As Veterans Day recedes and Republicans in Congress take up tax reform purportedly to help everyday Americans, it is worth noting that one in five veterans would benefit by raising the federal minimum wage to $15 an hour, according to the Economic Policy Institute.
“Of the 9 million veterans in payroll jobs across the country, approximately 1.8 million would get a raise if Congress raised the federal minimum wage to $15 by 2024, as was proposed earlier this year in the Raise the Wage Act of 2017,” wrote the Economic Policy Institute’s David Cooper and Dan Essrow. “This means that despite their service to the country, the intensive training that they have received, and the access to additional education provided to veterans through the GI Bill, 1 out of every 5 veterans is still being paid so little that they stand to benefit from raising the minimum wage.”
The veterans who would benefit from raising the minimum wage are in their 30s, approaching middle age, EPI’s experts noted.
“The stereotype that only middle-class teens working after school would benefit from raising the minimum wage is false. Yet this stereotype breaks down even more dramatically when considering the veterans who stand to benefit from a higher minimum wage,” they wrote. “Of the veterans who would get a raise, nearly two-thirds are age 40 or older, over 60 percent have some college experience, and nearly 70 percent work full time.”
“The fact that so many former servicemen and women would benefit from raising the minimum wage is a reminder that labor standards like the minimum wage protect all workers—even those whose courage, training, and sacrifice should guarantee them a good job,” EPI’s experts said. “Unfortunately, Congress has let the federal minimum wage erode to the point where, adjusted for inflation, workers at the federal minimum wage are paid less today than during the Vietnam War. There is no reason why the federal minimum wage could not be significantly higher than it is today; Congress simply needs to act.”
In September, shortly after the GOP released the initial framework for its so-called middle-class tax plan, multiple independent analyses revealed that millionaires would reap the greatest benefit, both as a share of the entire tax cut and as a percentage of their income.
The public narrative quickly shifted to the tax plan being a giveaway to the wealthy, and opinion polling revealed the plan was unpopular. So when House leaders unveiled formal legislation on Thursday, they made sure to highlight a provision that maintains a top rate of 39.6% for those reporting income of $1 million or more.
It’s a clever talking point that may temporarily provide political cover, but it is not a game-changer. The nation’s most affluent families tend to earn their money in different ways than the rest of us, and the House bill either creates or retains special loopholes for those types of income that dramatically water down the effect of the 39.6% rate. This is not breaking news. Tax writers are fully aware of this.
Under current law, the top tax rate on most investment income (capital gains and dividends) tops out at just 23.8%—far below the 39.6% rate applied to salaries and wages. This preference for income earned from investments over ordinary wages is the reason Warren Buffett, as he says, pays a lower tax rate than his secretary. The House tax plan leaves this loophole in place. As long as this loophole remains untouched, it will make little difference to wealthy investors whether the top ordinary income tax rate is 35%, 39.6%, or any other level because that rate will not apply to investment income. If lawmakers genuinely wanted to signal to the public that they intend to focus on the middle class, they would have closed this controversial loophole.
Instead, tax writers created more special carve-outs for the highest-income households that make the 39.6% top rate seem far less significant by comparison. Most notably, the plan eliminates the estate tax, which only the wealthiest 0.2% pay, as the first $11 million in wealth is exempt from the tax. The sole reason for repealing this tax is to shower more tax benefits on the wealthy. The legislation also dramatically reduces tax rates for corporations and other highly profitable businesses, and repeals the backstop Alternative Minimum Tax (AMT), which ensures that high-income taxpayers pay at least some basic amount of tax, no matter how many loopholes their accounts helped them find. All these provisions would offer an enormous windfall to the nation’s wealthiest families, despite a 39.6% top rate being left in place for salaries and wages.
House leadership essentially has chosen to answer public concerns about inequities in our current tax system by making them much worse, but in ways that can be difficult for everyone except tax accountants and analysts to understand.
Consider the proposed top rate of 25% that would apply to most types of business profits. Business owners would pay rates of no more than 25% on their income, while their employees would still be subject to rates ranging up to 39.6%. This creates a clear inequity and special tax preference for the types of income earned by the most affluent taxpayers. Business income, which makes up around a quarter of the earnings of the nation’s millionaires, is another reason House leaders were so quick to abandon their plan to cut the top tax rate on salaries and wages: precisely the types of income that millionaires are less likely to rely upon.
