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Good article, and suggestion, on HC costs, etc.
Posted on: March 24, 2017 at 08:52:32 CT
GA Tiger MU
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Here’s How 51 Senators Can Reduce Premiums
The secret to repealing ObamaCare’s regulations through reconciliation is buried in the Ryan bill.
As this week’s jousting between Speaker Paul Ryan and the Freedom Caucus makes clear, the Republican Party’s conservative and pragmatic wings don’t always agree. But there’s consensus on this: The American Health Care Act, the GOP’s bill to repeal and replace ObamaCare, doesn’t do enough to make insurance more affordable.
Here’s how Sen. Ted Cruz and Rep. Mark Meadows put it last week in this newspaper’s online edition: “First, we must lower insurance premiums. Nothing matters more. The current House bill would not achieve this, because it doesn’t repeal all of ObamaCare’s insurance mandates.”
The trouble is the Senate’s rules. Republican leaders are counting on passing the AHCA through the budget reconciliation process, which requires only 51 votes, bypassing a filibuster. But for a bill to go through reconciliation, every provision must be budget-related, with clear relevance to either taxing or spending. GOP leaders expect the Senate parliamentarian to rule that repealing ObamaCare’s regulations through the AHCA would have only incidental fiscal consequences.
That’s due to a flaw in how the bill’s tax credits are designed. For nearly all Americans with low and middle incomes—the ones most likely to use the tax credits to buy insurance—the amount of financial assistance the AHCA offers is constant, regardless of their circumstances. A 40-year-old gets a $3,000 tax credit, whether he makes $13,000 a year or $70,000. It doesn’t matter if he lives in a state with high or low costs. And that $3,000 doesn’t depend on how much the federal government regulates the private insurance market.
That last bit is the important part. The AHCA’s tax credits don’t vary based on the regulatory environment. So from a parliamentary standpoint, repealing ObamaCare’s regulations is fiscally incidental. But the AHCA’s tax credits don’t have to be structured that way.
The bill itself contains a model for how to make repealing insurance regulations more relevant to the budget. Section 202 of the AHCA contains a transitional schedule of tax credits that would apply only in 2018 and 2019. These tax credits vary by both age and income, and they are set up so that they cap Americans’ exposure to high premiums.
Take a childless 40-year-old making $25,000. Under Section 202, he would be expected to pay 6.3% of his income—roughly $1,500—for out-of-pocket premiums. The tax credit covers the rest. So if he buys a policy that costs $5,000 a year, the tax credit would be $3,500.
If the AHCA’s long-term tax credits for 2020 and beyond were structured more like Section 202’s, repealing more of ObamaCare’s insurance regulations would, in fact, be relevant to the budget. That’s because rolling back regulations would lower premiums, resulting in smaller tax credits.
Say that a new and improved AHCA reduced premiums 25%. Our 40-year-old’s premium would drop to $3,750. He would pay the same $1,500 out of pocket, but the tax credit would be only $2,250, with the savings accruing directly to the federal fisc. In other words: Deploying Section 202’s system of capping Americans’ exposure would make repealing more of ObamaCare germane to the budget. That would allow Republicans to do more through reconciliation while still passing muster with the Senate’s parliamentarian.
Providing additional support to low-income individuals need not increase the deficit, so long as the subsidies that the AHCA offers to upper-income individuals are also reduced.
There are two additional benefits to deploying Section 202’s schedule for 2020 and thereafter.
First, it would protect low-income Americans in their 50s and 60s from spikes to their out-of-pocket premiums. Under the AHCA’s current design, a 60-year-old making $25,000 a year would get a flat tax credit of $4,000. But premiums in this age range can be high—say, $13,000—and out-of-pocket costs can be unaffordable. Under Section 202, however, our 60-year-old would be expected to pay 8.3% of income—roughly $2,100. The tax credit would expand to pick up the remaining $10,900.
Second, extending Section 202 would aid the transition away from ObamaCare’s Medicaid expansion, because those formerly enrolled in Medicaid would receive enough assistance to afford coverage in the AHCA’s new consumer-driven insurance market.
If congressional leaders make this simple change—continuing Section 202’s tax credits past 2019—they can kill three birds with one stone: repealing more of ObamaCare, lowering premiums for everyone, and making coverage especially affordable for the working poor.
Mr. Roy is president of the Foundation for Research on Equal Opportunity and a former policy adviser to Mitt Romney, Rick Perry and Marco Rubio.
