This is the most important thing to understand about the politics of the American Health Care Act: House Republicans would much rather blame Senate Republicans for failing to repeal and replace Obamacare than take the blame themselves. Had the AHCA failed to make it through the House, Republicans in the Senate could shrug their shoulders when asked why Obamacare was still the law of the land. Those jokers in the House couldn’t get their act together! Sadly for them, House Republicans did get their act together—or rather, they got their act together just enough to pass a bill that is the stuff of Senate Republican nightmares.
Because Republicans hold a narrow 52-seat Senate majority, they can afford to lose only two members of their caucus if they want to pass a piece of legislation, assuming Vice President Mike Pence casts a tie-breaking vote. Somehow the Senate GOP leadership needs to find a way to corral the likes of Maine Sen. Susan Collins and Louisiana Sen. Bill Cassidy, both of whom fear the AHCA doesn’t do nearly enough for low-income households, and Kentucky Sen. Rand Paul, who sees the AHCA as unpardonably socialistic. In between, there are at least a dozen GOP senators who are just as wary of the prospect of insurance markets seizing up or of the Medicaid expansion unraveling too quickly.
Is it possible to revise the ACHA in such a way that Senate Republicans come together to support it, the legislation passes in the House, and Democrats won’t crush the GOP in the 2018 midterms? Maybe. For that to happen, the congressional GOP must realize that you need to give something to get something. That is the central lesson of how Obamacare passed over intense public opposition, and it’s a lesson Republicans can either learn the easy way—now, while they still hold both houses of Congress—or the hard way—a few years from now, when President Al Franken and a Democratic Congress are in the driver’s seat.
The AHCA has been billed as the repeal and replacement of Obamacare, but that’s not quite right. The rules of the budget reconciliation process limit Republicans to rejiggering Obamacare’s tax and spending provisions. There was some talk that Obamacare’s regulations could be tweaked under reconciliation on the grounds that they will have an impact on spending levels. But that’s very much in dispute. The upshot is that the AHCA mostly keeps Obamacare’s community rating rules intact. What the AHCA does do is repeal or delay most of Obamacare’s taxes. The price tag on that is $1 trillion over the next 10 years, most of which will flow to high-income households. The AHCA also swaps Obamacare’s means-tested premium credits for age-based credits that are more generous to middle-class households and less generous to lower-income ones. And finally and most importantly, the bill reduces the growth in future federal Medicaid spending by $880 billion over the next decade.
The contrast between the AHCA and Obamacare is stark. Obamacare included a large increase in taxes, mostly on high-income households, a large reduction in future Medicare spending (which the Obama administration claimed would have no negative effect on Medicare beneficiaries), and a large increase in spending on subsidies for medical care for low- and middle-income households via the expansion of Medicaid and new premium subsidies.
Passing Obamcare was really hard, not least because it was designed to redirect dollars from Medicare to help cover the uninsured. How did Democrats manage to get it past the finish line? Because while Obamacare did take something—the cuts to future Medicare spending—it offered something attractive in return—the increases in future Medicaid spending and the new subsidized exchanges. The brilliant thing about this strategy wasn’t that it delighted swing voters, many of whom were pretty anxious about how Obamacare might change their health care. Rather, it’s that Obamacare as a package deal defanged the opposition from the all-powerful hospital lobby, which ultimately bought into the idea that the Affordable Care Act would leave medical providers better off. That wouldn’t have been the case if, say, Obamacare just meant that growth in future Medicare spending would be cut, or if its tax hikes were just used to reduce the deficit. And while Obamacare wasn’t wildly popular with voters initially, it’s created a constituency of millions who now depend on the Medicaid expansion, and means-tested subsidies, and who will fight any effort to roll back their benefits.
How could Republicans turn the AHCA into a politically attractive package deal? Whereas Obamacare—to frame this as cynically as possible—used tax hikes and Medicare cuts to buy off hospitals, the AHCA in effect uses cuts to both future federal Medicaid spending and premium subsidies to help finance tax cuts for the rich. Granted, Obamacare’s tax hikes are not especially well-designed, and there’s a case to be made for replacing them with something else. But if we’re thinking cynically, the reality is that rich people who care about tax cuts know they’re always going to get a better deal from Republicans than Democrats. That means cutting taxes for the rich won’t win Republicans any votes they don’t already have.
Does the AHCA buy off anyone other than the rich? Not really. Yes, the age-based refundable credits will treat some middle-income households a bit better than Obamacare’s premium subsidies, but the difference will be negligible for most—and will be outweighed in the public imagination by the losses suffered by those who see their subsidies reduced. From a political perspective, you want highly visible benefits and invisible burdens. The AHCA delivers precisely the opposite: very tangible pain with very little in the way of tangible gain.
Somehow Senate Republicans need to beef up the AHCA’s benefits, which will (alas) mean dialing back its tax cuts for the rich. This won’t come naturally to the GOP. Democrats by and large believe in providing people with government benefits as a matter of principle while most Republicans at least pay lip service to the idea that they’re in office to shrink the size of government and cut taxes, not to bring home the bacon. But whether Republicans like it or not, bringing home the bacon is what they’ll have to do to overcome opposition to their Obamacare overhaul.
There are lots of ways to make the AHCA more politically attractive. One reason there’s been so much anxiety about the bill’s Medicaid provisions is that the cost of long-term care is rising rapidly as Americans age and Medicaid is picking up a lot of the slack. Bringing Medicaid costs under control would be a much easier sell if Congress moved to federalize the cost of providing for elderly Medicaid beneficiaries. Conservatives would still be able to address their concerns about how states manipulate the Medicaid program to squeeze federal taxpayers, a practice known as “Medicaid maximization.” Yet they’d do so without raising the specter of older Americans getting tossed out of nursing homes.
Medicaid is not the AHCA’s only political vulnerability. People are also worried about how it deals with the individual insurance market, and for good reason. The chief political objection to the AHCA’s replacement of Obamacare’s premium subsidies with age-based refundable credits is that the new credits won’t go nearly far enough to help lower-income households afford coverage. Instead of trying to save money by making deep cuts in subsidies for the individual market, Senate Republicans should make more modest cuts here and then hand over the money to the states, which would be tasked with devising their own strategies for increasing coverage.
This is roughly the approach taken by the Cassidy–Collins bill, which is convenient since Collins and Cassidy are two of the GOP senators who are most skeptical about the AHCA as it currently stands. Though Cassidy–Collins is more expensive than the AHCA, it jibes with the conservative commitment to federalism by allowing liberal-learning and conservative-leaning states to go their separate ways.
Would the House pass a kinder, gentler version of the AHCA that cuts taxes far less and that offers state governments and low-income families a much better deal? It’s hard to say. But Senate Republicans would be wise to put the ball back in the House’s court.