The fight over Obamacare's individual mandate took over the Senate's work on its tax legislation Wednesday, a day after Republicans decided to include a repeal of the insurance requirement in the legislation.
The Senate Finance Committee’s third day of marking up the tax reform bill devolved into the next chapter of a longstanding debate over Obamacare’s mandate that everyone buy health insurance or pay a penalty, one of the parts of the healthcare law that Republicans most detest.
Democrats sought to paint the Republicans' tax reform package as a major healthcare bill after the GOP’s decision Tuesday to include the mandate repeal, while Republicans contended that the mandate hasn’t had as much impact as Democrats say it does.
“The fact is Obamacare is already failing largely because the mandate has failed to do what it was designed to do,” said committee Chairman Sen. Orrin Hatch, R-Utah. “It has not improved markets or brought down premiums.”
Democrats responded that repealing the mandate would severely damage Obamacare’s exchanges since it would lead to people fleeing the law’s exchanges as they would no longer have an incentive to sign up.
“This is not just another garden-variety attack on the Affordable Care Act,” said Sen. Ron Wyden of Oregon, the top Democrat on the committee. “This is repeal of that law and one of the first things that is gonna go would be airtight, loophole-free protection for the millions of Americans who now have protection when they have a pre-existing condition.”
Hatch said later in the markup that he was “astonished” that Democrats wouldn’t support repealing the mandate since it is essentially a tax on the middle class, a talking point echoed by other Republicans on the committee.
Sen. Bill Cassidy, R-La., noted that the mandate penalty “disproportionately falls on low-income Americans.”
“What we are doing here is we are cutting taxes for low-income earners who are being hit hardest by the mandate tax,” added Sen. John Thune, R-S.D., a member of Senate leadership.
Sen. Claire McCaskill, D-Mo., responded that the middle class wouldn’t be helped by the mandate repeal since it would drive up premiums for everyone.
“This is such a scam. You are giving them a little bit of benefit over here but they are not gonna have health insurance,” she said.
Republicans said they aim to use the savings from repealing the mandate to increase the child care tax credit to $2,000 and pay for tax cuts. Sen. Debbie Stabenow, D-Mich., charged that Republicans are using the repeal to make corporate tax cuts permanent, even though individual tax breaks would end in 2025 in a new version of the Senate legislation released late Tuesday night.
The Internal Revenue Service told Congress in January that 12.7 million people last year received an exemption to the penalty, including for financial hardship or other reasons such as a job layoff. About 6.5 million taxpayers paid $3 billion in penalties.
The IRS found that the vast majority of the taxpayers, 77 percent, received a tax refund. The individual mandate penalty of $695, or 2 percent of gross income, is charged when a taxpayer files his return.
Democrats pointed to a recent estimate from the Congressional Budget Office that said repealing the mandate would lead to 13 million people forgoing insurance. It would also result in $338 billion in new revenue for the next decade.
But those numbers could change in the coming months. CBO said it is changing the way it calculates its projections about the individual mandate.
Some experts say the mandate repeal would destabilize the individual market, which features Obamacare’s exchanges and is used by people who don’t have insurance through a job or the government.
Repealing the mandate would have a greater impact than the elimination of cost-sharing reduction payments to insurers, tweeted Larry Levitt, senior vice president for the health research firm Kaiser Family Foundation.
“Cost-sharing payments were a known amount, so insurers could build them into higher premiums when they ended,” he tweeted. “The effect of repealing the individual mandate is highly uncertain.”
The best available evidence implies that the mandate would “significantly reduce insurance enrollment, while increasing” premiums for those remaining on the individual market, added Matthew Fielder, a fellow with the left-leaning Brookings Institution.
Fiedler said that the exact magnitude of the impact could vary but “the direction and nature of these effects is clear. And there is little question they will be large.”
Insurer, doctor, and hospital groups have called on the Senate to keep the mandate.
But other experts doubt the impact of the mandate, especially in the wake of major premium increases on Obamacare’s exchanges in recent years.
“A sensible person has to realize that by now it is clear that the amount of any penalty is quite low compared to the net premium for anybody that’s getting either no subsidy or a modest subsidy,” said Joseph Antos, a fellow with the right-leaning American Enterprise Institute.
Antos pointed to CBO’s decision to take another look at its baseline for establishing how many people could go without coverage.
“The number of people is undoubtedly way too high,” Antos said. “CBO is basically signaling that they are gonna have lower numbers in the new year.”
The Senate likely will have held a vote on tax reform by then.
But conservative healthcare expert Avik Roy said that the CBO’s decision to even look at the baseline numbers could have helped ease GOP concerns about including mandate repeal in tax reform.
“Without the CBO’s wacky mandate estimates as an albatross around GOP healthcare bills, we can return to a real conversation about the right way to make sure that health insurance is affordable for everyone,” he wrote in Forbes.