Say What? Senate Republicans May Keep Some of Obamacare's Taxes in Place

Republicans in the House and Senate may be world's apart when it comes to Trumpcare.

Sean Williams
Sean Williams
Jun 17, 2017 at 7:41AM
Health Care

Who needs soap operas when you can turn on the news and watch the Congressional seesaw over what should happen with healthcare in America?

When Donald Trump won the November presidential election, it was widely believed that the Affordable Care Act, the hallmark health legislation of Barack Obama's presidency that's more aptly known as Obamacare, would be on its way out in short order. This expectation was confirmed when Republicans managed to maintain control of both houses of Congress.

President Trump addressing Department of Homeland Security employees.

Image source: U.S. Department of Homeland Security, Flickr.

Healthcare reform is serious business

However, Trump and the GOP have come to terms with the realization that healthcare reform isn't easy.

The Republican health plan designed to repeal and replace Obamacare – which is being dubbed "Trumpcare" – didn't even get off the ground when it was first introduced in the House in March. The bill, officially known as the American Health Care Act (AHCA), failed to go to vote after conservative Republicans in the Freedom Caucus and more moderate Republicans wouldn't support it. The Freedom Caucus suggested that it failed to distance itself enough from Obamacare's Title I mandates, which state what insurers can and can't do, while moderates warned that Trumpcare took away too much from their constituents.

But a second version of the bill, introduced in early May, did find enough of a middle ground to pass the AHCA by the narrowest of margins in the House. Moderates were appeased by the addition of $8 billion in funds, on top of a previously allocated $100 billion, to help states manage the costs of high-risk patients -- a move known as the Upton Amendment. Meanwhile, the Freedom Caucus granted their support after the GOP added the MacArthur Amendment, which allows states the opportunity to apply for a waiver from Obamacare's mandated 10 minimum essential health benefits.

Trumpcare has since moved on to the Senate for debate.

Parents look at a laptop with concerned expressions, while one of their children looks on.

Image source: Getty Images.

Problems galore

But just because the AHCA moved on to the Senate doesn't mean it's anywhere near "passable." According to a number of senators, the bill, as it stands now, is dead on arrival.

The GOP is leaning on the reconciliation process (reconciliation involves passing bills that affect the federal budget) because it'll require only a majority vote, allowing it to lose up to two seats in the Senate, assuming Vice President Pence breaks the tie in favor of passage. The GOP currently holds 52 seats, allowing a 50-50 tie to be broken by Pence's vote. Currently, the Senate is nowhere near the 50/51 votes it needs to pass Trumpcare. The reason? The bill has a number of problems.

On the plus side, Trumpcare may very well lower long-term premium costs, making health insurance more intriguing for healthier, younger adults, and it does offer health insurance providers a more sustainable operating environment by giving them more plan-pricing freedoms.

On the other hand, the Congressional Budget Office's (CBO) scoring of Trumpcare 2.0 estimates that 23 million people will lose their coverage, including 14 million in 2018.  Trumpcare repeals the Advanced Premium Tax Credit and cost-sharing reductions, which respectively lowers premiums and the costs of going to the doctor for low- and middle-income folks, and replaces these subsidies with age-based tax credits. It's expected that low-income individuals and families could struggle to find affordable health coverage options under Trumpcare.

A doctor looks pensively at the camera.

Image source: Getty Images.

There's also serious concern about what Trumpcare may do to the elderly and people with pre-existing conditions. Insurers will be allowed to charge the elderly up to 67% more under Trumpcare than under Obamacare in relation to young adult premiums. In addition, insurers under Trumpcare may have the ability to offer plans with fewer essential health benefit requirements (depending on whether a state applies for the mandate waiver), and/or higher deductibles. They could also charge higher premiums to patients with pre-existing conditions, which is how things were before the implementation of Obamacare.

Related Articles

Republicans may have an unlikely middle ground

For Obamacare to be repealed and replaced by a Republican health plan, it's looking more and more likely that a middle ground will need to be reached. How does that happen? According to a handful of publications, including The Hill and Politico, Senate Republicans may opt to keep some of Obamacare's taxes in place. 

Wait, what? You read that right. The political party that fought so vehemently against Obamacare's taxes may choose to keep a few of them in place to pay for other aspects of their still-developing bill.

Senate Republicans are coming to terms with the idea that having 23 million people lose their health coverage isn't going to look good for them come election time, and it probably won't be good for America as a whole. Therefore, they're looking at ways to increase the age-based subsidies given to the elderly, as well as soften the end of Medicaid expansion, which is due to arrive at the beginning of 2020. Doing both could give the AHCA, or a completely rewritten health bill in the Senate, the desired momentum needed to get 50 or 51 votes. It may also get a thumbs-up from insurers that have come to rely on government-sponsored patients to bolster their bottom lines. 

A magnifying glass over IRS tax form 1040.

Image source: Getty Images.

However, the bill would need to generate additional revenue to cover these extra costs, and $133 billion would still need to be reduced from the deficit over a 10-year period (which was the figure the CBO estimated in its report from the passed House version). What's unclear is how Republicans might approach this revenue generation.

If I had to take an educated guess, I would assume the Shared Responsibility Payment, the penalty paid for not purchasing health insurance, is out. But, it's not out of the question that the net investment income tax, which added a 3.8% tax atop investment income for those earning $200,000 or more annually, could stick around. Also, the Medicare surtax, which is a 0.9% added tax on adjusted gross income above $200,000, could extend beyond the 2023 termination date noted in the House's version of the bill. Having the wealthy pay more is a plan that a majority of Americans are likely to support.

Senate Republicans are keeping a tight lid on their replacement bill, so it could be some time before we have concrete details to pass along. But it's looking to be a pretty good bet that the bill the House passed will look nothing like what the Senate could wind up approving. Can the two houses of Congress find their own middle ground? That remains to be seen.