Conservatives in the House Freedom Caucus swept into office, in large part, on a wave of opposition to President Barack Obama’s signature health law. Now, those same conservatives have emerged as the biggest early obstacle to Republicans’ efforts to pass the American Health Care Act, the bill put forth by House leadership to repeal and replace Obamacare.
This week, six of the arch-conservatives in the House Freedom Caucus joined two of Senate’s most conservative members — Sen. Mike Lee (R-UT) and Sen. Rand Paul (R-KY) — for a press conference on the steps of the Capitol as a show of force, denouncing the GOP health care bill as “Obamacare Lite” and threatening to defeat it.
"Obviously, we have serious concerns” with this bill, said Rep. Mark Meadows (R-SC), co-chair of the Freedom Caucus. “And we haven’t been shy about them.”
Added another Freedom Caucus member, Rep. David Brat (R-VA), “There’s a fundamental, philosophical difference here about what it means to do free markets.”
In blasting Republican leaders, Paul and the Freedom Caucus members have complained about the process of its rollout, the generosity of its tax credits, and its price-tag. They appear to have a chance at winning a major concession, as the White House is now working behind the scenes to get congressional Republicans to grant one of their key demands — accelerating the rollback of Obamacare’s Medicaid expansion.
But as Brat’s comments suggest, the dispute is exposing a much more philosophical rift within the Republican caucus over just how much the government should be in the business of ensuring Americans have health care.
“There are complicated concepts involved, but the underlying debate is about how much the federal government should be spending for health care,” says Larry Levitt of the Kaiser Foundation. “That’s what this fight comes down to.” It could sink Ryan’s bill before it clears the House.
On Thursday afternoon, an aide for the Freedom Caucus said that the coalition currently has the votes to kill the bill in its current form.
The Freedom Caucus accuses Paul Ryan of advancing “Obamacare 2.0”
House Speaker Paul Ryan needs 216 votes to get his bill through the House. There are 237 House Republicans; 40 of them are members of the Freedom Caucus. Do the math, and it will only take 22 of them to kill Ryan’s bill — assuming every Democrat marches in lock-step opposition to it, and assuming Republican moderates don’t break ranks.
The Freedom Caucus’s must public faces, conservatives like Brat, Meadows, Rep. Jim Jordan (R-OH), and Rep. Louie Gohmert (R-TX), have been pushing outright repeal of Obamacare since its passage. In 2013, Meadows sent a letter demanding that then-Speaker John Boehner refuse to fund the government unless Obamacare was not defunded — a fight that culminated in a 16-day government shutdown. Brat was elected in part by accusing former House Majority Leader Eric Cantor (R-VA) of not doing enough to eradicate the ACA.
The Republican Party as a whole has been committed to the proposition that Obamacare should be repealed. But the Freedom Caucus has distinguished itself within the party’s ranks for its willingness to use the levers are at its disposal to blow up Obama’s signature policy achievement.
In caucus members’ view, Ryan’s bill simply doesn’t come close to doing that.
As Vox’s Sarah Kliff writes: “The 123-page bill would retain some of the most popular parts of Obamacare, including a ban on preexisting conditions, allowing young adults to stay on their parents’ plan up to age 26, and banning lifetime limits in health insurance. It would eliminate the mandate that all Americans purchase health coverage or pay a fine.”
More than that, it leaves in place something core to the Freedom Caucus’s overriding objection to Obamacare — its use of millions of dollars in tax credits to pay for Americans’ health care.
House conservatives’ battle against “advanceable refundable tax credits,” explained
Among other objections, the caucus has made one key demand of Ryan’s bill — that it do away with “advanceable refundable tax credits,” in favor of either nonrefundable tax credits, or simple deductions for health insurance premiums.
The distinction is critical. But to understand why staunch conservatives are so eager to do away with the “advanceable refundable credits” at the heart of Ryan’s bill, it is key to understand what they do.
The “advanceable” part of the tax credit means that patients can receive help from the government on a monthly basis — rather than having to wait until the end of the year — to help pay for their insurance premiums. That difference is, obviously, huge for someone who would not otherwise be able to immediately have the money.
