D.C.’s Latest Health “Reform:” Seizing People’s Property

Just when you think the move for government control of health care couldn’t get any worse, somehow it manages to. Last Wednesday, the District of Columbia City Council approved a requirement for all DC residents to purchase health insurance. The mandate would take effect in January, right when the federal mandate penalty drops to $0, as per last year’s tax law.

The D.C. mandate contains three elements that make it just as bad as, if not worse than, the federal mandate it is intended to replace.

A (Deliberately?) Opaque Process

A cynic might believe that the D.C. Council acted in such a low-key manner by design. The council did not approve the mandate as a stand-alone bill, but wrapped it into a 297-page Budget Support Act. That bill contains such unrelated provisions as an amendment regarding the Fort Dupont Ice Arena, technical corrections to a supermarket tax incentive program, and amendments regarding civic associations using public schools.

Likewise, a press release by the D.C. Council summarizing Wednesday’s meeting contained not a word about imposing the individual mandate, nor did the council website show any stand-alone votes on the mandate itself. This lack of disclosure pushed me to contact my council member, Charles Allen, to find out what had happened at the council meeting Wednesday.

Upon hearing that the mandate as passed of a much larger package, I asked one of Allen’s staffers whether this provision had been “snuck in at the last minute.” The staffer said DC Mayor Muriel Bowser had proposed the mandate as part of her budget submission to the council back in March. He then rather sheepishly added that, while people had testified on behalf of other portions of the Budget Support Act, no one had spoken about the mandate specifically.

For a district that decries “Taxation Without Representation,” this Nancy Pelosi-esque behavior—where we literally had to pass the bill to find out what was in it—seems to embody the very congressional tactics that DC leaders love to hate.

Harsher Penalties for Violators

During the 2009-10 debate on Obamacare, the threat of penalties for violating the individual mandate became a source of intense controversy. During the Senate Finance Committee’s markup, Sen. John Ensign (R-NV) received a handwritten note from Thomas Barthold, head of the Joint Committee on Taxation, stating that, under federal law, non-payment of the mandate tax could result in imprisonment. Democrats buckled under this political pressure, removing from the Internal Revenue Service the power to imprison violators, or impose liens on personal property, for non-payment of the mandate tax.

By contrast, the district’s mandate—which comprises pages 168-182 of the Budget Support Act—includes this language at the bottom of page 180: “A taxpayer who fails to pay the District of Columbia shared responsibility payment imposed…shall be subject to all collection, enforcement, and administrative provisions applicable to unpaid taxes or fees, as provided in Chapter 18, Chapter 41, Chapter 42, Chapter 43, and Chapter 44 of this title [emphasis mine].”

Unlike the federal Internal Revenue Code, it does not appear at first glance that the district’s tax law allows for imprisoning individuals for non-payment of taxes (as opposed to deliberate tax evasion or fraud). However, Chapter 44 includes the following language:

If a person determined to be liable to the District of Columbia for a tax neglects or refuses to pay the tax within 10 days after notice and demand, the Mayor may collect the tax, with interest and penalties thereon (and an amount sufficient to cover the expenses of the levy), by levy upon all property (including rights to property) of the person or on which there is a lien provided in this chapter for the payment of the tax.

No wonder the D.C. Council didn’t want to hold an up-or-down vote on just this provision.

Hypocrisy Much?

Another relevant fact to the district’s mandate: The head of the District’s health insurance exchange—which recommended creating a DC mandate following the removal of the federal tax penalty—doesn’t buy exchange coverage herself. As I previously noted, many exchange heads (and Obamacare supporters) refuse to buy the coverage they promote, including the head of the district’s exchange, Mila Kofman.

When I discovered in late 2016 that I could not retain that plan in 2017, due in part to regulations imposed by the district’s exchange, I attended a meeting of the exchange authority. I asked Kofman whether she, and other exchange employees, purchased exchange coverage. She claimed that she and her colleagues could not purchase exchange policies, because they would lose their employer subsidy in the process.

I don’t know whether Bowser and the DC Council behave similarly to Kofman, but I can guess. On Thursday afternoon, I e-mailed Bowser’s office asking about the DC insurance mandate, and whether Bowser received a taxpayer subsidy for her insurance coverage. (The district’s mayor receives a salary of $200,000 annually.) I also asked what Bowser would “say to District residents like me—who make far less in salary than she does, yet do not receive [taxpayer-]subsidized benefits—being forced to buy coverage under penalty not just of taxation, but of property seizures through DC’s tax enforcement mechanisms?”

