The editorial boards road map on this is the right way to go. People need to see how wrong the CBO has been all along on its projections on Obamacare. In fact the CBO hasn't been close on getting ANY of its Obamacare projections right, especially on how many people would sign up. Their estimates on people signing up were instead by something like 109%. That is, only half the people they estimated would sign up actually did. That's why you can't trust their estimates on how many people would lose or refuse health insurance under Obamacare. They simply have no clue. None at all.
Tax Reform and ObamaCare
How killing the individual mandate can finance rate cuts.
The Editorial BoardNov. 5, 2017 6:05 p.m. ET
Photo: istock/Getty Images
By
The Editorial Board
Republicans are looking under every seat cushion to finance tax cuts and the political bribes that Members of Congress are demanding for their votes. One surprising potential “pay for,” believe it or not, would be repealing ObamaCare’s individual mandate.
The IRS administers the mandate, which ObamaCare euphemistically dubbed an “individual responsibility payment.” But Chief Justice John Roberts called it a tax to declare it constitutional, so a policy and fiscal nexus exists.
ObamaCare requires individuals without health coverage to pay the greater of 2.5% of their household income (above the $10,350 filing threshold for single adults in 2016) or $695. The tax is regressive in that about 96% of payers were households earning less than $100,000. Most high earners are covered by employer plans or Medicare.
While the penalty raised $3 billion in revenue in 2015, Arkansas Senator Tom Cotton points out that abolishing the mandate would actually be a revenue gusher under the Congressional Budget Office’s scoring rules. Last December CBO projected that repealing the mandate would save $416 billion over 10 years because fewer people would sign up for Medicaid or receive subsidies on the exchanges. Fewer workers might also enroll in employer-sponsored plans, which could result in more taxable compensation.
CBO estimated in July that a combined repeal of the employer and individual mandates would yield $275 billion in savings. The agency didn’t break down its score or explain its analysis. A future score might project greater savings—Mr. Cotton estimates around $300 billion—since next year’s average premium tax credit has ballooned by 45%. That’s because insurers jacked up prices on benchmark silver plans to make up for cost-sharing subsidies that the Trump Administration withdrew.
We think CBO has long overestimated the power of the individual mandate in driving coverage. And its faulty estimates hurt the GOP during the ObamaCare repeal debate by overestimating the number who would lose coverage. But now those estimates can help the GOP in the tax debate because CBO says an end to the mandate will mean fewer Americans would sign up for insurance and subsidies.
The fear is that this would complicate the political task of passing tax reform by combining it with the ill-fated ObamaCare repeal debate. But in this case the GOP would not be changing Medicaid or cutting spending. It would be changing no rules or mandates other than the individual purchase requirement and tax, which are among the least popular parts of the law. Republicans would merely be saying that they would no longer fine Americans for refusing to buy a product they don’t like or can’t afford.
Killing the mandate now would also make it easier to revisit health reform next year. With the mandate already gone, CBO would almost certainly find that there would be fewer uninsured under any new reform the GOP would propose.
As for financing tax reform, Republicans have to consider the alternatives. The House bill doesn’t repeal the mandate and thus has to include “pay fors” that are either bad policy (see the stealth tax rate above) or that face political resistance (ending the adoption tax credit).
In a Senate with only 52 Republicans, counting votes is paramount, but ending the hated individual ObamaCare mandate looks like a winner politically and as fiscal and health policy. Why not combine health-reform progress with a way to finance tax reform?
Appeared in the November 6, 2017, print edition.
Tax Reform and ObamaCare
How killing the individual mandate can finance rate cuts.
The Editorial BoardNov. 5, 2017 6:05 p.m. ET
Photo: istock/Getty Images
By
The Editorial Board
Republicans are looking under every seat cushion to finance tax cuts and the political bribes that Members of Congress are demanding for their votes. One surprising potential “pay for,” believe it or not, would be repealing ObamaCare’s individual mandate.
The IRS administers the mandate, which ObamaCare euphemistically dubbed an “individual responsibility payment.” But Chief Justice John Roberts called it a tax to declare it constitutional, so a policy and fiscal nexus exists.
ObamaCare requires individuals without health coverage to pay the greater of 2.5% of their household income (above the $10,350 filing threshold for single adults in 2016) or $695. The tax is regressive in that about 96% of payers were households earning less than $100,000. Most high earners are covered by employer plans or Medicare.
While the penalty raised $3 billion in revenue in 2015, Arkansas Senator Tom Cotton points out that abolishing the mandate would actually be a revenue gusher under the Congressional Budget Office’s scoring rules. Last December CBO projected that repealing the mandate would save $416 billion over 10 years because fewer people would sign up for Medicaid or receive subsidies on the exchanges. Fewer workers might also enroll in employer-sponsored plans, which could result in more taxable compensation.
CBO estimated in July that a combined repeal of the employer and individual mandates would yield $275 billion in savings. The agency didn’t break down its score or explain its analysis. A future score might project greater savings—Mr. Cotton estimates around $300 billion—since next year’s average premium tax credit has ballooned by 45%. That’s because insurers jacked up prices on benchmark silver plans to make up for cost-sharing subsidies that the Trump Administration withdrew.
We think CBO has long overestimated the power of the individual mandate in driving coverage. And its faulty estimates hurt the GOP during the ObamaCare repeal debate by overestimating the number who would lose coverage. But now those estimates can help the GOP in the tax debate because CBO says an end to the mandate will mean fewer Americans would sign up for insurance and subsidies.
The fear is that this would complicate the political task of passing tax reform by combining it with the ill-fated ObamaCare repeal debate. But in this case the GOP would not be changing Medicaid or cutting spending. It would be changing no rules or mandates other than the individual purchase requirement and tax, which are among the least popular parts of the law. Republicans would merely be saying that they would no longer fine Americans for refusing to buy a product they don’t like or can’t afford.
Killing the mandate now would also make it easier to revisit health reform next year. With the mandate already gone, CBO would almost certainly find that there would be fewer uninsured under any new reform the GOP would propose.
As for financing tax reform, Republicans have to consider the alternatives. The House bill doesn’t repeal the mandate and thus has to include “pay fors” that are either bad policy (see the stealth tax rate above) or that face political resistance (ending the adoption tax credit).
In a Senate with only 52 Republicans, counting votes is paramount, but ending the hated individual ObamaCare mandate looks like a winner politically and as fiscal and health policy. Why not combine health-reform progress with a way to finance tax reform?
Appeared in the November 6, 2017, print edition.
