Don’t ‘Fix’ Obamacare
In the official Republican response to President Obama’s State of the Union address on Tuesday night, newly elected Iowa senator Joni Ernst stressed the importance of combating liberals’ “stale mindset” that has “led to failed policies like Obamacare,” while reaffirming Republicans’ commitment to “fighting to repeal and replace” that disastrous legislation. To find an opportunity to match their words with actions, Republicans won’t have to wait long.
On March 4, the Supreme Court will hear oral arguments in King v. Burwell. Obamacare’s plain text says that its taxpayer-funded subsidies can only be paid out through state-based exchanges, yet the Obama administration has been paying out through federal exchanges as well. If the Supreme Court rules in King that Obama has been distributing subsidies in violation of Obamacare’s written text—that he has been paying them out illegally—millions of Americans across the 36 states with federal exchanges will lose their subsidies and, in most cases, their health insurance. The case should be decided shortly before July 4, and the way in which Republicans prepare for the ruling will go a long way toward showing how genuine their commitment to repealing and replacing Obamacare is.
Republicans can respond to a ruling finding the federal-exchange subsidies illegal in two main ways: They can negotiate “fixes” to Obamacare with the administration, or they can propose effectively repealing and replacing Obamacare in 36 states. The first response would help take the wind out of repeal’s sails; the second would help set the stage for victory in November 2016 and full repeal in January 2017.
Of late, however, Republicans and their corporate allies seem more focused on “fixing” Obamacare than on repealing and replacing it. Asked about Obamacare last week, Chamber of Commerce president Thomas Donohue Jr. declared, “We are not working for repeal.” The new Republican Congress has yet to vote for repeal, but it has voted for a “fix.” Changing Obamacare’s definition of full-time work from 30 to 40 hours simply tweaked the legislation, needlessly putting GOP fingerprints on it.
If the Court shuts the subsidies off in 36 states, it will be impossible for Republicans to blame Obama and otherwise ignore the issue, for the lost subsidies would be substantial. A 60-year-old married couple in Milwaukee, Wisconsin, making $20,000 a year, for example, gets a whopping $16,549 a year in Obama-care subsidies. If the Court rules that Obama has been providing such subsidies lawlessly, that couple will instead get nothing.
In such a scenario, Obama will petulantly tell Congress to pass a bill to turn the subsidy spigot back on. The weaker-kneed Republican governors and state legislators will angle to set up state-based exchanges to keep subsidies flowing. Congressional Republicans will be pressured to negotiate minor “improvements” to Obama’s government takeover of American medicine in exchange for turning the subsidies back on, and the Chamber of Commerce will be ready with a long list of corporate-backed “fixes.”
These actions, of course, would clash with Republicans’ public pledges to repeal and replace Obamacare. The voters who have generously boosted Republican tallies by 14 seats in the Senate and about 70 seats in the House since the start of the Obamacare debate didn’t send the GOP to Washington to have it take partial ownership of the Democrats’ 2,700-page overhaul and help cement it as a permanent fixture of American life.
Instead, if the Court rules that Obama has been paying out subsidies illegally, Republicans could propose a conserv-ative alternative that would effectively repeal and replace Obamacare in the affected states—and in any others that would like to jump ship to the GOP’s alternative.
Central to a winning conservative alternative is refundable, non-income-tested tax credits. These tax credits need to be refundable—that is, available even to those who don’t pay taxes—because most people who stand to lose subsidies
pay little or nothing in income tax and therefore would get little or nothing from a tax deduction or a nonrefundable tax credit. For Republicans to have political leverage in a subsequent showdown with the president, they have to help affected citizens. All Obamacare regulations and mandates would need to be waived in the 36 affected states—and in any of the 14 others that choose to abandon their state-based exchanges—so that people could buy insurance of their own choice on the open market, rather than being forced to buy Obamacare-compliant insurance through HealthCare.gov.
In his State of the Union address, Obama repeatedly talked about “middle-class economics,” which he explained as “the idea that this country does best when everyone gets their fair shot, everyone does their fair share, and everyone plays by the same set of rules.” But that hardly describes Obama-care. It treats everyone differently, bestowing almost all of its lavish benefits on a select few—the near-poor and near-elderly—while sticking the middle class with the tab.
For example, a 39-year-old single woman in Fairfax County, Virginia, who makes $35,000 a year doesn’t get a dime in Obamacare subsidies—she’s too young and too middle class. She would need to be at least 40, make less than $35,000, or both. Meanwhile, a married 60-year-old couple down the street that makes $60,000 gets $8,632 in subsidies. If that same couple makes $65,000, they get $0. And sometimes it’s not just the middle class that gets a raw deal. If a 45-year-old married couple in that same county has two kids and makes $25,000, they get $10,507 in Obamacare premium subsidies, plus additional subsidies for out-of-pocket costs. If they make $20,000—$5,000 less—they get nothing, although their kids (only their kids) get to go on Medicaid. If they didn’t have kids, they’d get $7,243 instead of $0.
The Republican alternative could do away with all this nonsense and offer simple, understandable tax credits that would finally end the longstanding unfairness in the tax code. For 70 years, Americans who have bought insurance on their own haven’t generally gotten a tax break like the one enjoyed by their neighbors who have insurance through their employers.
Republicans would do well to make their tax credits very simple, so that everyone knows what they’d be getting—offering, say, $1,200 for those under 35 years of age, $2,100 for those between 35 and 49, $3,000 for those over 50, and $900 per child. The 39-year-old woman who makes $35,000 and gets nothing under Obamacare would get a $2,100 tax credit (which, in most cases, would be entirely a tax cut) to purchase insurance of her—not Obama’s—choice. The 45-year-old married couple with two kids that makes $20,000 and gets nothing under Obamacare would get a $6,000 tax credit. The Republican tax credits would significantly reduce federal spending compared with Obamacare’s subsidies, while benefiting far more people.
The American people want to get rid of Obamacare. They are merely waiting for Republicans to unveil a winning conservative alternative—one that fixes what the federal government had broken before Obamacare was passed and made things so much worse. King v. Burwell offers Republicans a welcome opportunity and a time for choosing: Do they want to be the party that “fixes” Obamacare and thereby helps cement its place in American society, or the party that repeals and replaces it with real reform?
© 2015 Weekly Standard LLC. Reprinted with permission.