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The 3 leading conservative cases for the Senate health bill, explained

It’s about taxes, mostly.

While the Senate considers landmark legislation that would transmute hundreds of billions of dollars of federal health spending into tax cuts, while shifting around how hundreds of billions of dollars more are spent, conservative media has largely chosen to opt out of the debate. The Washington Post’s David Weigel reports that on Tuesday night, as the coalition behind Mitch McConnell’s Better Care Reconciliation Act was crumbling, none of Fox News’s prime time shows covered the story at all.

It isn’t just the commercialized segments of conservative media. On Thursday morning, neither the Weekly Standard nor the National Review homepages had any health care content whatsoever.

Republican senators, meanwhile, have struggled mightily to even explain what their bill is supposed to do. Much of the administration’s push for the legislation consists of flat-out lying — trying to convince people that the bill doesn’t cut Medicaid spending (it does) or that it will reduce the number of uninsured (it won’t).

As a result, it’s possible for a news consumer — especially one who brings liberal predispositions to the table — to reach the view that there is literally nobody out there defending the legislation on the merits. But while it’s true that such defenses are few and far between, and largely don’t seem to hold up under much scrutiny, they really are out there. Here is a review of some of the leading pro-BCRA commentary.

The bill helps low-income people get private insurance

The Affordable Care Act set up a kind of two-tier system for expanding insurance coverage. If you were poor, the ACA envisioned you securing coverage through your state’s Medicaid expansion — with the government offering major financials carrots and sticks to encourage states to expand. For those earning between 100 and 400 percent of the federal poverty level, there would be, instead, sliding-scale tax credits to help you purchase insurance. The BCRA rolls back that Medicaid expansion and makes the tax credits less generous, but it also extends them all the way down the income spectrum.

Longtime conservative health wonk Avik Roy argues that this makes the bill a step forward for the poor. It “replaces the A.C.A.’s Medicaid expansion with a robust system of tax credits for which everyone under the poverty line is eligible,” he says, whereas “under Obamacare, you could enroll in private insurance exchanges only if your income exceeded the poverty line.”

The problem with this is that the tax credits are not actually all that robust. The poor would be able to afford plans with a deductible of about $6,000 for an individual (more for a family), which would be worthless to a person earning $12,000 a year or less. Consequently, according to the CBO, “despite being eligible for premium tax credits, few low-income people would purchase any plan.”

Roy himself quietly undermines his main argument in favor of the plan by saying that the bill “should be improved” by having Republicans “appropriate additional funds to help low-income enrollees afford their deductibles.” But since Republicans haven’t done that, low-income enrollees won’t be able to afford their deductibles. Few will enroll, and if they do, they will find themselves worse off financially than if they hadn’t enrolled.

Cutting Medicaid spending is good on its own terms

A leading Democratic criticism of the bill is that it cuts Medicaid spending, forcing per-patient federal spending on Medicaid patients’ health care needs to grow more slowly than the cost of purchasing health care.

James Capretta, the Milton Friedman chair at the American Enterprise Institute, argues that the bill is good because it cuts Medicaid spending, forcing per-patient federal spending on Medicaid patients’ health care needs to grow more slowly than the cost of purchasing health care:

The Senate bill would impose a stricter growth limit on per capita spending than the House bill by indexing the caps, after 2024, to the full Consumer Price Index (CPI) rather than to the medical-care component of the CPI. The practical effect of tying the caps to general consumer inflation is to lower the growth rate in the per-person caps by about 1 or 1.5 percentage points each year.

Capretta thinks “Congressional Republicans are right to want to move away from today’s open-ended federal spending on Medicaid,” because federal willingness to match state spending on covering eligible patients gives states “strong incentives to maximize the amount of federal money coming into their Medicaid programs.”

What will happen to patients if the dollars available to pay for their care grow more slowly than the cost of purchasing the case? Capretta doesn’t say. He does remark that “Medicaid, along with Social Security and Medicare, is a primary reason that the federal government is running large budget deficits today and will run growing and unsustainable deficits in the future.”

In a practical sense, however, the Senate bill expends Medicaid savings on a series of large tax cuts rather than on reducing the deficit.

The bill cuts middle-class taxes

The centerpiece of the BCRA, like the AHCA before it, is a gigantic tax cut, which leaves the government with much less money to spend on people’s health care — which is why the quality of care on offer declines so much. Most Republican politicians go to great lengths to avoid acknowledging this basic trade-off, but anti-tax fanatic Grover Norquist leans into it with an op-ed called “What the Mainstream Media Won’t Tell You About the Senate’s Health Care Bill.”

The secret turns out to be that it “contains massive tax relief for middle class families.”

One reason the MSM has been keeping this under wraps is that it’s not true. According to the Tax Policy Center, the typical middle-class family could expect a tax cut of $200 to $400 per year from the BCRA. A family in the top 20 percent of the income distribution, by contrast, could get a $3,200 tax cut. The top 1 percent will see its taxes fall by $45,000 on average, and the top 0.1 percent of the population will get a staggering $250,000 tax cut.

Essentially every tax cut featured in the bill is regressive in its impact, with much of the tax cutting dedicating to expanding HSA and FSA tax shelters that are primarily valuable to affluent families. But what truly tips the scale is the inclusion of two tax cuts that exclusively help families with more than $200,000 in income per year. As this chart from the Center on Budget and Policy Priorities shows, these two tax cuts combine to provide a massive dose of inequality.

CBPP

Norquist, to his credit, does acknowledge the existence of this big gift to the least needy Americans, arguing that “repeal of this tax will create an estimated 133,000 jobs over the long-term” with a citation to an analysis by the center-right Tax Foundation. If you accept that estimate, it would amount to a little bit more than a 0.1 percentage point increase in employment in the United States in exchange for a near-doubling of the uninsurance rate.

Many other analyses, of course, doubt that tax cuts for wealthy people’s investment income really are a surefire job creator.

The issue is actually pretty simple

Health care policy is complicated, but if you dive into the serious arguments on the merits about the BCRA, the debate actually looks quite simple.

One can quibble with the rhetoric used by Norquist and Capretta, but both men are broadly correct. The bill really does lower taxes, especially on investment income, and it really does lower the long-term trajectory of federal spending on health care. To the extent that you believe those are important goals, then the BCRA is a very important step toward the long-term goal of lower spending and lighter taxation of investment income.

Whether or not the conservative agenda of lighter taxes on investment income will really supercharge growth is an important debate (traditional economic theory has agreed with them; a newer strain of empirical research disagrees), but note that this is not really a debate about health policy. The argument that the Better Care Reconciliation Act will actually lead to better health care seems essentially impossible to make. Even Roy, the BCRA’s leading advocate among health wonks, concedes that without a big injection of extra money, it won’t actually fulfill his health care vision.