It was a close call, but an Obamacare tax paid chiefly by the country’s richest individuals just might survive even as Senate Republicans try to slash other pieces of the Affordable Care Act. Why? The tax on investments is just too lucrative, for one thing. Repealing it is too politically dangerous, for another. And there are no big, powerful health-care lobbies hammering away at it, either.
Senators emerging from a huddle yesterday over changes to their health-care bill named the ACA’s tax on investment income as a part of the health-care law they might keep, after all, even though the bill’s original version would wipe it out. Several individuals familiar with GOP leaders’ thinking said this idea is under active consideration, my colleagues Kelsey Snell, Sean Sullivan and Juliet Eilperin report.
The move would hardly be surprising, from both a policy and a political perspective.
The net investmen incomet tax is projected to bring the federal government $172.2 billion over the next decade, meaning it is Obamacare’s biggest revenue raiser by far. That money would basically double the funding available to Senate Majority Leader Mitch McConnell (R-Ky.) to make the bill more generous to low-income Americans, changes that moderates are demanding before they’d even consider voting for the troubled legislation.
Word on the street is that McConnell is intent on improving estimates of insurance coverage for his bill, most likely by beefing up its insurance subsidies and giving insurers more money to cover their most expensive, sickest patients. If he can achieve better estimates of how many people the bill would cover then the bill could be less politically painful to support and help the Kentucky Republican pass it when the voting is slated to start next week.
Speaking of politics, Republicans could also achieve something useful by keeping around the investment income tax. They’d kill one of Democrats’ single best attack lines against the effort to repeal and replace Obamacare.
The tax, which collects a 3.8 percent levy on a couple’s investment income above $250,000, is overwhelmingly paid by not just the richest Americans, but the richest of the richest Americans. (My colleague Max Ehrenfreund explains more here about how the Senate GOP will would treat the richest versus poorest Americans.)
Repealing it would restore 2.6 percent of the after-tax income for the top 0.1 percent of earners (those making more than $3.9 million) and 2.1 percent of income for the top 1 percent – but just 0.5 percent of the income of middle-income households, according to research by the Urban Institute.
Couple that with the fact that the Senate GOP bill would significantly roll back federal Medicaid dollars and subsidies helping to cover low-income people, and the optics of such a move would be pretty awful for Republicans — and pretty great for Democrats. The latter has been framing the health-care bill for weeks now as a tax giveaway to the rich at the expense of the working poor.
From Sen. Bernie Sanders (I-Vt.):
A great nation is not judged its number of billionaires or the tax breaks they get. It’s judged by how we treat the most vulnerable.
— Bernie Sanders (@BernieSanders) July 9, 2017
And Sen. Kamala Harris (D-Calif.):
Tax cuts for 400 wealthy families is equivalent to the Medicaid expansion for 700,000 Americans. Keep up the calls.https://t.co/9cxk1X8lk7
— Kamala Harris (@KamalaHarris) June 28, 2017
And here’s another big reason the investment income tax could be a keeper, even for conservatives who most want to root out Obamacare: It doesn’t have many opponents, including in the powerful health-care industry world.
Health insurers focused their mighty forces on pressuring lawmakers to repeal the ACA’s health insurance tax, known as HIT, and its so-called “Cadillac tax” on high-cost health plans. They somewhat succeeded, as Congress has delayed both levies. The Cadillac tax is now set to take effect in 2020, instead of 2018, and the HIT tax won’t kick in until January even though it was scheduled for this year.
Those taxes, which insurers argue would force them to hike premiums even more, are likely to still be repealed in the modified bill McConnell says he’ll roll out on Thursday.
John Barrasso, the No. 3 Senate Republican, spun it this way to Bloomberg’s Sahil Kapur:
Barrasso on revised Senate Trumpcare: “The taxes that will be repealed are all the taxes that have been driving up the cost of insurance.”