Wouldn’t you know it: I have yet to receive a response.

Here Are Some Policy Solutions

Thankfully, several of the policy and process problems outlined above contain within them readily achievable solutions:

  • The D.C. Council should pass legislation requiring the mayor, council, exchange CEO, and exchange board members to buy coverage through the exchange—without using separate taxpayer-funded benefits available to other district employees.
  • If the council will not act, the Trump administration could promulgate regulations requiring the CEOs and board members of all state-run exchanges (including the district’s) to buy the coverage they promote and oversee.
  • Congress could also exercise its constitutional prerogatives and strike down the district’s individual mandate, ensuring that no individuals will have their property seized by an overzealous government if they cannot afford to buy “bureaucrat-approved” health insurance.

Better yet: The District of Columbia Council could decide to stop micromanaging its residents’ health care by surreptitiously passing onerous mandates in legislation that few district residents know about.

This post was originally published at The Federalist.

Congress Needs to Eat Its Spinach

The tax bill’s effective repeal of Obamacare’s individual mandate briefly reprised the “broccoli mandate”—whether, as Justice Antonin Scalia asked during Supreme Court oral arguments on Obamacare in March 2012, the federal government could compel individuals to purchase certain foods.

But instead of broccoli, spinach might serve as a more apt analogy, for the way the tax bill came to repeal the mandate demonstrates the ways Congress refuses to eat its policy spinach, following the path of least resistance in making easy choices rather than tough ones.

Avoiding Tough Choices on Taxes

Cotton said the “looks of hesitance and outright terror on the faces of my colleagues” convinced him that Republicans had to repeal the mandate as part of the tax package. Translation: Republicans thought it easier to obtain revenue from repealing the mandate than to weed out the tax code of popular tax breaks—the point of tax reform, which Republicans initially sold as a way to simplify the Internal Revenue Code.

Remember how Speaker of the House Paul Ryan (R-WI) sold tax reform as a way to allow Americans to complete their taxes on a postcard? That type of reform didn’t happen, because enacting that reform would have involved eliminating many more popular deductions than the final tax bill ended.

Revenue Neutrality and Spending

Another key point in the tax debate surrounded the issue of revenue neutrality. The “Better Way” platform released by House Republicans last year not only “envision[ed] tax reform that is revenue neutral,” it included a very clear standard for that metric: “House Republicans measure revenue neutrality by reference to a ‘current policy baseline’—i.e., achieving a level of federal revenues that is approximately $400 billion less over the ten-year [budgetary] window than the current law baseline.”

Congress may have valid justifications for reducing revenues, such as to increase economic growth, or to shrink the size of government. But the fact remains that, when faced with enacting a supposed “parade of horribles” to achieve a revenue-neutral tax bill, Congress chose to change the nature of the bill rather than to make the tough choices needed to achieve its original benchmark.

Likewise on spending reductions arising from the tax bill. Because the tax measure increased the federal deficit, the Statutory Pay-as-You-Go (PAYGO) act would normally require commensurate spending cuts offsetting the revenue loss. However, rather than allow these reductions to go into effect—or replacing the proverbial hatchet of automatic cuts with more targeted spending reductions—both Republicans and Democrats voted to exempt the tax bill from the PAYGO law, ducking another difficult choice.

Repeal Only Unpopular Parts of Obamacare

Repealing only Obamacare’s individual mandate—one of the most loathed parts of the 2010 health care law—echoes a problem Republicans faced during the “repeal-and-replace” debate last year: Many want to retain popular elements of the law, while repealing its unpopular features. Witness Republicans’ statements of support for keeping the status quo on pre-existing condition exclusions.

By repealing the unpopular parts of Obamacare but retaining the popular parts, Congress may have created an incoherent, and potentially unstable, policy that results in premium increases, infusions of taxpayer cash to “stabilize” markets, or both. Senate Republican leaders have already proposed the latter, precisely because they fear the political effects if the former occur.

Therein lies the problem with the congressional strategy: Avoiding tough choices generally only postpones them for a time—not forever. If insurers decide to leave markets after the mandate’s repeal takes effect in 2019, Congress will have to fix a problem it helped create. Likewise attempts by today’s Congress to reduce taxes, and not reduce spending, in shifting the blame to future generations.

At some point those bills will come due, so Congress might want to consider actually making some tough choices now, rather than creating even tougher choices in years to come.

This post was originally published at The Federalist.

There He Goes Again: Lamar Alexander Misrepresents His Obamacare Bailout

As Ronald Reagan might say, “There you go again.” Last week, Sen. Lamar Alexander (R-TN) published an op-ed in the Washington Examiner making claims about the Obamacare “stabilization” bill he developed with Sen. Patty Murray (D-WA).

