Excellent news: Senate Republicans have added the repeal of the ObamaCare individual mandate to their tax reform bill. Senators Tom Cotton and Rand Paul had pushed for the measure, and President Trump has also indicated he wants this in the bill.
There are a lot of reasons this is a good thing.The trick is Senate procedure. The GOP is invoking a budget process that allows the party to pass the bill with 51 votes. But Republicans have to comply with the Senate’s Byrd Rule, which says the legislation can’t add to the deficit beyond the 10-year budget window starting in 2028. The Senate draft doesn’t meet this standard, so some parts of the bill may have to expire after a decade unless Republicans can fill the hole. It’s a shame this process pummels good policy.
Enter the idea of repealing ObamaCare’s individual mandate. The Congressional Budget Office predicts that dumping the mandate would “save” $338 billion over 10 years—and the savings continue in the following decades. The budget gnomes assume that if people are not forced to buy health insurance, fewer people will sign up for subsidies or Medicaid. The idea that millions of people will dump free health care is one oddity of CBO methods, but that’s an editorial for another day. Some Republicans are traumatized from the GOP’s health-care failure and don’t want to complicate tax reform with fights over insurance coverage. But remember that Chief Justice John Roberts called the mandate penalty a tax. This is a political fight the GOP can win: If you like your ObamaCare plan, you can keep it. If you don’t want it or can’t afford it, you don’t have to pay a penalty. There would be no changes to benefits or coverage for pre-existing conditions, and not a dollar taken out of Medicaid, a word that would appear nowhere in the bill. Note that the mandate is a tax on the poor. More than one in three households that paid the “individual shared responsibility payment” in 2015 earned less than $25,000 and more than 90% made less than $75,000, according to IRS data. For instance: More than 34,000 families in Maine paid $15 million to the government for the high privilege of not buying ObamaCare. Repeal would be tax relief for low-income families.Basically, the mandate costs the federal government money because it pushes people onto the subsidized ObamaCare exchanges. And everytime someone who qualifies for a subsidy signs up, federal spending increases. The only saving grace of the individual mandate is that so many people are ignoring it, but even with its paltry impact on signups, it's still a budget buster.
If you were deliberately trying to design the most arbitrary, painful and pointless tax possible, how would you go about it? First, you would structure it to inflate the cost of an essential product. Then, you’d create exemptions so vast that only 5% of taxpayers were subject to it. You might even ensure that it hit people only when they were particularly vulnerable—like when they’d lost a job. Finally, you would use it to drive enrollment in entitlements, so that it increased the federal deficit by $338 billion. In short, you would design something that looks very much like the Affordable Care Act’s individual mandate. Sen. Tom Cotton (R., Ark.) has made headlines by suggesting that tax reform should include a repeal of the mandate—an annual tax of between $695 and $13,380 imposed on 6.5 million American households. In defense of the mandate, ObamaCare’s defenders have resorted to hyperbole and scare-mongering, probably because the penalty is so difficult to justify on the merits.
In most insurance markets, people seek coverage in proportion to the risk they expect to face, and insurers receive payment in proportion to the cost they expect to cover. This approach prevailed for nongroup health insurance in most states prior to ObamaCare. It produced stable markets with premiums of less than half what currently prevails on the exchanges, but often failed to ensure affordable coverage for individuals with major chronic conditions. The ACA has reversed this situation, providing affordable coverage to individuals with pre-existing conditions, but yielding plans that are priced well above the needs of most Americans. The average annual premium was $5,712 in 2016, while median health-care spending was only $709 in 2014.So the individual mandate inflates the cost of a not-that-valuable product, increases the deficit and punishes those least able to pay. Great policy, huh? It remains to be seen if this will cost them the votes of pseudo-Republicans like John McCain, Susan Collins and Lisa Murkowski, who would see it as a backdoor way to undermine the very ObamaCare they saved from the gallows only months earlier. As a policy matter, the idea is unassailable.
Dan Calabrese’s column is distributed by HermanCain.com, which can be found at HermanCain
Follow all of Dan’s work, including his series of Christian spiritual warfare novels, by liking his page on Facebook.