— Sahil Kapur (@sahilkapur) July 11, 2017
A few conservative-leaning groups do want to see the investment income tax die. Two of them are the Americans for Tax Reform and the National Federation of Independent Businesses, which argue that cutting capital gains taxes are the best way to spur job creation and therefore expand access to employer-sponsored coverage.
ATR spokesperson John Kartch tweeting a statement from President Grover Norquist:
— John Kartch (@johnkartch) June 30, 2017
The Washington Examiner’s Phil Klein noted that leaving the tax intact means Republicans are increasingly willing to keep more of Obamacare around:
Brick by brick, GOP versions keep restoring parts of Obamacare. https://t.co/83Ld9WkeJs
— Philip Klein (@philipaklein) July 11, 2017
But these advocates don’t appear to have any solid champions in Congress who are devoted to getting rid of the investment income tax.
Even the most conservative members have expressed a surprising openness to keeping the tax in an Obamacare overhaul if they get other demands. Sen. Ron Johnson of Wisconsin has said he could live with keeping it. House Freedom Caucus Chairman Mark Meadows (N.C.) said it wouldn’t be a deal-breaker. Sen. Mike Lee of Utah would accept keeping the tax if he gets his ask for the Cruz amendment, his office told The Health 202 last week.
“Has anyone fallen on their sword specifically for this one? No, I haven’t seen anyone,” NFIB lobbyist Kevin Kuhlman told me.
There is a widespread feeling among both leadership and the rank-and-file that repealing the investment tax is a doubly losing strategy for a bill that could go down in flames because it’s so unpopular. Opponents of the tax acknowledge the reality, too.
“It would be our preference to see it go, but I think for political reasons and optics it might remain in there,” Kuhlman said. “It is the biggest [tax] and probably the most politically difficult.”
From The Post’s Dave Weigel:
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AHH, OOF and OUCH
AHH: Let’s take a break for one second from Obamacare repeal-and-replace drama. The Justice Department has reached its first settlement with a major opioid manufacturer. “The DOJ and Mallinckrodt Pharmaceuticals reached a $35 million settlement Tuesday to resolve allegations that the company failed to report signs that large quantities of its highly addictive oxycodone pills were diverted to the black market in Florida, where they helped stoke the opioid epidemic,” The Post’s Lenny Bernstein and Scott Higham report.
“The agreement is the first with a major manufacturer of the opioids that have sparked a crisis of overdoses and addictions across the country. The Justice Department said the deal establishes ‘groundbreaking’ new standards that require the company to track its drugs as they flow through the supply chain to consumers in an effort to control the epidemic,” they write.
The company had argued that once it passed the drugs to wholesale distributors, it was not responsible for illegal diversion of the painkillers as they were sent to retailers and then pain patients. Attorney General Jeff Sessions disagreed. Part of DOJ’s mission is “holding drug manufacturers accountable for their actions,” Sessions said in a statement. “Mallinckrodt’s actions and omissions formed a link in the chain of supply that resulted in millions of oxycodone pills being sold on the street.”
Now back to these guys:
OOF: Americans in general are sending mixed messages to Congress. A new Gallup poll found that 44 percent of Americans want significant changes to the ACAwhile keeping it mostly in place; 30 percent favor repealing and replacing it; and 23 percent want to maintain the status quo.
But far greater numbers of Republican voters favor repealing the whole law or at least changing it: 70 percent want repeal-replace; 23 percent prefer to make significant changes to the law and just 6 percent want the ACA to stay in place largely as it is. So even though the Senate health-care bill’s pathway to passage is extremely murky, Republicans know they’d get pummeled by their base if they fail to vote on something that significantly revamps Obamacare.
OUCH: Recall the phrase “success has many fathers while failure is an orphan?” It describes how Senate Republicans are acting as they struggle to pass their health-care bill, my colleague Paul Kane writes. Yesterday, McConnell spent less than 25 seconds of his news conference giving a basic update on the timing of the legislation, never made the case for why Republicans should support it and then moved on for another minute to attack Democrats on unrelated issues.
