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Republicans can’t agree on how to replace Obamacare after repeal

Republicans are working on a plan to replace the Affordable Care Act this spring

February 27, 2017

Ask a Democrat to describe the government’s role in healthcare, and he or she will say it’s to ensure everyone gets insurance.

Pose the question to a Republican, and you’ll get all sorts of answers.

Republicans are poised to erase much of Obamacare. But two months into the new Congress, they’re struggling to sketch in a replacement with broad enough backing to pass both the House and Senate. They agree the government needs more boundaries, but they’re far from in agreement on where to draw those lines.

“That’s what we continue to wrestle with,” Sen. John McCain, R-Ariz., told the Washington Examiner.

Interviews with members of Congress over the past month highlighted the divisions, which are hanging like a dark cloud over congressional GOP leaders as they try to build consensus around a plan to replace the Affordable Care Act this spring, even as they repeal big parts of the law.

Virtually every Republican says the sweeping 2010 healthcare law represents too much interference by the federal government. They dislike its heavy spending on subsidies helping low-income Americans to purchase private plans and how it beefed up the Medicaid program, the two major ways the law has halved the U.S. uninsured rate.

They’re also averse to its taxes on insurers and medical device makers to help pay for the law, and its regulations requiring plans to cover more services, which has given people access to more care without out-of-pocket costs but has also pushed premiums and deductibles upward.

Republicans are most comfortable when they’re talking about easing regulations and shrinking the federal footprint. Lifting insurer requirements, allowing people to buy leaner plans, expanding the use of tax-free health savings accounts and giving states more control over their Medicaid programs will result in cheaper, more widespread coverage, they argue.

But hard realities are also dogging Republicans as they work toward replacing the law with their own set of ideas: Health insurance, as it stands right now, is just too expensive for most low-income Americans to buy on their own without some help from the government.

And while they nearly all feel healthcare consumes too much of the federal budget, more than a quarter, they don’t agree on how much to trim it.

“There are people who want to see the cost curve bent perhaps further than others,” said Rep. Kevin Cramer of North Dakota. “My main concern is it’s bent in the right direction.”

If GOP leaders want to pass an Obamacare replacement this year as they’ve promised, they’ll have to make hard decisions about where federal assistance begins and ends, and get enough in their party to sign on.

Right now, Republicans don’t even agree on the end goal. Some say it’s to get everyone covered. Some say it’s to ensure everyone has access to affordable coverage, even if they don’t necessarily buy it. Others want to work on just lowering the cost of insurance and let the rest work itself out.

McCain and other moderates are generally in the “get everyone insured” camp.

“I think there has to be a comprehensive plan that provides some level of healthcare to every American citizen,” said McCain, who introduced his own healthcare proposal during his 2008 presidential campaign.

“That doesn’t mean everyone gets to go to Mayo clinic or Sloan Kettering, but it does mean they have to be provided a level of healthcare that sustains life,” McCain said.

Rep. Tom MacArthur, R-N.J., is one of just nine Republicans who recently opposed a budget bill to begin repealing the healthcare law, saying he doesn’t want to repeal the law until it can be replaced at the same time. No American should lack coverage, period, MacArthur told the Washington Examiner.

“I have said before — and I believe strongly — no American should be without any health insurance,” MacArthur said.

That question of actual coverage versus merely access to coverage is a key distinction for Republicans. It heavily influences how they view the role of federal assistance in an Obamacare replacement, and how big or small they want to make state Medicaid programs for the poorest Americans and subsidies for the slightly better-off.

“Republicans disagree on the objective of this alternative,” said Chris Jacobs, a former Republican Capitol Hill staffer. “Is the objective covering as many people as Obamacare, or is it lowering costs?”

Health and Human Services Secretary Tom Price wouldn’t bite last month when Senate Democrats demanded in his confirmation hearing that he commit to covering just as many Americans in an Obamacare replacement.