There likely won’t be much outcry over the top tax rate staying at 39.6%, even among wealthy special interests who are pushing for tax reform, because they’ve already succeeded in ensuring that the House proposal will include enough loopholes to stop that top tax rate from applying most of the time.
My colleagues at the Institute on Taxation and Economic Policy produced an analysis of the September framework, which would have cut the top rate to 35%, and found that the share of the overall tax cut going to millionaires would have fallen by less than 2 percentage points, from 58.6% to 56.8%, if that top rate cut had been left out while the other tax cuts for the wealthy remained intact.
The unfortunate truth is that this so-called millionaires’ tax is little more than a talking point developed to assuage public concern about income inequality and a tax plan that could make it worse by substantially boosting the after-tax income of the wealthiest Americans.
Donald Trump had barely left the US Capitol on Tuesday after a meeting with Republicans senators when Jeff Flake took the Senate floor. He delivered a barnstorming speech, excoriating the state of the Republican party under the stewardship of the president.
Just moments before, reports that Flake would not seek re-election had sent shockwaves across Washington.
From the Arizona senator’s vantage point, the writing was on the wall: he had a reliably conservative record but his willingness to speak out about the controversial behavior of a divisive president had rendered him a man without a party. This was Trump’s Republican party, Flake said, and there was no room for him within it.
“It is time for our complicity and our accommodation for the unacceptable to end,” Flake said, in explosive remarks that were instantly labeled as a historic act of defiance. “There are times when we must risk our careers in favor of our principles. Now is such a time.”
The senator delivered a 17-minute speech, framing the moment as an existential crisis for the party, taking direct aim at Trump’s conduct and what his presidency symbolized in a lacerating critique.
It was an extraordinary event that would have otherwise been regarded as a major breach of decorum. But this is Washington in 2017. The norms have already been broken.
A handful of Flake’s colleagues sat stony-faced in the chamber as he implored Republicans not to acquiesce on core principles in the pursuit of appeasing Trump’s angry nationalist base.
“We must stop pretending that the degradation of our politics and the conduct of some in our executive branch are normal,” he said.
Flake went on, thrusting the knife even further into Trump, though avoiding naming him: “Reckless, outrageous, and undignified behavior has become excused and countenanced as ‘telling it like it is’ when it is actually just reckless, outrageous, and undignified.”
Among those who bore witness to Flake’s remarks was John McCain, the senior senator from Arizona who just a week previously blasted “half-baked, spurious nationalism” in a coded attack on so-called “Trumpism”. Mitch McConnell, the Senate majority leader, looked on stoically.
As the speech reached its conclusion, one senator applauded: Ben Sasse, a young Republican from Nebraska who, like Flake, declined to endorse Trump in the 2016 election. Many of the Senate’s 52 Republicans were nowhere to be found. They had just left a closed-door lunch with the president, dining over chicken marsala, green beans and Trump’s favorite, meatloaf, before a major push to overhaul the tax code.
Much of the meeting featured Trump – characteristically – singing his own praises, according to some attendees. There was general discussion of taxes, but few specifics from a president who takes little interest in the policy details.
It was nonetheless a cordial meeting, by Trump’s standards, embodied by the takeaway quote of John Kennedy, of Louisiana: “Nobody called anyone an ignorant slut.”
Nonetheless, Flake’s sudden exit was a stark reminder that the rapport between Republicans and the figurehead of their party is anything but congenial.
The November election did not put an end to the Republican Party’s civil war – a chasm between the establishment in Washington and grassroots activists that deepened with the rise of the Tea Party movement of 2009. Trump has only amplified it. Flake, after all, was not alone in his scathing criticism of the president.
All week, a feud between Trump and Bob Corker, the Republican chair of the Senate foreign relations committee, soared to new heights – or depths. It culminated in Corker issuing his own stunning rebuke of Trump.
“When his term is over, the constant non-truth-telling, the name-calling, the debasement of our nation, will be what he will be remembered most for,” Corker told CNN.
Corker announced his own retirement last month, joining the ranks of a small but growing number of Republicans who have come to see Trump’s presidency as a moment of reckoning.
On one side is Trump, the most unpopular president in modern US history, ushered in by a grassroots movement with Steve Bannon, the former White House chief strategist, at its helm. On the other is the old guard of Republican leaders, struggling to distance themselves from Trump’s toxicity and a party base that he increasingly drives with racially motivated nationalism.
