Ted Cruz Has a Plan to Solve Obamacare’s Big Problem

“I’m highly disappointed,” Wisconsin senator Ron Johnson told reporters Thursday afternoon. “I’m just shocked we’re going home. . . . I want to stick around 24/7 to get this done.”

Senate GOP leadership released its 142-page healthcare bill last Thursday, June 22, with the stated intention of voting on it this week. But by Monday night five GOP senators—a mix of conservatives (Ron Johnson, Rand Paul, and Mike Lee) and moderates (Dean Heller and Susan Collins)—had announced that they would block debate on the bill. And with all Democrats opposed, the bill could only lose two GOP votes and still pass.

By Tuesday afternoon, Senate majority leader Mitch McConnell had announced that there wouldn’t be a vote until the week of July 10, at the earliest. But Senate leadership said they intended to reach an agreement on a new bill by Friday, June 30. “My hope is we’ll get this wrapped up this week and give [the Congressional Budget Office] time to score it” over the Fourth of July break, Senate majority whip John Cornyn told reporters on Tuesday.

But two days later it was apparent there was no consensus on a new bill. “Damned if I know,” Arizona’s John McCain told THE WEEKLY STANDARD when asked if the Senate GOP would send a new bill to CBO on the 30th.

Asked if they made any progress at their final caucus lunch meeting of the week, McCain repeated: “Damned if I know. It’s the same conversation we continue to have.”

“There’s all kinds of stuff flying around. Obviously they’re scrambling for votes,” McCain said. “They see the pictures of the nine senators who have already said they’re voting against it.”

And so, as the Republican senators head back to their home states, they’ll likely be greeted by passionate protests of their effort to partially repeal and replace Obamacare. A Marist poll, typical of other polling this week, found that just 17 percent of Americans support the bill, with 55 percent opposed and 27 percent unsure.

Against this bleak backdrop, however, there are a couple signs of life for the repeal-and-replace effort.

First, there appeared to be a growing consensus that one Obamacare tax on high-income Americans (a 3.8 percent tax on investment income for couples making more than $250,000) should be kept to help pay for the bill.

“I’ve never ruled that out on the high-earner side. Not the medical device tax,” Florida senator Marco Rubio told reporters on Thursday. “But only if it’s part of a plan that works.”

“I think even the president alluded to it at the meeting the other day,” Rubio added.

“Everybody has now accepted in America that we want to cover pre-existing conditions,” Ron Johnson said. “Recognize the fact that we have a new entitlement. That’s not going away. . . . One of the reasons we’re talking about not repealing all of the taxes is . . . you’re maintaining the subsidies, you ought to maintain the funding mechanism for that too. I’m really concerned about debt and deficits.”

“We are going to figure out a way, I believe, before Friday comes to greatly enhance the ability of lower income citizens to buy insurance on the exchange and at the same time my sense is that the 3.8 percent is [not] going to go away,” Tennessee senator Bob Corker said. “It’s not an acceptable proposition to have a bill that increases the burden on lower-income citizens and lessens the burden on wealthy citizens.”

More money—both for Medicaid and the tax credits—is the chief concern of moderates. And that could help pave the way for giving conservatives what they want: More flexibility and freedom from Obamacare’s costly and onerous regulations.

To that end, Texas senator Ted Cruz has come up with an idea that would earn not only his vote but also that of Utah’s Mike Lee: “If an insurance company offers at least one plan in the state that is compliant with the [Obamacare] mandates,” Cruz said Wednesday, “that company can also sell any additional plan that consumers desire.”

Cruz’s plan could solve the central problem of Obamacare, which is that the program provides coverage to people with pre-existing conditions on the individual market by forcing a tiny slice of the population—relatively healthy middle-class families and individuals who don’t have employer-sponsored health insurance—to pay thousands of dollars more each year for health insurance.

Cruz’s plan would allow these middle-class families on the individual market without high healthcare costs to purchase cheaper plans, while also protecting those with pre-existing conditions in the Obamacare-compliant plans. In effect, it would turn the Obamacare-compliant plans into high-risk plans, but insurance could remain affordable to those with pre-existing conditions because the premiums are capped at a percentage of income for those earning 350 percent of the poverty line or less (that is, a modified adjusted gross income of $85,000 or less for a family of four).

This would cause the cost of the subsidies to skyrocket for those in the Obamacare-compliant plans, but conservative senators say having taxpayers transparently pick up the tab makes more sense than forcing the small number of people who lack an employer-sponsored plan to pay for those with pre-existing conditions.

“You are very transparently taking care of those people, and we’re all taking care of them,” Ron Johnson said, “as opposed to forcing that cost on the very small slice of the population.”

“If those with serious illnesses are going to be subsidized, and there is widespread agreement in Congress that they are going to be subsidized, I think far better for that to happen from direct tax revenue rather than forcing a bunch of other people to pay much higher premiums,” Cruz told Vox.com on Wednesday.

Cruz’s idea isn’t some right-wing pipe dream. Avik Roy, a center-right healthcare expert who has pushed for more generous subsidies for low-income Americans, agrees with the Texas senator in principle. “I philosophically support the idea of directly subsidizing the costs of care for the poor and the sick, instead of doing it through regulation,” Roy tells TWS, adding that “[T]here’s a lot of uncertainty as to whether it can pass muster with the parliamentarian and also whether or not the two-risk-pool market would be stable. But if it has 50-vote support it’s certainly worth exploring.”

Cruz’s plan may make sense, but even if 50 Republicans can agree to it, it would still face a procedural challenge. Budget reconciliation rules, which allow the Senate to bypass the typical 60-vote threshold and pass a bill with a simple majority, prohibit certain regulatory changes that are deemed not to be primarily budgetary.

If it does pass procedural hurdles, the plausibility of Cruz’s plan “would depend a lot” on what people in the Obamacare-compliant plans have to pay, says the American Enterprise Institute’s James Capretta. “At about 200 percent of the federal poverty line, the premiums would be okay, but the deductible would be very high and probably not affordable for a sick person who needs a lot of services,” Capretta told TWS in an email Friday. “Having said that, I could see this being attractive to some in the GOP as a way out of their current mess.”