GOP senators can cut Obamacare taxes or preserve coverage for millions, but probably not both

WASHINGTON – As they take up the campaign to replace the Affordable Care Act, Senate Republicans face a critical choice between cutting taxes or preserving health coverage for millions of Americans, two competing demands that may yet derail the GOP push to roll back the 2010 health care law.

House Republicans, who passed their own Obamacare repeal measure last week, skirted the dilemma by cutting both taxes and coverage.

Their bill – embraced by President Donald Trump – slashed hundreds of billions of dollars in taxes, a key goal of GOP leaders and the White House as they seek to set the stage for a larger tax overhaul later this year.

At the same time, the House legislation cut more than $1 trillion in health care assistance to low- and moderate-income Americans, a retrenchment the nonpartisan Congressional Budget Office estimates would nearly double the ranks of the uninsured over the next decade to more than 50 million.

In the Senate, coverage losses on that scale are unacceptable to many rank-and-file Republicans whose states have seen major coverage gains under Obamacare. That makes the preservation of benefits one of the biggest challenges confronting Senate Majority Leader Mitch McConnell, R-Ky., and other GOP leaders.

“Coverage matters,” Sen. Bill Cassidy, R-La., said Tuesday on MSNBC’s “Morning Joe” program, noting the importance of preserving Medicaid spending in the current law. “To someone (who) is lower-income, you’re going to need those dollars to cover that person.”

Yet moderating cuts to Medicaid and other government health programs without driving up budget deficits could force Republican senators to also dial back the tax cuts that many in the GOP want.

“It’s not that complicated. . If you want to use money for tax reform, you can’t have it for health coverage,” said Gail Wilensky, a veteran Republican health policy expert who ran the Medicare and Medicaid programs under President George H.W. Bush. “You can’t do both.”

McConnell has convened a group of GOP senators – all of whom originally were white men – to develop Obamacare replacement legislation, though the panel largely excludes Republican lawmakers who are most concerned about coverage, including Cassidy.

The trade-off between cutting taxes and preserving Americans’ health protections reflects, in part, the legislative procedure that congressional Republicans have chosen to repeal the Affordable Care Act.

That process, known as budget reconciliation, allows Senate Republicans to pass their Obamacare repeal with a simple majority, rather than the 60-vote super-majority that is usually required to pass controversial legislation. (Republicans have only a 52-48 majority in the Senate.)

But to qualify for budget reconciliation under Senate rules, the bill must reduce the federal deficit over the next decade.

Tax cuts alone typically do the opposite, driving up budget deficits.

The tax cuts in the House Republican health care bill total more than $600 billion over the next decade, according to independent analyses by the Congressional Budget Office and the congressional Joint Committee on Taxation.

They include most of the major taxes enacted in the 2010 health law to fund the law’s program for extending health insurance to more than 20 million previously uninsured Americans.

On the chopping block are taxes on medical device makers and health insurance plans, which together account for about $165 billion in tax cuts over the next decade.

Couples making more than $250,000 a year (and single taxpayers making more than $200,000) would see two tax cuts, including one on investment income, that the budget office estimated would cost the federal government nearly $300 billion over the next decade. (That estimate may be revised down as House Republicans delayed one of the tax cuts in the final version of their bill.)

Also eliminated would be a host of limits on tax-free spending accounts that many Americans use for medical expenses. Republicans argue these taxes are unnecessary and even undermine efforts to control health care costs.

“It’s bad for economic growth,” House Speaker Paul Ryan, R-Wis., told Fox News during the House debate.

The tax on health plans, for example, is widely seen as contributing to higher premiums, as insurers customarily pass the costs along to consumers.

But eliminating so many taxes isn’t cheap.

So the Republican health care bill – known as the American Health Care Act – slashes hundreds of billions of dollars in federal health care spending, including an estimated $880 billion in federal money for Medicaid, the state-run government health plan for the poor that currently covers some 100 million Americans.

That would effectively cut federal Medicaid spending by more than a quarter over the next decade, an unprecedented reduction that independent analyses suggest would force states to sharply limit coverage for poor patients.

The House bill would also reduce insurance subsidies now available to low- and moderate-income Americans who get health plans through Obamacare marketplaces such as HealthCare.gov.

The reduction in federal aid would, in turn, dramatically increase the number of uninsured Americans. Overall, the Congressional Budget Office has estimated that the 24 million fewer people would have health coverage by 2026 under the original version of the House bill.

By contrast, the wealthiest Americans stand to get a large tax break. By 2023, families making more than $1 million would see their taxes decrease by an average of more than $50,000, an analysis by the independent Urban-Brookings Tax Policy Center suggests.

That means that in a country of more than 300 million people, nearly half of all the tax breaks in the House health care bill would go to only about 780,000 households.

The combination of tax breaks for wealthy Americans and historic reductions in assistance to low-income patients has fueled widespread criticism of the House GOP health care legislation, particularly on the left.

“The math is pretty clear,” said Edwin Park, vice president for health policy at the liberal Center on Budget and Policy Priorities. “They are sharply cutting Medicaid and insurance subsidies to pay for tax cuts.”

Whether GOP senators will be able to moderate the reductions in health care assistance remains unclear.

The early version of the House bill was projected to reduce the federal deficit by about $150 billion over the next decade, according to the Congressional Budget Office analysis.

That number has likely shrunk slightly, as House Republicans added some additional spending to the legislation before it passed last week. An updated budget analysis is expected soon.

Nevertheless, Senate Republicans likely still have at least $100 billion in budget savings that could be used to boost aid to low- and moderate-income patients without increasing the federal deficit.

“They have some money to play with,” said Rohit Kumar, a tax and health care advisor at consulting giant PwC who was a senior aide to former Senate Majority Leader Bill Frist, R-Tenn.

The problem for Senate Republicans is that still may not be enough to prevent unprecedented losses in health insurance coverage.