Critics like Flake, Corker and McCain subscribe to the views espoused by Republican presidents back to Ronald Reagan – a belief in limited government, moderate positions on immigration and trade – but Bannonites have waged war on “globalists” and used race and class to drive a wedge between the establishment and a rancorous base unmoored by the economic and cultural dislocation of the last 20 years.
The friction has prompted a battle for the soul of the Republican party. A strategist aligned with Bannon told the Guardian that Trump’s victory unleashed an insurgent movement that wants to overthrow the party establishment in Washington.
“The strategy is to make everyone look over their shoulders,” the Bannon ally said, “so they understand that they are no longer in charge of the Republican party.”
As reports of Flake’s retirement surfaced, another ally of Bannon swiftly celebrated the news by claiming “another scalp”.
The departure of another moderate senator – at least, a moderate within the current Republican party – was the latest victory in Bannon’s mission to reshape the conservative movement.
Although he did not formally join Trump’s campaign until August 2016, three months shy of the election, Bannon spent years cultivating his influence as the executive chairman of Breitbart News. The hard-right website traffics in often vitriolic content about immigrants and Muslims, and once published stories under the tag “black crime”.
The seeds of racial anxiety sown by Breitbart were not simply fodder for rightwing readers, but were intended as markers for Republicans in elected office. The message was clear: if Republicans did not adhere to protectionism they risked being vilified as part of the “establishment”, a tag that by the 2016 primaries became so potent it was regarded by contenders as an insult.
To longtime political observers, this insurgency is the likely culmination of the Tea Party movement that rose up against Barack Obama and swept Republicans to control of the House of Representatives in 2010 and the Senate four years later.
If the bombast of Sarah Palin as McCain’s 2008 running mate foreshadowed the uprising, the die was cast by 2012. Although Mitt Romney survived a bruising primary, the centrist former governor of Massachusetts failed to placate the right wing in the general election.
Romney was also vilified as an out-of-touch plutocrat at a time when the American economy was still recovering from the worst financial collapse since the Great Depression. In some ways, he was the antithesis to what the Tea Party insurgency was seeking.
The GOP’s mainstream nominee also performed abysmally among Hispanic, African American, women and young voters, resulting in a 100-page “autopsy” commissioned by the Republican national committee that recommended dramatic change. Little did party leaders know that Trump would come along and render that autopsy irrelevant.
Trump’s support was fueled, in part, by Breitbart, which during the Obama years shaped the debate on the right over issues ranging from immigration and healthcare to fiscal policy, never giving an inch to compromise.
Bannon’s swift return to the website after leaving the White House in August suggested a “take-no-prisoners” war was only just beginning, and could reach the West Wing if Trump moved away from the “America First” agenda on which he campaigned. But Republican leaders in Congress were, and continue to be, the top targets of Breitbart’s ideological crusade.
The website has been so ruthless in its attacks against House speaker Paul Ryan that it not only promoted his primary challenger in 2016 but also ran a story criticizing him for having a fence around his home in Wisconsin but not being sufficiently supportive of a wall along the US-Mexico border.
Speaking at the Values Voter Summit, an annual gathering of conservative activists held earlier this month, Bannon declared “a season of war”.
“Nobody can run and hide on this one, these folks are coming for you,” he said, to raucous approval.
In a pointed advisory to McConnell, the Senate majority leader, Bannon invoked Shakespeare, stating: “Up on Capitol Hill, it’s like the Ides of March.”
“They’re just looking to find out who is going to be Brutus to your Julius Caesar,” he said. “We’ve cut your oxygen off, Mitch.”
‘You’re going to see more retirements’
For some Republicans facing a tough road to re-election in 2018, the Bannon insurgency has already proved too daunting. A flurry of high-profile retirements have been announced, many hailing from competitive districts eyed by Democrats as potential wins.
If Bannon has his way, the party will not simply transform itself. It will instead create a new establishment, led by what Bannon dubbed as “the populist, nationalist, conservative revolt that’s going on, that drove Donald Trump to victory”.
Flake’s exit appeared to usher in a turning point for Republican leaders in Washington. Senate Leadership Fund, a political action committee aligned with McConnell and tasked with preserving a Republican majority in the upper chamber, revealed plans this week to meet Bannon’s fire with fire.
