Sasse Steps Up

Obamacare by from The Weekly Standard, March 5, 2015

Ben Sasse of Nebraska, who rode his opposition to Obamacare to a seat in the Senate, has introduced legislation that should help Republicans avoid turning a potential victory at the Supreme Court into a defeat for the cause of repeal.  Sasse’s bill, introduced yesterday evening, is designed to keep Republican governors and state legislators from setting up state-based exchanges in the wake of a favorable ruling in King v. Burwell, and to keep Republican congressional leadership from negotiating “fixes” to Obamacare with President Obama in the wake of the same.  At the same time, Sasse’s bill wouldn’t turn the Obamacare subsidies back on, and it won’t prevent Republicans from uniting behind a proposal to let each state choose whether to switch to a conservative alternative that would effectively repeal and replace Obamacare in the state.

Senator Sasse’s bill, which is intended to be transitional and encourage further consideration of alternatives to Obamacare, has three main parts.  First, it would provide COBRA-like protection to anyone who was compelled by Obamacare’s unprecedented individual mandate to buy federally approved health insurance.  COBRA, signed into law by President Reagan 30 years ago, allows those with employer-based insurance to keep it for 18 months at its current price if they leave or lose their job.  Similarly, Sasse’s legislation would allow those with Obamacare-compliant insurance to keep it for 18 months at its current price and not be forced to renew their policy through an Obamacare exchange.

Second, the bill would ban the Obama administration from subcontracting with states to set up phony “state-established exchanges” that are really federal exchanges.

Third, the bill would provide refundable tax credits to help keep people from losing their health insurance.  These tax credits would be distinct from Obamacare’s subsidies and would not be allocated using Obamacare’s byzantine subsidy formula.  Instead, the tax credits would simply cover 65 percent of a person’s or family’s current premiums, provided that this tally wouldn’t exceed what that person or family was getting under Obamacare.

Take a family of five living in Milwaukee, Wisconsin with an income of $30,000 and parents aged 59 and 54.  If they’re enrolled in Obamacare’s second-cheapest “silver” plan, they currently receive a whopping $20,142 in taxpayer-funded Obamacare premium subsidies, plus further lavish subsidies to help cover their out-of-pocket costs.  Under Sasse’s proposal, they would have to settle for a tax credit of $13,484 (65 percent of the $20,745 premium).  This would save taxpayers a ton of money while still being quite generous.  (A 30-year-old single woman in Milwaukee who makes $37,000 and gets just $7 in Obamacare subsidies would presumably consider this family’s modified financial assistance to be extremely generous.)

These tax credits would be temporary, phasing out over 18 months.  Their value would remain constant (covering 65 percent of premiums) for six months before dropping to 60 percent of premiums in the seventh month, 55 percent in the eighth, and so on.  By the 18th month, they would cover just 5 percent of premiums before disappearing altogether a month later, at about the same time that the next president would mercifully take office.

These tax credits would not be financed using Obamacare’s revenue streams.  Instead, they would be paid for by closing a loophole that has been exploited by Department of Health and Human Services bureaucrats, who have been approving tens of billions of dollars in unauthorized Medicaid spending.  The best guess based on a Government Accountability Office study is that closing this loophole would save about $31.5 billion over 18 months, more than enough to cover the value of the tax credits.

Sasse’s proposal is helpful to the cause of repeal in a number of ways:

First, it takes pressure off of Republican governors and state legislators, many of whom, in the absence of a proposal along these lines, could reliably be counted upon to cave and set up state-based Obamacare exchanges.  Such state-based exchanges would prevent people from being left high and dry as a result of a Supreme Court ruling that the Obama administration has been lawlessly paying out the subsidies (through federal exchanges) on which these people are counting.  But setting up such state-based exchanges would entail a massive Republican expansion of Obamacare that must be avoided.  Sasse’s proposal helps to avoid that.

Second, it wouldn’t “fix” Obamacare.  It makes no effort to reform it or make it more market-based.  It offers tax credits apart from it to help transition people off of it.

Third, it helps remove the temptation for Republican congressional leaders to negotiate “fixes” to Obamacare with Obama.  Such “fixes” are the likely price that congressional leadership would demand in exchange for turning Obamacare’s subsidies back on.  But Republicans shouldn’t be in the businesses of “fixing” Obamacare; they should be in the business of repealing it and replacing it with a conservative alternative.  Negotiating “fixes” is the worst thing they could do — far worse than turning the subsidies back on temporarily in exchange for nothing.  Sasse’s bill helps prevent the “fix it” caucus from taking the lead.

Fourth, since the temporary tax credits would be phased out (presumably yielding to a full alternative whose tax credits would end the inequality in the tax code, rather than merely helping people transition off of Obamacare), they wouldn’t lend themselves to being perfunctorily extended at the end of 18 months.  (If anything, the phase-out should perhaps be more gradual, with the tax credits’ value dropping to only 50 percent or so of the cost of premiums by the end of 18 months — given that the same Republicans who might otherwise set up state-based exchanges or negotiate Obamacare “fixes” won’t realistically sit idly by and let people’s tax credits fall from 65 percent to 5 percent of their premiums before a new president can take office.)

Fifth, because the tax credits would only go to people who are currently getting Obamacare subsidies, the proposal would effectively freeze enrollment in the Obamacare exchanges, rather than letting it balloon and thereby letting Obamacare get more entrenched.  On our current course, the CBO projects that the Obamacare exchanges will cost more than twice as much next year ($66 billion) as this year ($32 billion), as another 9 million people will enroll.

Sixth, the proposal would save billions — presumably tens of billions — in taxpayer dollars over the next year and a half, in relation to the cost of the Obamacare subsidies.

In short, Sasse’s bill reduces the likelihood of having a favorable ruling by the Court give Republicans just enough rope to hang themselves.  If Republicans respond to a win in King v. Burwell by expanding or “fixing” Obamacare, they will have left the repeal movement — quite strong now — in a worse place than it is in today.  Sasse’s proposal goes a long way toward ensuring that a win at the Court won’t be a loss for repeal.

It’s good to see Sasse stepping forward and leading on this issue, just as it’s good to see favorable developments on the House side.  Slowly but surely, Republicans seem to be moving toward championing the winning alternative to Obamacare that has long been the missing ingredient in getting to full repeal.

Jeffrey H. Anderson is executive director of the 2017 Project, which is working to advance a conservative reform agenda, including a Winning Alternative to Obamacare.

© 2015 Weekly Standard LLC. Reprinted with permission.

Photo courtesy of Gage Skidmore.