“That’s the way it has gone for the Better Care Reconciliation Act ever since it was unveiled nearly three weeks ago,” Paul writes. “In public appearances, and often in private GOP meetings, Republican after Republican outlines the reasons that they stand opposed to the legislation, as written, with almost no one taking up the mantle of defending a proposal that was unpopular from Day One.”
Consider this: Sunday’s talk shows included four Republican senators talking about health-care. Two of them, Sens. Ted Cruz of Texas and Bill Cassidy of Louisiana, tried to sell changes in the legislation before promising their support. One senator, John McCain of Arizona, pronounced that the legislation is “probably going to be dead.”
Only Sen. Lindsey Graham of South Carolina lent his endorsement to the bill — but even that was tepid one at best. “I think this bill is better than Obamacare,” Graham said on NBC’s “Meet the Press.” Graham then hedged by saying he was not sure it would pass and that a bipartisan effort might be a good fallback for Republicans.
HEALTH ON THE HILL
–In case you hadn’t yet heard the groans resonating throughout Washington, D.C., McConnell announced yesterday that he’s delaying August recess by two weeks. But it’s not really about buying them more time to work on health-care; McConnell aides are insisting that vote will be held next week, so they can move onto other things like defense authorization and another health-care priority — reauthorizing FDA user fees. This is mostly about creating the perception that Republicans are trying really, really hard to reshape Obamacare — even if they ultimately fail. President Trump and other Republicans are helping them spread that message.
Trump expressed support for delaying August recess by retweeting this today:
Getting the job done! Sen. Mitch McConnell delays August recess to work on health care bill pic.twitter.com/wBjha8ldeK
— FOX & friends (@foxandfriends) July 12, 2017
The House Freedom Caucus is supporting the decision, too. From its spokeswoman:
Freedom Caucus statement on Senate postponing August recess –> pic.twitter.com/fW7aBaZaxD
— Alyssa Farah (@Alyssafarah) July 11, 2017
Senate rank-and-file chimed in. From Sen. Joni Ernst (R-Iowa):
WATCH: Pleased the Senate will delay August work period, aka recess, so we can keep working on the ppl’s priorities https://t.co/DnKlOmg64M
— Joni Ernst (@SenJoniErnst) July 11, 2017
CNN’s Jeremy Herb heard from Sen. John McCain (R-Ariz.):
McCain on the canceled recess: That’s fine, but GOP still needs a plan (for healthcare, for debt ceiling for defense budget/approps)
— Jeremy Herb (@jeremyherb) July 11, 2017
From Sen. Bob Corker (R-Tenn.):
We should stay in Washington as long as it takes to complete our work on behalf of the American people. My statement on the recess delay: pic.twitter.com/F6Q5OBqIip
— Senator Bob Corker (@SenBobCorker) July 11, 2017
From Sen. John Kennedy (R-La.):
1/3 I’m pleased @SenateMajLdr has agreed to delay the August recess for two weeks.
— John Kennedy (@SenJohnKennedy) July 11, 2017
–Tomorrow promises to be another dramatic day in the health-policy world; McConnell has said he’ll release the revised version of his bill with the aim of bringing it to the floor next week (after it gets a score from the Congressional Budget Office, likely on Monday). Aides and lobbyists tell The Health 202 it’s looking more and more likely the changes will be to the bill’s insurance subsidies and not to its Medicaid cuts. And it’s undecided but unlikely that the “Freedom Amendment” pushed by Cruz and Lee will be included.
Senate Majority Whip John Cornyn of Texas said yesterday the final decision about what to include will depend on CBO estimates of the budgetary and coverage impact for each proposal. “We’re looking at maintaining all of the options,” Cornyn told reporters. “There will be a base bill, but 51 senators will be able to amend it.”
–Don’t forget about the Senate parliamentarian’s role in all this. This week, Elizabeth MacDonough and her deputies are meeting with Democratic and Republican aides to hash out what can actually go into the Senate bill under rules governing the budget reconciliation process. That could throw another wrench into this whole process if MacDonough says the Cruz amendment or antiabortion language doesn’t apply.