The article tells a nice story about how conservatives should support the bill, but alas, one can consider it just that: A story. The article includes several material omissions and outright false statements about the legislation and its impact. Below are the facts and full context that Alexander wouldn’t dare admit about his bill.

Fact: In reality, the Congressional Budget Office in its score of the Alexander-Murray bill said the exact opposite:

Simply comparing outcomes with and without funding for CSRs [cost-sharing reduction payments], CBO and [the Joint Committee on Taxation] expect that federal costs in 2018 would be higher with funding for CSRs because premiums for 2018 have already been finalized and rebates related to CSRs would be less than the CSR payments themselves. [Emphasis mine.]

Insurers have already finalized their premiums for 2018 (in most states, open enrollment ends this Friday, December 15), and when doing so assumed cost-sharing reductions would not be paid. If Congress now turns around and appropriates those payments for 2018, insurers would have the possibility to “double-dip.” That means getting paid twice by the federal government to provide lower cost-sharing to low-income individuals.

While CBO believes insurers will return some of the “extra” subsidies they receive to the federal government—$3.1 billion worth, according to their estimate—they also believe that insurers will keep some portion of the excess, as much as $4-6 billion worth. That dynamic explains why CBO believes federal spending will increase, not decrease, as Alexander claims, if Congress appropriates cost-sharing reduction payments for 2018.

Fact: The $194 billion figure has no bearing to the Alexander-Murray legislation. Elsewhere in the op-ed, Alexander admits his bill would include “two years of temporary cost-sharing reduction payments.” If these payments would be “temporary,” then why cite a purported savings figure for an entire decade? Is Alexander trying to elide the fact that he wants to continue both Obamacare and these taxpayer payments to insurance companies in perpetuity?

Claim: “This bill includes new waiver authority for states to come up with their ideas to reduce premiums.”

Fact: The bill includes precious little new waiver authority for states. On substance, it retains virtually all of the “guardrails” in Obamacare that make implementing conservative ideas—like consumer-driven health-care options that use health savings accounts—impossible in a state waiver. While the bill does provide for a faster process for the federal government to consider waiver applications, without changing the substance of what provisions states can waive, the bill would just result in conservative states getting their waivers rejected more quickly.

Fact: This provision appears nowhere in the Alexander-Murray measure. Instead, it comprises a separate bill, introduced by senators Susan Collins (R-ME) and Bill Nelson (D-FL). And that bill, as originally introduced, would appropriate not $10 billion in reinsurance funds, but “only” $4.5 billion.

Some conservatives may find it bad enough that, in addition to appropriating roughly $20-25 billion straight to insurance companies in the Alexander-Murray bill, Alexander now wants a second source of taxpayer funds to subsidize insurers. Moreover, by more than doubling the amount of reinsurance funds compared to the original Collins-Nelson bill, Alexander seems to be engaging in a bidding war with himself to determine the greatest amount of taxpayers’ money he can shovel insurers’ way.

Claim: “Almost all House Republicans have already voted for its provisions earlier this year.”

At this point readers may question why Alexander made such a series of incomplete, misleading, and outright false claims in his op-ed. One other tidbit might explain the article’s dissociation with the truth.

Fact: Since 2013, the largest contributor to Alexander’s re-election campaign and leadership PAC has been…Blue Cross Blue Shield.

This post was originally published at The Federalist.

CBO Confirms “Stability” Bill Provides a Multi-Billion Dollar Insurer Bailout

Upon release of the Congressional Budget Office (CBO) analysis of the “stability” bill he and Sen. Patty Murray (D-WA) introduced last week, Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R-TN) issued a statement claiming that “we have language in our proposal to make sure that benefits go to consumers and to taxpayers and not to insurance companies” and that “the Congressional Budget Office has found that our proposal benefits taxpayers and benefits consumers, not insurance companies. The specific benefit to the taxpayers is $3.1 billion.”

Unfortunately, Alexander is only half correct. The CBO score reveals that the Alexander-Murray bill would provide some benefit to consumers, but it would also provide a direct, taxpayer-funded bailout to insurers that will likely match, and could well exceed, the benefit to consumers. Overall, insurers could  receive a windfall of $4 to $5 billion—more than the “specific benefit” to taxpayers.

In other words, overall federal spending will rise because insurers will pocket some portion of the CSR payments rather than rebating that money back to taxpayers and consumers.