The Washington Post reported that McConnell’s allies would tie Bannon to white nationalism in a bid to undermine him and his roster of outsider candidates. The group will reportedly commit millions of dollars, while supporting more orthodox Republicans.
It is likely to be a nasty battle, costing tens of millions of dollars. Hedge fund billionaire Robert Mercer and his daughter Rebekah are ready to assist Bannon, their close ally. Rightwing commentators such as Sean Hannity and Rush Limbaugh have begun to trumpet Bannon’s anti-establishment message to millions of loyal followers.
In some ways, Flake and Corker signalled an uphill climb. Flake confessed he would have had to run a campaign he would not be proud of in order to fend off a challenge from the right.
The attacks levied at Trump by his Republican opponents in the 2016 campaign went far beyond the norms of primary jostling, with some declaring him “unfit” and going so far as to say he could not be trusted with the nuclear codes. But when voters selected Trump as the Republican nominee, his critics lined up behind him, insisting their allegiance was to the party and anyone would be better than Hillary Clinton.
David Jolly, a former Republican congressman from Florida, said that was short-sighted.
“We’re not going to win a long-term governing majority by endorsing those kind of candidates,” he said.
“We might win a few races here and there in the short term, but we’re not winning the hearts and minds of the American people and independent voters looking at a party they don’t recognize.”
‘Rationalize and capitulate’
For Republicans in Washington, capitulating to Trump has often meant ignoring the unprecedented ways in which he has tested institutions, incited racial resentment and governed in 140 characters or less.
Trump has feuded with military families, flouted US allies, attacked members of his own party and made divisive remarks on race after the death of an anti-racist protester in Charlottesville in August. Republican lawmakers on Capitol Hill have taken to meeting such daily controversies with a shrug of the shoulders.
“I’m not going to comment on the tweets of the day,” Paul Ryan says near-weekly while fielding questions from reporters on Capitol Hill.
There is a growing sense in Washington that more and more Republicans are willing to hold their noses in hope of passing tax reform – or more likely, tax cuts.
Despite engaging in his own war of words with Trump this summer, McConnell has similarly sought to project unity this month.
Compounding pressure on GOP leaders is nine months without a major legislative accomplishment. Republicans exhausted three months on healthcare only for their efforts to dismantle the Affordable Care Act to fall short, thwarted by opposition within their own party.
Operatives say Republicans will be “crucified” by constituents if they are left with nothing to run on in 2018, despite controlling both chambers of Congress and the White House.
Trump critics such as Charlie Sykes, a conservative talk radio host who authored the book How the Right Lost Its Mind, have resigned themselves to believing the party has been “thoroughly Trumpified”.
“The capacity of the Republican party to rationalize and capitulate to Donald Trump is extraordinary,” Sykes said, “and their capacity for surrender has not yet been exhausted. How many times have we said, ‘Surely, this will be enough?’”
Sykes predicted the dysfunction that created Trump would live on well after his exit, bolstered by a “post-truth conservative media”, until and unless Republicans provided a clear, electoral alternative.
“Candidates more in line with mainstream conservative thinking and basic human decency would have to come forward,” he said.
He paused and chuckled, before adding with a sigh: “But I also want a unicorn for Christmas.”
The big tax code makeover President Trump and Republicans have been promising for months is finally out.
It’s nine pages long. That may sound like a lengthy document, but the final bill in Congress will be hundreds of pages. What the White House released today is a framework. It’s a summary of what top Trump officials and congressional Republican leaders have agreed to so far. The Trump administration says it’s the job of Congress to flesh out the specifics.
Here are the key takeaways:
The plan will likely add to America’s $20 trillion debt. There are lots of tax cuts spelled out. There are almost no loopholes eliminated.
The rich make out pretty well. The White House vows poor people won’t have to pay more than they do now, but there are few specifics in the plan so far to ensure that.
Businesses (both small and large) get major tax cuts.
Most people will pay lower taxes, although it’s unclear if the rich get a bigger break than the middle class.
There are still a lot of details Congress has to figure out.
What’s in there for the rich? The wealthy get a tax cut. They will pay only 35 percent on their income taxes (down from 39.6 percent). At the moment, this rate applies to any income above about $418,000. It’s unclear if Congress will tinker with the income level that rate kicks in at. Trump says he would be fine with Congress raising taxes on the rich in the final plan, but he isn’t requiring that they do that.
