constantly on display.

    But then, Republicans have been self-selecting for idiocy for a long time. It’s now about 18 dominant genes that will overwhelm any recessive trait, like sense.

    ReplyReply
  21. 21
    JGabriel says:

    David Anderson @ Top:

    BUT HERE IS THE PROBLEM. It pisses off voters who receive coverage through work.

    It’s also the easiest counter-ad in the world:

    Republicans want to cut ACA taxes on incomes over $250k/yr., and on stock market transactions, by taxing emplyer-provided middle-class health insurance. Your insurance.

    ReplyReply
  22. 22
    JGabriel says:

    Mike J:

    Harward turned down Flynn’s spot.

    I’m assuming that was right after Crooked Donald’s press conference from Cuckoo Land.

    ReplyReply
  23. 23
    JGabriel says:

    @PaulW:

    tell their upper income buddies to man up and take their tax hikes as part of their nobliesse oblige.

    Noblesse Oblige vanished from the conscience of the conservative rich as Ayn Rand’s Asshole Training Manuals became de rigueur in the upper classes.

    ReplyReply
  24. 24
    Scotius says:

    @dr. bloor:

    We’re going to loathe anyone corrupt enough to accept a job offer from that tangerine shitstain.

    It’s the Trump Administration Catch 22. Anybody sufficiently competent to fill a position is not going to be willing to do so.

    ReplyReply

Leave a Comment

Leave a Reply

Your email address will not be published. Required fields are marked *