It looks like President Trump used his joint session speech before Congress to take sides in the internal Republican battle over repealing and replacing Obamacare.
In laying out his "five principles" on healthcare, Trump mainly focused on broad areas of agreement among Republicans — expanded health savings accounts, access for those with pre-existing conditions, medical malpractice reform, more flexibility to the states and allowing for the interstate purchase of insurance.
But one part that raised the eyebrows of those in the health policy community was when Trump endorsed "the use of tax credits" to expand coverage.
The issue of using tax credits toward the purchase of insurance has emerged as one of the key rifts between Republican leadership and conservatives in Congress, which is no surprise, given that it has long been one of the main dividing lines within the right on healthcare.
Many conservatives prefer offering tax deductions to individuals because they function more like a tax cut — that is, people's tax liabilities are reduced by the amount that they spend toward coverage. However, this approach tends to cover fewer people, because many Americans with low incomes pay little or no income taxes against which to deduct.
Providing individuals with tax credits of a specific amount, regardless of how much they pay in taxes, would benefit that lower-income population. Of course, it comes with a higher cost, as tax credits function more like spending, which is what gives other conservatives pause.
The credit-based approach is one that has been embraced by House Speaker Paul Ryan and Health and Human Services Secretary Tom Price.
Conservatives in Congress have declared the idea of refundable tax credits as a non-starter, seeing it as Obamacare by another name. But so far, they have not been jumping out of the gate to condemn Trump's comments. They could be holding out hope that as Trump's ideas get more fleshed out, they could migrate more closely to the deduction-based model. Though Trump used the term "tax credits," he could have theoretically meant it in a more general way, and not specifically to describe the sort of refundable tax credits supported by Price and Ryan and opposed to by many conservatives.
"President Trump specifically mentioned expanding health savings accounts, allowing purchase across state lines, and having tax credits — all of which are elements of the [Rep. Mark]Sanford/ [Sen. Rand] Paul plan and in line with the conservative approach we hope to see to replace," Alyssa Farah, spokeswoman for the conservative House Freedom Caucus told the Washington Examiner.
While the Sanford/Paul plan is centered around tax deductions for those purchasing insurance, it does describe a separate tax credit against taxes owed that could go into a health savings account.
One significant aspect of Trump's Obamacare section was that he didn't mention any spending levels. His comments are perfectly consistent with either steep cuts to Obamacare, or to maintaining the $2 trillion in Obamacare spending over the next decade, but just allocating it differently and with more state flexibility.