The bigger tax break for the rich is the elimination of the estate tax, sometimes called the “death tax.” It’s the tax families currently pay when an asset like a house or ranch worth over $5.49 million is passed down to a heir after someone dies. Trump’s plan scraps this tax entirely.
What’s in there for the middle class? This is the giant question mark. There’s a lot of details left for Congress to fill out. Under the plan, America will have just three tax rates: 35, 25 and 12 percent, but we don’t know yet which rate someone earning $50,000 or $80,000 will pay.
What we do know is the standard deduction (currently $6,350 for individuals and $12,700 for married couples) will nearly double. This means that a married couple earning $24,000 or less or an individual earning $12,000 or less won’t pay any taxes. But the plan also eliminates what’s known as the additional standard deduction and the popular personal exemption. Some filers may end up worse off after these changes.
The plan also promises a “significant increase” to the child tax credit (it’s currently $1,000 per child) and that middle class Americans can keep using the mortgage interest deduction as well as tax breaks for retirement savings (e.g. 401ks) and higher education. But it eliminates the state and local tax deduction, which is used by many in high-tax states like New York and California.
Can I really file my taxes on a postcard? The “file on a postcard” idea was an exaggeration. The goal now is to get most people’s tax returns down to one page.
What about the working poor? A senior White House official told journalists Tuesday, “We are committed to making the tax code at least as progressive as the current tax code.” Translation: The poor should not end up paying more than they do now. But it’s hard to check if that’s true because we still don’t have enough details.
In theory, increasing the standard deduction should mean that more Americans pay $0 in taxes, but it depends what happens to a lot of other tax provisions (and whether Congress ends up cutting safety net programs that help the poor to pay for tax cuts). Top Republican officials have not decided what to do with the Earned Income Tax Credit (EITC), which is widely used by the working poor to help them reduce their tax bill and even get a small amount of money back from the government.
What happens to the Alternative Minimum Tax?
The Alternative Minimum Tax (AMT) would go away under the plan. It currently applies mainly to individuals earning more than $130,000 and married couples earning more than $160,00. It was created in the 1970s to prevent wealthier families from taking so many tax breaks that they end up paying little to no taxes, but over the years, the AMT has impacted more and more families.
What happens to big businesses?
America’s large corporations will get a big tax cut. The top rate at the moment is 35 percent, one of the highest rates among developed nations. Most U.S. companies don’t pay that rate, but it is still a starting point. The Trump plan slashes the rate to 20 percent, just below the average of major developed countries the U.S. competes against.
The White House and Congress promised to close some loopholes that businesses currently enjoy, but no one is saying what those are yet. In fact, the only details we have show MORE business goodies, not less. The plan calls for businesses to be able to write off their investments (e.g. the cost of building a new factory) right away instead of crediting a little bit each year for several years. This is supposed to encourage companies to invest more, which will hopefully create more jobs.
What happens to small businesses? Small businesses also get a tax cut under the plan. At the moment, many small business owners pay whatever their personal income tax rate is, so some end up paying as much as 39.6 percent. Under this plan, most “pass throughs” (code for small businesses) would pay at the 25 percent rate (the exception is if a small businesses earned very little income, they might be able to pay at the 12 percent rate).
There’s concern some rich people, especially hedge fund managers and consultants to the stars, will simply use this as a way to lower their tax bill. Instead of paying at the new 35 percent top income tax rate, they could say all their income is small business income and pay at the 25 percent rate. Trump has promised to fix that problem, but no one is sure how.
How will this plan help growth?
Trump’s big claim is that this tax overhaul will unleash economic growth. The United States has been growing at about 2 percent a year lately, below the historic norm. Trump keeps saying this plan will unleash growth of 3 percent — or more.
Economists, even those who work at Wall Street banks and for big companies, only project a modest boost to growth. Estimates range from 2.1 percent to 2.25 percent.
How much will this add to the debt? Originally, Republican leaders said they would not add $1 to America’s debt, but that promise appears to be gone. The White House says it will go along with whatever price tag Congress allows. Right now, Senate Republicans have a deal to add $1.5 trillion to the debt over the next decade, so there’s a good chance this tax plan will add to the debt.
What are the pitfalls?