The secret to repealing ObamaCare’s regulations through reconciliation is buried in the Ryan bill.
As this week’s jousting between Speaker Paul Ryan and the Freedom Caucus makes clear, the Republican Party’s conservative and pragmatic wings don’t always agree. But there’s consensus on this: The American Health Care Act, the GOP’s bill to repeal and replace ObamaCare, doesn’t do enough to make insurance more affordable.
Here’s how Sen. Ted Cruz and Rep. Mark Meadows put it last week in this newspaper’s online edition: “First, we must lower insurance premiums. Nothing matters more. The current House bill would not achieve this, because it doesn’t repeal all of ObamaCare’s insurance mandates.”
The trouble is the Senate’s rules. Republican leaders are counting on passing the AHCA through the budget reconciliation process, which requires only 51 votes, bypassing a filibuster. But for a bill to go through reconciliation, every provision must be budget-related, with clear relevance to either taxing or spending. GOP leaders expect the Senate parliamentarian to rule that repealing ObamaCare’s regulations through the AHCA would have only incidental fiscal consequences.
That’s due to a flaw in how the bill’s tax credits are designed. For nearly all Americans with low and middle incomes—the ones most likely to use the tax credits to buy insurance—the amount of financial assistance the AHCA offers is constant, regardless of their circumstances. A 40-year-old gets a $3,000 tax credit, whether he makes $13,000 a year or $70,000. It doesn’t matter if he lives in a state with high or low costs. And that $3,000 doesn’t depend on how much the federal government regulates the private insurance market.
That last bit is the important part. The AHCA’s tax credits don’t vary based on the regulatory environment. So from a parliamentary standpoint, repealing ObamaCare’s regulations is fiscally incidental. But the AHCA’s tax credits don’t have to be structured that way.
The bill itself contains a model for how to make repealing insurance regulations more relevant to the budget. Section 202 of the AHCA contains a transitional schedule of tax credits that would apply only in 2018 and 2019. These tax credits vary by both age and income, and they are set up so that they cap Americans’ exposure to high premiums.
Take a childless 40-year-old making $25,000. Under Section 202, he would be expected to pay 6.3% of his income—roughly $1,500—for out-of-pocket premiums. The tax credit covers the rest. So if he buys a policy that costs $5,000 a year, the tax credit would be $3,500.
If the AHCA’s long-term tax credits for 2020 and beyond were structured more like Section 202’s, repealing more of ObamaCare’s insurance regulations would, in fact, be relevant to the budget. That’s because rolling back regulations would lower premiums, resulting in smaller tax credits.
Say that a new and improved AHCA reduced premiums 25%. Our 40-year-old’s premium would drop to $3,750. He would pay the same $1,500 out of pocket, but the tax credit would be only $2,250, with the savings accruing directly to the federal fisc. In other words: Deploying Section 202’s system of capping Americans’ exposure would make repealing more of ObamaCare germane to the budget. That would allow Republicans to do more through reconciliation while still passing muster with the Senate’s parliamentarian.
Providing additional support to low-income individuals need not increase the deficit, so long as the subsidies that the AHCA offers to upper-income individuals are also reduced.
There are two additional benefits to deploying Section 202’s schedule for 2020 and thereafter.
First, it would protect low-income Americans in their 50s and 60s from spikes to their out-of-pocket premiums. Under the AHCA’s current design, a 60-year-old making $25,000 a year would get a flat tax credit of $4,000. But premiums in this age range can be high—say, $13,000—and out-of-pocket costs can be unaffordable. Under Section 202, however, our 60-year-old would be expected to pay 8.3% of income—roughly $2,100. The tax credit would expand to pick up the remaining $10,900.
Second, extending Section 202 would aid the transition away from ObamaCare’s Medicaid expansion, because those formerly enrolled in Medicaid would receive enough assistance to afford coverage in the AHCA’s new consumer-driven insurance market.
If congressional leaders make this simple change—continuing Section 202’s tax credits past 2019—they can kill three birds with one stone: repealing more of ObamaCare, lowering premiums for everyone, and making coverage especially affordable for the working poor.
Mr. Roy is president of the Foundation for Research on Equal Opportunity and a former policy adviser to Mitt Romney, Rick Perry and Marco Rubio.
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Good article, and suggestion, on HC costs, etc. - GA Tiger MU - 3/24 08:52:32
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