“If it weren’t the advanceable part of the credit, you’d only get the credit at the end of the year when you file your taxes. You would somehow have to come up with enough money to pay for your premiums for the whole year as soon as you need it,” says Timothy Stoltzfus Jost, a health care expert and professor at Washington and Lee University School of Law. Making patients wait until year end for the money, he said, would by itself deprive “millions” of care.
The “refundable” aspect of Ryan’s bill is even more important. Making the credit refundable means patients can use it to offset their insurance premiums, rather than just their tax obligation to the government. Caucus members see that as a welfare payment.
An example here may help illustrate the distinction. Let's say Ryan's bill makes Sally eligible for a $2,000 tax credit, and Sally happens to owe the government $1,000 in taxes. Under Ryan's plan, Sally would still get the full $2,000 to help her pay her insurance premiums, regardless of her existing tax liability.
Rewriting these tax credits as the Freedom Caucus wants would likely mean that they would be unavailable outside someone’s outstanding tax obligations. Under what the Freedom Caucus wants and the tax credits were non-refundable, half of Sally's $2,000 credit could go toward offsetting her existing tax bill. But the other $1,000 could not be used for covering her insurance premiums. The tax credit, in other words, couldn’t be larger than what Sally already owes the government.
For Freedom Caucus members, that’s just fiscal prudence. “When we promised to repeal Obamacare, we didn’t tell folks we’d replace it with a new entitlement that is equally unsustainable,” Rep. Jordan said in a statement.
It keeps Obamacare subsidies but renames them "refundable credits."— Senator Rand Paul (@RandPaul) March 7, 2017
Critics say that change would result in less government help for the poorest Americans. “If you make it a deduction, you are saying the only people who qualify for it are in the higher income brackets. It’s basically useless to someone who doesn’t have a tax liability and is below the filing limit,” Jost said. “It’s terribly important.”
It is also, as the caucus notes, fundamentally similar in structure to Obamacare, which also relied on advanced, refundable tax-credits.
But as Vox’s Julia Belluz notes, Ryan’s bill doesn’t leave Obamacare’s tax credits untouched. Instead, it would transform how they work by basing their amount on age instead of income — a move that would help higher earners and hurt lower earners.
Is Republican leadership calling the Freedom Caucus’s bluff — or sabotaging their own bill?
For now, Republican leadership is signaling that they’re not particularly fearful of a Freedom Caucus revolt. Though the arch-conservatives have gone directly to Trump this week to get him to intervene on their behalf, most signs this week have pointed to congressional Republicans moving forward with Ryan’s bill more-or-less intact — without ceding to House conservatives’ basic demand for a much more dramatic overhaul.
In part, Speaker Ryan has rebuffed the Freedom Caucus by saying that his hands are tied by the nature of budget reconciliation — the complicated process Republicans have to use since they don’t have the 60 votes needed to pass legislation, and that restricts the tools at their disposal.
"Naturally in the legislative process, people are saying, well, 'I'd love to have this in there; I'd love to have that in there,' Ryan said at a press conference. “People are sort of learning is this reconciliation tool is pretty tight. There's a lot of stuff we would love to put in the bill, but unfortunately, the Senate rules don't allow us to do that.”
Other leaders of the AHCA push have shown even less willingness to grant the Freedom Caucus’s demands. At a press conference on Friday morning, Rep. Greg Walden (R-X) argued that conservatives, not the bill, needed to change. “This is a step forward in the conservative cause — to get the bureaucracy out of the middle,” he said. “They should be embracing what we're doing.”
Added House Majority Leader Kevin McCarthy (R-CA): “We just walked through two committees. Every Republican on both committees voted for the bill … When you have pushback on one side and the other side, from the political spectrum you might have found the sweet spot.”
The day before, a clutch of reporters had gathered around Rep. Kevin Brady (R-TX), one of the bill’s authors, and asked if he was considering ceding to the Freedom Caucus’s demands to do away with the refundable tax credit.
He said that without having an immediately available tax credit to use in the insurance market, some people may not feel secure enough to pursue business opportunities and risk leaving Medicaid — where they’d at least be guaranteed health care. He suggested it was a conservative principle to do more to guarantee that Americans could rely on government help for health care.
A reporter asked Brady if he would be “willing to negotiate that principle” to ensure the bill’s passage.
“For conservatives focused on small businesses,” he said, “this is an important provision.”
It sounded like a no.