Do Republicans Have a Death Wish?

By Dr. John C. Goodman

Originally posted at Forbes, February 2017. 

Just when you thought things couldn’t possibly get better for the Republican party, a startling thought is cropping up on Capitol Hill and on K street. It’s being reinforced by the ugly reception Republicans are getting at Town Hall meetings around the country.

The thought: The Republican Party could actually lose control of the House of Representatives in the next election. The reason: health care.

By all rights, this should be the issue that propels the party to election victories year after year, indefinitely into the future. And it’s a gift from the Democrats. Republicans didn’t do anything to deserve it. Opportunity simply fell into their lap.

Think about it. The Democrats put as much as $2 trillion (over 10 years) on the table for health reform. Then, they screwed it up. All Republicans have to do is take the money and do a better job. How hard can that be? It’s a cake walk, unless self-destructiveness is part of your DNA.

There’s more. Most of the revenue that funds Obamacare comes from special interests who agreed to be taxed or agreed to take lower fees:

  • The AMA agreed to lower doctor fees.
  • The American Hospital Association (AHA) agreed to lower hospital fees.
  • AARP agreed to $850 billion in Medicare cuts, overall.
  • Insurance companies agreed to be taxed.
  • Drug companies agreed to be taxed.
  • Big business and big labor agreed to be taxed.
  • Wealthy Wall Street types agreed to higher taxes on capital.

These are the people who gave us Obamacare. They agreed to pay for Obamacare because they expected to profit from it. One large drug company estimates the annual cost to it of Obamacare is about $1 billion a year. But they are not asking for their money back. In fact, most of the groups listed above are not asking for their money back.

Even if they did ask for it back, who could possibly think they deserve it? Answer: The Republican leadership in Congress.

But before getting to the Republicans, let’s stick with the Democrats for a minute. They did something that is very, very difficult to do. So difficult, in fact, that I am reasonably sure Republicans could never have done anything remotely similar. The Democrats got all the major players in health care to cough up $2 trillion.

Take AARP. In agreeing to $850 billion in Medicare spending cuts, they agreed to cuts that are so severe even Medicare’s Chief Actuary said the measure will do serious harm to senior citizens in the future. Why did they do it? For money. AARP makes more off the sale of supplemental insurance (which was expected to soar under Obamacare) than it gets from member dues.

So, the Democrats got AARP to sell out the seniors. They got the AMA (which gets more money from the licensing of billing codes that it gets from member dues) to sell out the doctors. They got the AHA to sell out the safety net hospitals. They wrung concessions from the drug companies, the insurance companies, the device manufacturers, etc.

Would AARP do the same for Republicans? Not in your lifetime. What about the AMA? Not a chance. The AHA? No way.

So, the D’s did something for the R’s that the R’s could never have done on their own.

What can Republicans do with all that money? They can do a very Republican thing: enact a tax cut – one that is tied to health care. They can take all the Obamacare money plus all the other funds we use to subsidize private health insurance and create a universal health tax credit – the same amount for everyone, regardless of income. Tax cuts for the little guy in the form of a tax credit for health care is a bedrock Republican idea that in the past has been endorsed by Paul Ryan, John McCain and many others.

Unfortunately, the current Republican leadership – at least in the House – has lost its way. They seem bound and determined to undo the Democrat’s favor and give all that money back to the sponsors of Obamacare. But if the money goes away, how can we keep Donald Trump’s promise not to leave people out on the street with no insurance and no health care?

The Republican answer, incorporated in a half dozen proposals over the last three years: Shift the burden of health reform away from the special interests to the elderly and the disabled and middle class working families.

The first of these proposals was advanced in the Senate by Tom Colburn (R-OK), Richard Burr (R-NC) and Orrin Hatch (R-UT). It proposed a Cadillac plan tax on the health insurance of most employees – even those earning only the minimum wage. The proposal would have repealed every single tax on the special interests, but, remarkably, it retained all the cuts in Medicare.

Since then, there have been a slew of Republican proposals in similar vein. The most important difference among them is how to distribute the financial burden between Medicare cuts and higher worker taxes. According to the website One Nation, which appears to speak for the House leadership, the latest Republican plan will propose a smaller Cadillac tax but call for an additional $1.56 trillion of cuts in Medicare spending – over and above Obamacare cuts. That means the Republican proposal will cut spending for the elderly and the disabled by three times as much as Obamacare!

[Fair disclosure: Along with former Medicare Trustee Thomas Saving and his colleague Andrew Rettenmaier, I have advocated fundamental reform (privatization) of Medicare. However, our proposed cuts in future spending are offset by giving young people the opportunity to save in private accounts that grow through time and it guarantees everyone the right to return to Medicare if things don’t turn out as planned. The leadership proposal has no offsetting saving opportunities and no guarantee.]

To make matters worse, virtually all new government spending for private health insurance under the Republican proposals is going into what has become the most dysfunctional part of the health care system – the individual insurance market. This is where premiums are spiraling and there is a race to the bottom on quality and access to care. There is no new subsidy for the employer market.

Consider what this means for a moderate-income worker with employer provided health insurance. He will (1) pay a Cadillac tax on his health insurance to help subsidize the individually purchased insurance of others and (2) his tax subsidy from the federal government will be lower than the federal tax subsidy for the people he is subsidizing – even if those people earn more than he does!

How will this play politically? Consider that the single most irritating feature of Obamacare for labor unions is that their members are paying a special tax to subsidize health insurance for their non-union competitors. They will be even less happy with Republican solutions.

Fortunately for the GOP, there is one Republican plan that is different. It (1) is shovel ready, (2) meets Donald Trump’s objectives, (3) avoids serious economic problems and (4) avoids the impossible political obstacles described here. It is a bicameral proposal by Rep. Pete Sessions (R-TX) and Sen. Bill Cassidy (R-LA).

I believe it is a bill that can get Democratic support.


This article was originally published at Forbes on February 13, 2017.