Allowing Health Insurers’ ‘Double Dipping’

The report addresses language in Section 3(b) of the Alexander-Murray bill (pages 13-18), intended to prevent “double dipping” for plan year 2018 as it relates to cost-sharing reduction payments. As CBO noted, premiums for the 2018 plan year have already been finalized, with open enrollment starting next week.

In most states, insurers submitted significantly higher premium rates, because they assumed they would not receive CSR payments from the federal government. However, including a CSR appropriation at this late date would allow insurers to “double dip”—receiving both the direct CSR payments and the higher premiums that they calculated in the belief that they would not receive CSR funding.

  • In a September report, CBO concluded that spending on CSR payments would total $9 billion for fiscal year 2018.
  • In that same September report, CBO assumed that, if CSR payments went away, premiums would rise “by an average of roughly 15 percent.” Based on a total of $52 billion in federal insurance subsidies ($47 billion in premium subsidies, plus $5 billion for the basic health program), a 15 percent increase would equal roughly $7.8 billion in higher subsidy payments.
  • Conversely, CBO said yesterday the federal government would receive only $3.1 billion in rebates back from insurers relating to CSR payments for plan year 2018.

Under their best-case scenario, insurers could pocket up to $4 to $5 billion—nearly $8 billion in “excess” premium subsidies, offset by only $3.1 billion in rebates. (Because insurers have to reduce cost-sharing for qualified enrollees regardless, the $9 billion in CSR payments would be considered a “wash.”)

That best-case scenario appears somewhat unrealistic. Some states specifically instructed insurers to assume CSR payments continue, so carriers would not receive “excess” premium subsidies in those states. Regardless, the fact that the $7 to $8 billion in “excess” subsidies dwarfs the $3.1 billion in rebates provided to taxpayers indicates the extent to which insurers would pocket the extra government spending.

A Better Solution: No Bailouts

Given CBO’s conclusions with respect to the Alexander-Murray bill, it is difficult to see how any legislation can resolve the problem of giving windfalls to insurers for the 2018 plan year. Because plan premiums are already set for the upcoming year, and in most cases assume that the federal government will not make CSR payments, there is no feasible way to make those payments yet prevent “double dipping” by insurers. In other words, any bill providing cost-sharing reduction payments for 2018 will by definition give insurers a massive bailout.

This post was originally published at The Federalist.

Legislative Bulletin: CBO Estimate of American Health Care Act as Passed by the House

On May 24, the Congressional Budget Office (CBO) released its score of the American Health Care Act, as passed by the House on May 4. CBO found that the bill would:

  • Reduce deficits by about $119 billion over ten years—$133 billion in on-budget savings, offset by $14 billion in off-budget (i.e., Social Security) costs.
  • Increase the number of uninsured by 14 million in 2018, rising to a total of 23 million by 2026—a slight reduction from its earlier estimates.
  • Generally reduce individual market insurance premiums, “in part because the insurance, on average, would pay for a smaller proportion of health care costs.” However, those reductions would vary widely, as detailed further below.

Most of the CBO analysis focused on changes to the legislation made since the bill was originally introduced—and specifically the effects on insurance markets. The current CBO report therefore should be read in conjunction with the prior report (found online here, and my summary of same here).

Waivers:         With respect to the state waivers for insurance regulations—specifically, essential health benefits and community rating requirements—CBO categorized states as adopting one of three general approaches, based in part on the way states regulated their insurance markets prior to Obamacare. CBO did not attempt to determine which states would make which decisions, but used three categories to describe their attitude toward the waivers:

  • About half of the population would live in states that would not adopt the waivers;
  • About one-third of the population would live in states adopting “moderate” waivers; and
  • About one-sixth of the population would live in states adopting “substantial” waivers.

No Waiver States:       CBO estimated that in these states, premiums would fall by an average of 4 percent by 2026, due largely to a younger and healthier population purchasing insurance. Specifically, the greater variation in age rating that the bill permits for insurers, beginning in 2019, would raise premiums for older people while “substantially” lowering them for younger individuals.

Moderate Waiver States:        CBO estimated that in these states, premiums would fall by an average of 20 percent, with significant variations. “The estimated reductions in average premiums range from 10 percent to 30 percent in different areas of the country,” and reductions for younger people would be greater than those for older individuals. The premium reductions would come because “on average, insurance policies would provide fewer benefits;” however, plans “would still offer financial protection from most major health risks.”

