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The real reason Republicans want to pass this Obamacare bill so much

Perspective by
Reporter
June 26, 2017 at 11:01 a.m. EDT
Senate Majority Leader Mitch McConnell crafted the Senate Republicans' health-care bill. (J. Scott Applewhite/AP)

The Senate health-care plan isn't a health-care plan. It's a tax cut.

That's clear enough from how little thought it puts into actually stabilizing insurance markets versus how much it does into showering the rich with as much money as possible. Indeed, it would go so far as to retroactively cut the capital gains tax — something, remember, that's supposed to be about incentivizing future investment — in an apparent bid to get people to create jobs six months ago. The way it would slash Medicaid to pay for this tax-cutting largesse, though, is even more important. It would be more than just a transfer of wealth from the poor and sick to the rich and healthy. It would be a transfer of financial risk from the government to individuals.

This isn't about keeping taxes low for our time. This is about keeping taxes low for all time.

The easiest way to think about all this is that Republicans are trying to solve two problems. The first is that they want to be able to say they did something to get rid of Obamacare, and the second is that they want to keep health-care spending from growing the government down the road. Viewed from this perspective, the Senate bill checks both boxes.

Senate Majority Leader Mitch McConnell (R-Ky.) unveiled the legislation that would reshape a big piece of the U.S. health-care system on Thursday, June 22. Here's what we know about the bill. (Video: Monica Akhtar/The Washington Post)

It isn't hard to tell, though, which one they care about more. Not when their plan for replacing Obamacare is about as desultory as it gets. It would keep the same basic structure in place — income-based subsidies that go up as the cost of plans do — but tweak it in such a way as to make it more stingy and less sturdy. How is that? Well, it would tie its subsidies to much skimpier plans than Obamacare does, so that people would get about 15 percent less money than they do now. That, in turn, would push a lot of them into low-cost, high-deductible plans that they couldn't afford to use, especially poorer people who under the Senate bill would also be losing so-called cost-sharing subsidies that had given them a little extra help. In the case of someone making up to $18,090 (150 percent of the federal poverty level), the nonpartisan Kaiser Family Foundation estimates that their average deductible would go from $255 under Obamacare to $6,105 under the Senate plan.

This probably wouldn't bring premiums down either. If anything, the opposite. The problem is that the Senate bill would keep Obamacare's protections for people with preexisting conditions — at least, as we'll get to in a minute, in name — but not its penalties for people who don't buy insurance. This could very well lead to what's known as a death spiral: Premiums would shoot up because not enough healthy people had signed up, the healthy people who had signed up would drop their coverage because premiums had shot up so much, and this would repeat until eventually the insurance pool was entirely made up of sick people. This might be averted if, as is expected, Republicans add a six-month waiting period — the idea being that healthy people would be less likely to go uninsured if they knew they couldn't get a plan right away — for anyone who hasn't maintained continuous coverage. But, as the Brookings Institution's Matt Fiedler points out, it's not clear that that would be enough. In fact, it might even make things worse by adding a lot of red tape that healthy people might not have as much patience for.

But even if insurance markets didn't collapse, the markets for certain types of insurance might. In particular, for the kind of care that people with preexisting conditions need. That's because the Senate bill would make it easy for states to opt out of the rules requiring that every plan cover “essential health benefits” like mental health, maternity care and prescription drugs. This would probably create a two-tiered system that would quickly devolve into one. At first, healthy people who decided to get covered would probably go for bare-bones plans, and sick people who needed to get covered would be the ones getting more comprehensive care. But a plan that mostly sick people want is a plan that will become mostly unaffordable, until it might as well not be offered at all. A lot of sick people, then, would only be able to buy insurance that's no use if you are sick.

So if you think the problem with Obamacare is that deductibles aren't high enough, markets aren't wobbly enough, and sick people aren't on their own enough, well, the Senate bill is for you. That might be a small constituency, but a much bigger one is everyone who thinks that the problem with Obamacare is that a Democrat did it. That's who the Senate bill is really for. It lets Republicans say that they overturned Obamacare, which is all they actually seem to care about. Otherwise, they wouldn't be rushing to vote on a health-care plan that would make people pay more to get less. Campaign slogans — repeal and replace! — matter more than policy details.

Well, except when it comes to tax cuts. That's when Republicans get serious. They aren't content to just get rid of Obamacare's 3.8 percent surtax on investment income for couples making $250,000 or more — that's what the Senate bill is really about — but they also want to get rid of it yesterday, and stay rid of it tomorrow.

That last part, though, would take some doing. After all, there's a reason that Republicans talk about our fiscal future in quasi-apocalyptic terms. It's that it doesn't look conducive to tax-cutting. “A major debt crisis is inevitable,” now-Speaker of the House Paul D. Ryan wrote back in 2012, “if the U.S. government remains on its current unsustainable path” with “the ongoing sovereign debt crises in Greece and other highly-indebted European countries” providing “a cautionary tale for America.”

Now, this was never true — markets are still happy to lend to us for 30 years at a piddling 2.72 percent — but what was true was that health-care spending looked like it was going to make the GOP's brand of small-government conservatism untenable. The combination of the government having to pay for more people's care as the baby boomers hit retirement and that care costing a lot more as prices for it rise faster than almost anything else mean that the government is automatically set to grow over the next few decades — at which point taxes would have to go up.

Unless, of course, we cut Medicare and Medicaid. Ryan, for his part, prefers to do that by turning them from programs that guarantee people coverage into ones that merely contribute to it — which, when it comes to Medicaid, is exactly what both the House and Senate bills would do. Specifically, they would transform Medicaid from an open-ended program that grows as needed to one that's capped on a per-person basis and only grows according to inflation. The single difference between the two is that, starting in 2025, the Senate plan would pick a much lower rate of inflation for Medicaid to grow by. According to the Urban Institute, this would translate into cuts that are more than twice as big as the House's over the course of a decade — cuts that would not only preclude future tax increases but also make room for future tax cuts.

This isn't your father's social contract. It's your grandfather's. It would take us back to a time when the government didn't promise to take care of the sick and the needy, but only to help take care of them. There's a trillion-dollar difference between the two. A trillion-dollar difference that Republicans would plow into tax cuts for the rich. Now, normally they like to say that this would make the economy grow so much faster that everyone else would be better off, too, but they're not even bothering with that pretense today. Instead, they're just trying to give wealthy investors the biggest tax cut possible by having it apply to last year as well. Perhaps the idea is that that will incentivize people to invent time machines so they can create more jobs in the past.

It's an inspiring piece of legislation for everyone who thought Robin Hood was picking on the wrong people.