“What I commit to, senator, is working with you and every single member of Congress to make certain we have the highest quality healthcare and that every single American has access to affordable coverage,” Price told Finance Committee ranking member Sen. Ron Wyden, D-Ore.

Price and other conservatives feel the government should take steps toward making affordable coverage generally available to Americans, but doesn’t necessarily need to guarantee that every person can buy a plan. They emphasize the idea of access so people can make their own choices about what to purchase.

Sen. Jeff Flake of Arizona told the Washington Examiner he wants to make sure everyone has “access” to affordable healthcare and that “we don’t have barriers that prohibit that.”

Sen. Ted Cruz of Texas, who largely built his political career around railing against Obamacare, said Americans don’t have a right to federal assistance in paying for health insurance. And enrolling in federal programs such as Medicaid doesn’t ensure access anyway, he said, noting the difficulty some enrollees have in finding doctors who will see them.

“The government giving you a piece of plastic in your wallet is not the same thing as having access to healthcare,” Cruz said.

Sen. Rand Paul of Kentucky and the conservative House Freedom Caucus have unified around a plan that seeks primarily to lower the underlying cost of coverage so people can buy it on their own, with little to no government help. The plan would also roll back Obamacare’s Medicaid expansion.

The proposal, according to Paul, would make plans cheaper by prompting more people to actively shop for coverage on their own, instead of just relying on their employer to select a plan. They would also be able to put more money into tax-free accounts to pay for services, which would enable them to choose a higher-deductible plan in exchange for lower monthly premiums.

The result will be cheaper insurance, reducing the need for federal assistance at all, Paul said.

“If you develop a real marketplace, it will drive prices down,” he said.

That’s how Paul defends his support for a tax deduction to buy health insurance, over the refundable, age-based tax credits that House Speaker Paul Ryan wants. Unlike a credit, available even to people who don’t pay taxes, a deduction would only reduce a person’s taxable income.

Tax credits, even if they’re age-based instead of income-based like under Obamacare, are still a government subsidy, say Paul and other conservatives who are skeptical of the plan the House committees are working on under Ryan’s direction.

“It’s essentially a subsidy by another name,” Paul said. “So Obamacare had subsidies. If we call them refundable tax credits, have we really done anything other than change the name?”

Paul and other conservatives are lobbing a similar criticism at an Obamacare replacement proposed by Sens. Bill Cassidy and Susan Collins, which would allow states to essentially keep the healthcare law in place if they chose, or develop an alternative system. That approach would just keep Democrats’ healthcare around forever, they say.

“We believe the Collins-Cassidy plan really just institutionalizes the Affordable Care Act in some ways,” said Freedom Caucus co-chairman Rep. Mark Meadows. “It says if you like your Obamacare, you can keep it, and I don’t know of any conservatives that support that position.”

Conservatives say they’re withholding judgment on the plan being guided by Ryan, but the disputes over tax deduction versus credit are one aspect that could bungle efforts toward an Obamacare replacement. Once the Congressional Budget Office scores the plan, estimating how much it would cost and how many people it would cover, there will be even more details to potentially divide members of Congress.

There’s the question of the size of the subsidies, which will almost certainly be smaller than the ones available under Obamacare. Ryan wants credits that would be available to anyone without employer-sponsored coverage, based on their age. Young people would get less, older people would get more.

And then there’s the tricky question of how to handle the law’s Medicaid expansion, which expands the program to people earning up to 138 percent of the federal poverty level. Republicans want to give states more control over the program and reduce federal spending on it. But they’ve reached no decisions on how big federal contributions should be, or how to equalize matters between the states that expanded Medicaid and the 19 that didn’t.

“Whether it’s set at 138 percent of poverty, whether it’s at 100 percent of poverty, whether it’s at 150 percent of poverty, how do you make it fair in every single state?” asked Meadows, R-N.C.