There’s a ton we don’t know yet. Many on the left are concerned this plan gives away too much to the rich and big businesses. Many across the political spectrum are alarmed that it will likely add to America’s already large debt.
As he does so often, Bob Phillips, head of Common Cause in North Carolina, had it exactly right with his comments on some pitiful, harshly partisan legislative districts as redrawn by Republican lawmakers, or rather by their hired consultant.
Made necessary by federal court rulings that found some of their 2011 districts to be racially gerrymandered, the new maps – likely in a drawer for some months while the court cases played out – continue to skew districts toward Republicans. That was entirely expected, since the rules for new maps the GOP leaders made for themselves allowed partisan consideration and voting patterns to be used in the new districts. Phillips, long an advocate of nonpartisan redistricting – done after every 10-year census – said GOP lawmakers blew a “golden opportunity to adopt fair, nonpartisan standards” for districts. Instead, he found “partisanship at the core,” and that’s right.
Making things worse is that by calculation, GOP leaders have offered the public a very limited amount of time to comment and offer input on the maps. In reality, of course, Republicans couldn’t care less about what the public thinks, which is the point of not allowing them time to offer their own opinions. If they did, they’d likely state the obvious: Why not form a nonpartisan redistricting commission to draw new maps and avoid what has been a huge public expense as Republicans have tried to defend the indefensible in federal court, to no avail?
Now, of course, Republicans are taking a chance that their maps will again be found to be gerrymandered in the extreme by the courts, at which point the courts would come in and draw the maps.
This story has been like the maps themselves – twists and turns and misdirection and confusion that do no favors for the fair democratic process in which people should vote for their representatives based on geographical good sense and competing ideas, not on ridiculously-drawn districts designed to give Republicans an advantage in keeping control of the General Assembly. If Republicans believe so strongly in their ideas, they should not fear a fair competition. But they do.
(WASHINGTON) — Senate Republicans would cut Medicaid, end penalties for people not buying insurance and erase a raft of tax increases as part of their long-awaited plan to scuttle President Barack Obama’s health care law, congressional aides and lobbyists say.
After weeks of closed-door meetings that angered Democrats and some Republicans, Senate Majority Leader Mitch McConnell planned to release the proposal Thursday. The package represents McConnell’s attempt to quell criticism by party moderates and conservatives and win the support he needs in a vote he hopes to stage next week.
In a departure from the version the House approved last month, which President Donald Trump privately called “mean,” the Senate plan would drop the House’s waivers allowing states to let insurers boost premiums on some people with pre-existing conditions. It would also largely retain the subsidies Obama provided to help millions buy insurance, which are pegged mostly to people’s incomes and the premiums they pay.
The House’s tax credits were tied to people’s ages, a change the nonpartisan Congressional Budget Office said would boost out-of-pocket costs to many lower earners. Starting in 2020, the Senate version would begin shifting increasing amounts of tax credits away from higher earners, making more funds available to lower-income recipients, some officials said.
The emerging Senate bill was described by people on condition of anonymity because they were not authorized to discuss it publicly.
Facing uniform Democratic opposition, the Senate plan would fail if just three of the chamber’s 52 Republicans defect. More than half a dozen GOP senators have expressed problems with the measure, and a defeat would be a humiliating setback for Trump and McConnell on one of their party’s top priorities.
“We have a responsibility to move forward, and we are,” said McConnell, R-Ky.
GOP Senate leaders were eager for a seal of approval from Trump, who had urged them to produce a bill more “generous” than the House’s.
“They seem to be enthusiastic about what we’re producing tomorrow,” No. 2 Senate GOP leader John Cornyn of Texas said Wednesday of White House officials. “It’s going to be important to get the president’s support to get us across the finish line.”
Democrats say GOP characterizations of Obama’s law as failing are wrong, while the Republican effort would boot millions off coverage and leave others facing higher out-of-pocket costs. The budget office said the House bill would cause 23 million to lose coverage by 2026.
The sources said that, in some instances, the documents McConnell planned to release might suggest optional approaches for issues that remain in dispute among Republicans.
That could include the number of years the bill would take to phase out the extra money Obama provided to expand the federal-state Medicaid program for the poor and disabled to millions of additional low earners.
The House-passed bill would halt the extra funds for new beneficiaries in three years, a suggestion McConnell has offered. But Republicans from states that expanded Medicaid, like Ohio’s Rob Portman, want to extend that to seven years.