–Most watchers around Washington put the chances of the Senate passing a bill at about 50-50, at best. It’s still almost impossible to see a viable path forward and there are plenty of naysayers.
“I’m very pessimistic,” Sen. Charles Grassley, R-Iowa, said on Fox News yesterday morning. But if Republicans don’t repeal Obamacare after promising to do so for seven years they’ll suffer, he predicted. “There are consequences if you don’t deliver on election promises, and there ought to be,” Grassley said.
Over the weekend, Grassley had tweeted that if Republicans don’t complete a bill, “WE WILL GO FROM MAJORITY TO MINORITY.”
–Some moderates have been calling all along for working with Democrats on fixing the ACA’s problems. Graham appeared to join that crowd yesterday when he said he’s working with other senators to draft an alternative plan to replace Obamacare — and he hopes to win support from across the aisle, according to Politico.
“I’m working with some senators to come up with a new approach to deal with how to replace Obamacare,” Graham told reporters. “I think it will be fundamentally different. I think it will potentially attract some Democrats.”
–Pressure is building, building, building for moderates to stick to their guns and defect. The AARP is making another ad buy targeting five of them: Sens . Lisa Murkowski of Alaska, Dean Heller of Nevada, Cory Gardner of Colorado, Rob Portman of Ohio and Shelley Moore Capito of West Virginia. The ads on radio and TV call for the Republicans to vote against the health bill:
“Nothing we’ve advocated so far would cause anyone currently on Medicaid to come off of it.” –Senate Majority Leader Mitch McConnell, in a speech in Paducah, Ky. on July 5
–How the big Medicaid funding cuts in the Senate health-care bill would affect the program’s financing and scope is a heated point of debate. Post Fact Checker Michelle Ye Hee Lee looks at McConnell’s claim….and finds he’s not exactly presenting the whole picture.
The facts: The Senate bill would phase out the Medicaid expansions under the Affordable Care Act by reducing the federal match for newly eligible adults, place a cap on the federal reimbursements to states, and lead to fewer people being enrolled than under current law. The cap on federal reimbursements begins in 2020, and the reduction in federal matching rates for newly eligible adults in expansion states starts in 2021.
What the Senate health-care bill doesn’t do: It doesn’t require or direct states to change their own Medicaid programs; it just cuts the federal funding to them. The crux of McConnell’s argument is that states can make their own decisions that are best for them. Some states might choose to keep their current level of Medicaid coverage, and change their state budget priorities to make that work.
However: This argument is misleading, Michelle writes. “Mandate or not, the Senate GOP health bill would decrease federal reimbursement for Medicaid, and states would need to decide how to move forward with less federal money,” she concludes. “This would create pressures on states to cut or eliminate coverage for certain populations, and some people would ‘come off’ Medicaid.”
Some other reads from around the web:
- The Center for American Progress holds an event on the Intersection of Faith and Reproductive Justice.
- The Hazelden Betty Ford Foundation holds a “national town hall” on the opioid crisis.
- The House Energy and Commerce Subcommittee on Health will hold a hearing on examining medical product manufacturer communications.
- The Hill is hosting an event on “The Cost of Caring: Family Caregivers and Tax Reform,” featuring Sen. Tammy Baldwin (D-Wis.), Sen. Joni Ernst (R-Iowa), Rep. Dan Donovan (R-N.Y.) and Rep. Michelle Lujan Grisham (D-N.M.) on Thursday.
- The Bipartisan Policy Center will hold an event on Thursday on state flexibility in health care
- The American Enterprise Institute is holding an event on Friday on Medicare in the Trump era.
Senate Republicans push back August recess:
Democrats slam Cruz amendment for allowing “junk insurance”:
Schumer on recess delay: “Two weeks isn’t going to solve their problem”
See Donald Trump Jr. defend his meeting with a Russian lawyer on “Hannity” last night: