Leaked draft offers glimpse of GOP Obamacare replacement
posted at 1:21 pm on February 24, 2017 by John Sexton
Politico reports today that a leaked draft of the GOP’s Obamacare replacement plan shows the House is not fiddling around the edges but moving toward full repeal and replacement of the law.
The legislation would take down the foundation of Obamacare, including the unpopular individual mandate, subsidies based on people’s income, and all of the law’s taxes. It would significantly roll back Medicaid spending and give states money to create high-risk pools for some people with pre-existing conditions. Some elements would be effective right away; others not until 2020.
The replacement plan would have no individual mandate. Instead, there would be a penalty of 30% for those who fail to maintain coverage. So people who wait until they get sick to sign up, as has been happening under Obamacare, will pay more. In place of the subsidies, the new plan would offer people tax credits of $2,000, with people over 60 getting double that amount. As for Medicaid expansion, states would have the option to continue it but federal support would end by 2020.
All of this is still going to cost a lot of money. The plan to cover those costs boils down to something similar to the Cadillac tax:
According to the document, there’s only one single revenue generator to pay for the new tax credits and grants. Republicans are proposing to cap the tax exemption for employer sponsored insurance at the 90th percentile of current premiums. That means benefits beyond that level would be taxed.
And while health care economists on both sides of the aisle favor tax-limits along those lines, politically it’s a hard sell. Both businesses and unions fought the Obamacare counterpart, dubbed the Cadillac tax.
The devil is in the details with proposals like this. The insidious part of the Cadillac tax was that it was designed to gradually ratchet down and eliminate the tax exemption for all employer sponsored insurance. We’ll see whether the GOP proposal has a similar design.
But if the GOP does anything close to what is described above then former Speaker Boehner was wrong when he suggested yesterday that the GOP would only wind up fixing Obamacare rather than repealing and replacing it. Removing the mandate and the subsidies ends the structure of the exchanges. I suspected the GOP might do that and then leave Medicaid expansion in place, but it sounds like they are going to end federal support for that as well. So this is not shaping up to be a repeal in name only.
Politico notes that the document is still preliminary since the GOP is waiting on scoring from the Congressional Budget Office. Depending what that scoring looks like, the shape of the replacement bill could still change significantly.