The Senate proposal would also impose annual limits on the federal Medicaid funds that would go to each state, which would tighten even further by the mid-2020s. Unlimited federal dollars now flow to each state for the program, covering all eligible beneficiaries and services.
The Senate would end the tax penalties Obama’s law created for people not buying insurance and larger employers not offering coverage to workers. The so-called individual mandate — aimed at keeping insurance markets solvent by prompting younger, healthier people to buy policies — has long been one of the GOP’s favorite targets.
To help pay for its expanded coverage to around 20 million more people, Obama’s law increased taxes on higher income people, medical industry companies and others, totaling around $1 trillion over a decade. Like the House bill, the Senate plan would repeal or delay many of those tax boosts.
The House waiver allowing higher premiums for some people with pre-existing serious illnesses was added shortly before that chamber approved its bill last month and helped attract conservative support. It has come under widespread criticism from Democrats and helped prompt some moderate House Republicans to vote against the measure.
Conservatives like Sen. Rand Paul, R-Ky., have warned they could oppose the bill if it doesn’t go far enough in dismantling Obama’s law. Moderates including Sen. Susan Collins, R-Maine, have expressed concern that the measure would cause many to lose coverage.
From Alan Fram & Ricardo Alonso-Zaldivar / AP/Time
Rep. Jason Chaffetz (R-Utah), moments before voting to undo Obamacare’s preexisting condition protectionsBill Clark/ZUMA
When Republican lawmakers face criticism over their plan to allow states to dismantle protections for people with preexisting conditions, they have a pretty standard response. Their Obamacare repeal bill, they insist, would only allow insurers to jack up prices on sick people if those people haven’t maintained continuous health coverage. “For individuals with preexisting conditions, once you are in the system, every proposal that I’ve heard so far says you stay in the system,” Sen. Mike Rounds (R-S.D.) told NPR Thursday. “And if you do have a serious illness, you can’t run out of coverage.”
But we now know that isn’t really accurate. As Mother Jones‘ Kevin Drum points out, Wednesday’s Congressional Budget Office analysis of the bill suggests that anyone with a preexisting medical condition—even people who already have health insurance—could face steep premium hikes.
“The nongroup markets in those states would become unstable for people with higher-than-average expected health care costs.”
Part of what Republicans are saying is technically true: The bill does, in fact, bar insurance companies from singling out individuals for price hikes if they have maintained continuous coverage. But the CBO notes that insurers would have—and likely would use—a workaround that would effectively jack up rates on every sick person they cover in the non-group market.
The exact mechanism is a bit complicated. In essence, insurance companies would entice healthy people out of the community-rated market—which mandates that everyone pay the same rate, with no differences based on health status—by offering plans with cheaper premiums. Those new plans would be subject to underwriting, which means that they’d likely be unaffordable for people with preexisting conditions. Sick people would remain in the community-rate plan, where prices would skyrocket. That, in turn, would drive more healthy folks away from the community-rated plans, creating a downward spiral.
The Brookings Institution’s Matthew Fiedler flagged this possibility before the CBO report came out. “With healthy enrollees opting out of the community-rated pool,” Fiedler wrote, “community-rated premiums would need to be extremely high, forcing sicker individuals—including those with continuous coverage—to choose between paying the extremely high community-rated premium or being underwritten themselves. Either way, people with serious health conditions would face prohibitively high premiums.”
The CBO is surprisingly frank about the effects the GOP bill would have on people preexisting conditions. The report predicts that about 15 percent of Americans will live in a state that obtains a waiver to end the ban against price discrimination. According to the report, “The nongroup markets in those states would become unstable for people with higher-than-average expected health care costs.” Premiums would become far more expensive, and possibly so expensive that people with preexisting conditions would essentially be excluded entirely from the market.
According to the Kaiser Family Foundation, about 27 percent of people under the age of 65 have serious enough preexisting conditions that they would have been denied coverage prior to Obamacare. Those people would be left struggling to pay higher premiums in the states that opt out of the Obamacare protections. Republicans have promised government-funded high-risk pools as a fallback option, but they have wildly exaggerated the amount of money that the bill would provide for these pools. Just $8 billion over 5 years is earmarked for high-risk pools (with no future money promised). According to the CBO, that amount “would not be sufficient to substantially reduce the large increases in premiums for high-cost enrollees.”