By John C. Goodman
Originally posted at Forbes, May 2016
Do you know how Obamacare is funded? That is, do you know where the money comes from that pays for the operation of the exchanges, the subsidies people get when they buy insurance and the expansion of Medicaid to millions of new enrollees in more than half the states?
I’ll bet that not more than 1 in 100 people know the answer to that question. No, make that 1 in 1,000. And most of those are probably inside the Washington, D.C. Beltway.
Yet this little known information, that the vast majority of voters have never heard about and have very little interest in, has been the focus of intense debate among Republican Party insiders – especially activist group insiders — for quite some time. In fact, it is disagreement over what to do about this one issue that is most responsible for the fact that Republicans have allowed six long years to pass by without agreeing on how to alter, amend, abolish or simply replace Obamacare.
Think of Obamacare as having two parts. One part is the spending/regulatory side. This is the part that mandates that people buy insurance, and subsidizes them if they do, and taxes them if they don’t. This is what most people think about when they hear the word “Obamacare.” This is the part that most people have in mind when they say the word “repeal.”
The other part is the revenue side. The Congressional Budget Office tells us that Obamacare will cost about $1.7 trillion over the next ten years. If more states expand Medicaid and if more people enroll in the exchanges – all things that were initially predicted – the cost will easily exceed $2 trillion.
Where does this money come from? A big chunk ($817 billion) consists of future cuts in Medicare spending — agreed to by AARP (because they expected a surge in their Medigap business) and by the doctors (AMA) and the hospitals (AHA) because they expected more fees. Then, there are taxes on the other special interests who helped give us Obamacare: drug companies, insurance companies, big business, big labor, etc. – all agreed to by the very entities that are now paying those taxes. There are hidden taxes on small fry items – everything from tanning salons to over-the-counter drugs. Finally, there are taxes on the rich – mainly hitting the top 10 percent of the income distribution.
Here is the bottom line from a political point of view and perhaps even from an ethical point of view: The vast bulk of the money that pays for Obamacare comes in the form of lower fees and higher taxes for the very people who sat behind closed doors and designed Obamacare in a way that would be good for them, but not necessarily good for the rest of us.
If you believe in replacing Obamacare, what should be done with all this money? Give it back to the special interests who gave us Obamacare? Not on your life. First, they don’t deserve it. Second, most are not even asking for their money back. And third, we need the money in order to fund a conservative vision of health reform – the kind of reform Obama and the Democrats should have given us in the first place.
A conservative thing to do (something Ronald Reagan surely would have championed) is to divide up all that money and give everyone an equal share in the form of a tax cut. And while we are at it, why stop with Obamacare? Why not do the same thing with all of the money the government uses to subsidize health care – both on the tax side and the spending side? We could all get an equal share, provided we use the money to pay health insurance premiums and make deposits to Health Savings Accounts. Then government could get out of the way and let individual choice and competition in the marketplace shape and mold our health care system.
As it turns out, bills to do just that were introduced last week by House Rules Chairman Pete Sessions (R-TX) and by Sen. Bill Cassidy (R – LA). Each individual and each family would get a tax credit generous enough to give them access to Medicaid-like insurance. If they and their employers spend more (unsubsidized) dollars, they could have more and better options.
Still, there are those who insist that if we don’t rescind the Obamacare revenues we have not “completely” repealed Obamacare and thus we will have broken a pledge to the voters (who again, don’t have any idea what the ObamaCare revenues are). This type of thinking has misled some of the best and brightest members of Congress and led to potentially disastrous consequences.
Remember: once you repeal all of the Obamacare revenues, you have no money left to insure the uninsured – including the 20 million or so that Obamacare is insuring. So unless you want to throw all those people out on the street, you have to find new money from some other source. That inevitably means cutting benefits and raising taxes for everyone else.
Take Tom Coburn, a doctor who was one of the most respected members of the Senate and a leader in health reform. Some time ago, Coburn and Paul Ryan devised a health reform that was similar in many ways to the Sessions-Cassidy bill. But after Obamacare became law, Coburn was persuaded that health reform had to involve repeal of all the Obamacare taxes. As a result, Sen. Coburn’s second stab at health reform:
- Repealed the Obamacare taxes on high incomes and on all the special interests that gave us Obamacare.
- Imposed a Cadillac tax on the health plans of employees.
- Reduced the subsidies in the individual market.
- Kept the cuts in Medicare and imposed new cuts in Medicaid spending.
In other words: a huge tax cut for the rich and for large corporations paid for by higher taxes and reduced benefits for everyone else, including ordinary workers; low-income families buying insurance in the exchanges; the poor, the disabled and nursing home residents on Medicaid; and the elderly and the disabled on Medicare.
Sen. Coburn was probably the most honest senator in the entire Senate. He would never dream of fashioning a health bill just to please a few special interests. But if the folks who sat behind closed doors and designed Obamacare were given carte blanche to redesign it, would their redesign look any different than Sen. Coburn’s redesign?
The Coburn II bill and many similar Republican proposals fit exactly into the way Democrats often try to portray Republicans – as tools of the rich who care nothing about anyone else.
My advice to the GOP: resist the image. Reject the thinking that leads to it.
Just Don’t Do It.