Healthcare is a particularly hard policy area for Republicans, who have traditionally taken a backseat to Democrats on the issue.

Longstanding federal programs such as Medicare and Medicaid are uncomfortable terrain for many Republicans, particularly conservatives, who walk a fine line between criticizing the programs’ doctor shortages and heavy federals costs while still reassuring some 120 million enrollees that they’ll protect their benefits.

And the differences over federal assistance and coverage goals are apparent in the dozen or so different healthcare plans Republicans have proposed over the past few years. Besides the Freedom Caucus, Ryan and Cassidy/Collins plans, there are proposals from Price, the Republican Study Committee and from Sens. Orrin Hatch, Richard Burr and former Sen. Tom Coburn.

“Everyone has their own plan,” said Rep. Fred Upton, former chairman of the House Energy and Commerce Committee.

The upside for Republicans is that the wave of proposals reflect a surge in GOP interest in healthcare policy after decades of Democrats dominating the issue.

Bob Moffit, a senior fellow at the Heritage Foundation who served in the Department of Health and Human Services under the Reagan administration, recalls that few Republicans knew much at all about healthcare policy in the 1980s and 1990s. Beyond Rep. Bill Thomas of California, who chaired the House Ways and Means Committee, there were few knowledgeable Republicans beyond that.

“People who really understood this stuff were basically overwhelmingly on the Left,” Moffit said. “Conservatives had a pretty thin bench.”

Part of the challenge for Republicans is they’re not starting with a blank page. Congress passed Medicare and Medicaid in 1965, on a bipartisan basis. Republicans emphasize they don’t want to remove those safety nets, but they’ve been increasingly uncomfortable with the size of both programs, which now cover one in five Americans.

And before the federal entitlement programs, Congress enacted the employer tax exclusion in the 1950s, which gave rise to the current system of employer-sponsored coverage, which many blame for driving up prices because consumers don’t shop for healthcare in the same way they buy other products.

Many Republicans strike a tone of resignation as they discuss the situation. It’s not ideal, but there are political realities, they say.

“Nobody who believes in free market and the ability to bargain to drive down prices would construct a system like we have right now,” Flake said.

“We have Medicaid, we have Medicare,” said Rep. Jim Jordan, R-Ohio, when asked what the government’s role should be in providing Americans with health coverage. “I think we’ve already crossed that bridge.”

Preserving some kind of safety net while defining the role of the state versus the federal government is “the most difficult of debates going on right now,” Meadows said.

“Obviously the government has a role in healthcare with Medicare and Medicaid, so there is a federal role already,” he said. “The limited scope of where we should be in terms of providing a safety net is a critical question.”

Republicans, who generally like to emphasize broad principles of limited government, may also be less willing to embrace the political downsides of enacting healthcare reform. When former President Barack Obama and Democrats passed the Affordable Care Act in 2010, they agreed that it must dramatically expand coverage to the uninsured, even though it would cost money to do so and might mean insurance could become more expensive for some.

Republicans, by contrast, want to repeal the healthcare law’s taxes that helped pay for the law while still retaining some subsidies. And the larger the subsidies available, the more people will get covered, but the more their replacement will cost. At some point, they’ll have to embrace the realities and brace themselves for political criticism.

“I think the problem that Republicans have is any decision you make has trade-offs,” said Tevi Troy, a former deputy HHS secretary under George W. Bush.

Troy and other conservative health policy thinkers emphasize the commonalities among Republicans on the topic. There’s wide agreement that the government needs to get Medicare, projected to become insolvent in 2028, on a firmer financial footing. States should have more control over how to run Medicaid. People should be able to buy leaner insurance plans that also cost less. They should be able to put more money into tax-free health savings accounts.

Figuring out how to do all that while still retaining a safety net is the question Republicans on Capitol Hill are trying to tackle.

“That’s the issue dividing the conference right now,” said Rep. Dave Brat of Virginia. “You got to sort that out.”