Indeed, after several GOP health care bills had failed over the past year—from “repeal and replace” to “repeal and delay” to “skinny repeal” to “Graham-Cassidy”—many of Cotton’s GOP colleagues felt the same way: “They all believed that ‘you can’t do health care on the tax bill,’ and ‘you can’t make the tax bill harder to pass.’ ”
“My immediate standard response was: It doesn’t make the tax bill harder to pass,” says Cotton, “it makes the tax bill easier to pass.” When the Senate voted on tax reform in the wee hours of December 2, that analysis was proven right: The bill included repeal of the individual mandate, and it passed, 51-49, with the vote of every Republican but Bob Corker of Tennessee.
Why now, after so much failure, are Republicans on the cusp of repealing a significant part of Obamacare? Repeal of the individual mandate was, after all, the centerpiece of the modest eight-page bill (known as “skinny repeal”) that Republican senators John McCain of Arizona, Lisa Murkowski of Alaska, and Susan Collins of Maine killed at the end of July. Yet all three senators voted for the tax reform bill that would kill the individual mandate.
There were some important differences between the “skinny repeal” health care bill and the tax bill. When senators voted on the “skinny repeal” bill, they did so with the explicit understanding that it wasn’t supposed to be a final product—that they were just moving the process forward so the House and Senate conference could negotiate some bill that would be put up for final passage in Congress. Also, the process was different: The “skinny repeal” had been made public just hours before senators voted on it, while the idea of repealing the individual mandate had been discussed and debated for weeks.
“As a matter of principle, I’ve always supported individual liberty and believe the federal government should not penalize Americans who cannot afford to purchase expensive health insurance,” John McCain said in a November 30 statement. “By repealing the individual mandate, this bill would eliminate an onerous tax that especially harms those from low-income brackets. In my home state of Arizona, 80 percent of people who currently pay the individual mandate penalty earn less than $50,000 per year.”
“Every day at our daily lunches I was pushing it very hard,” says Cotton, who, along with Pat Toomey of Pennsylvania, reintroduced a bill targeting the mandate in October. The measure got a boost after Cotton discussed it with President Trump the last Sunday in October. The president “said that he loved it and wanted to do it,” says Cotton. “It was really that week around Halloween that it kind of caught fire inside of the conference.” By the first week of November, Mitch McConnell was pushing for repeal of the mandate.
The biggest reason why mandate repeal survived in the Senate’s tax bill is that it allowed Republicans to pass a bigger tax cut. Republicans had passed a budget resolution that allowed their tax cut to increase the deficit by no more than $1.5 trillion over 10 years, according to the Congressional Budget Office (CBO). And the CBO estimates that over 10 years, repeal of the individual mandate will save the government over $300 billion because millions of Americans will not participate in federally subsidized health insurance if the government doesn’t fine them. The theoretical savings achieved by repealing the mandate allowed the Senate to create a bigger child tax credit and keep more tax breaks than the House bill did. The rules under which the tax bill was considered also prohibit any increase to the deficit beyond 10 years, so repealing the mandate, which would save money for years to come, allowed Senate Republicans to make more of their cuts permanent.
Of course, conservatives and Republicans have long argued that the CBO has overestimated the power of the mandate to force people to buy health insurance. “The downside of that for Republicans is that they’re not likely to have the cost savings CBO is promising them as a result of getting rid of the mandate,” says Yuval Levin of the Ethics and Public Policy Center. “On the upside, you’re not likely to have the [health insurance] coverage losses that CBO projects either.”
The CBO estimated in November that without the mandate 13 million fewer people would be covered by health insurance in 10 years. According to the CBO, 5 million people who qualify for Medicaid, which is free to them, would no longer sign up for it if they were not threatened by the IRS with a fine. Another 2 million, according to the CBO, would lose or drop their employment-based coverage, and another 5 million in the individual market would go without insurance.
“It’s fake money, but the mandate is where CBO keeps its fake money, and [lawmakers] needed the fake money to make the math work on the tax bill,” says Levin. Some Republicans have argued that because tax reform will spur economic growth, the bill won’t add to the deficit, but no analysis has found that. One of the rosier studies that took economic growth into account found the bill would still increase the deficit by $500 billion over 10 years.
What the likely repeal of the mandate means for the future of health care in the United States is a matter of debate. At the very least it will provide a tax cut to the six million Americans who would otherwise be paying the fine, which in 2017 equals $695 or 2.5 percent of household income, whichever is greater. Many of those paying the fine do so because they can’t afford Obamacare’s high premiums or deductibles, so mandate repeal will provide relief to many working-class and middle-class families.
With fewer young, healthy people buying health insurance, that could increase premiums. “The risk it runs is that it could destabilize some of the state individual markets, and it could leave fewer people with coverage than otherwise would have it,” says Levin. “But the mandate hasn’t been very effective, and so its removal isn’t likely to be enormous and dramatic in its effects.” Levin notes that the Congressional Budget Office’s analysis is starting to reflect this reality: “CBO now says that [elimination of the mandate] would increase premiums by 10 percent. Three months ago they said 20 percent.”
Tax reform is of course not a done deal yet: The Senate and House need to agree on a final package. But it appears very likely to include repeal of the mandate. Maine’s Susan Collins has pushed for other legislation to prop up health care insurance markets, but she hasn’t made it a precondition to vote for final passage of the tax measure. With the opposition of Tennessee’s Bob Corker, Republicans have one vote to spare and still get tax reform through. That means a loss in the December 12 special election in Alabama by itself wouldn’t be fatal to tax reform.
“It’s essential to making the budgetary picture work, and it’s extremely popular,” Cotton says of repealing the mandate. “Those two things combined, I’m pretty confident we’re once and for all going to take the beating heart out of Obamacare.” That may overstate the importance of the mandate to Obamacare, but repealing it is no small thing either.