CBO noted that states making moderate changes might eliminate such requirements as maternity care, mental health, substance abuse, rehabilitative and habilitative care, and pediatric dental care. In general, insurers “would not want to sell policies that included benefits that were not mandated by state law.” Carriers could sell supplemental riders for such coverage, but CBO concluded most individuals purchasing those riders would utilize them, potentially resulting in “substantially higher out-of-pocket costs” for said individuals.

In the case of states making moderate changes via waivers, CBO estimated that while premiums would be lower for individual insurance, employers would be more likely to continue offering group coverage, and therefore fewer employees would switch from employer to individual market policies. CBO estimated that, compared to the previous estimate, “slightly more people would have insurance in those states, but fewer of them would be enrolled through the non-group market.”

Substantial Waiver States:    In these states, CBO estimated that, while waivers would result in “significantly lower premiums” for those with low expected health costs, the changes could destabilize markets over time, such that less healthy individuals might be “unable to purchase comprehensive coverage with premiums close to those under current law and might not be able to purchase coverage at all.”

Essentially, CBO believes that waiving the community rating provision will create an arbitrage opportunity, whereby healthy individuals will want to undergo medical underwriting to lower premiums, while sick individuals will be unable to do so. CBO wrote that some healthy individuals will actually attempt to hide proof of continuous health insurance coverage, because they could achieve lower premiums by doing so:

CBO and JCT anticipate that, in states making substantial changes to market regulations, most healthy people applying for insurance in the nongroup market would be able to choose between underwritten premiums and community-rated premiums. If underwritten premiums were to their advantage, healthy applicants could fail to provide proof of continuous coverage when first applying for nongroup insurance—or allow their coverage to lapse for more than 63 days before applying. Moreover, insurers and states might have difficulty verifying that an applicant did not have continuous coverage. As a result, such a waiver would potentially allow the spread of medical underwriting to the entire nongroup market in a state rather than limiting it to those who did not have continuous coverage.

Essentially, CBO believes that this arbitrage opportunity could lead to a “death spiral” when it comes to coverage for individuals with high health needs—they may be unable to purchase coverage at any price. As a result, CBO concluded that in substantial waiver states, “employers would be even more likely to continue offering coverage than in states making moderate changes,” which would tend to keep individuals enrolled in group coverage, and decrease coverage in the individual insurance market overall.

CBO also noted that a “few million” (number not more specifically defined) individuals might purchase coverage that “would not cover major medical risks.” It noted the possibility that a secondary market would develop to sell insurance policies priced to match the amount of the bill’s tax credits: “Although such plans would provide some benefits, the policies would not provide enough financial protection in the event of a serious and costly illness to be considered insurance.”

Patient and State Stability Fund:            The estimate included additional details surrounding the Stability Fund, most of which CBO assumed “would be used by states to reduce premiums or increase benefits in the non-group market:”

  • The original $100 billion allocated to the fund would “exert substantial downward pressure on premiums in the non-group market and would help encourage insurers’ participation in the market.”
  • The $15 billion in invisible risk sharing funds, which “would be directed to insurers to reduce their risk of having high-cost enrollees…would have a small effect on premiums in 2018 and a larger effect on premiums in 2019.”
  • The $8 billion in funds for waiver states “would increase the number of states choosing such a waiver,” but CBO did not attempt to predict the precise way in which states would utilize those funds. While one section of the estimate alleges that “the funding would not be sufficient to substantially reduce the large increases in premiums for high-cost enrollees,” another section notes that only $6 billion of the funding would be spent over the decade—providing contradictory and unclear messages about whether the funding would be sufficient, and if it would not, why CBO thinks some of that supposedly insufficient funding would not be spent within a decade.
  • The $15 billion to cover maternity and mental health care would likely go to “health care providers rather than to insurers;” $14 billion would be spent over the decade.

Changes in Insurance Coverage:               CBO estimated that under the bill, the number of uninsured would rise by 14 million in 2018, 19 million in 2020, and 23 million in 2026. With respect to Medicaid, 14 million fewer people would have coverage than under current law; however, CBO noted that some of those individuals “would be among people who CBO projects would, under current law, become eligible in the future as additional states adopted” Medicaid expansion.

CBO estimated that the individual insurance market would decline by 8 million in 2018, 10 million in 2020, and 6 million in 2026. The estimate noted CBO’s belief that the individual market will shrink in 2020, only to expand in later years, because of implementation difficulties, particularly for states that apply for waivers and are therefore charged with certifying plans. “CBO and JCT expect that such implementation difficulties would result in some reduction in coverage and some occasions when individuals purchasing coverage would fail to get the credits. Those difficulties would probably decline over time in most markets.”

When compared to its original estimate of the bill, CBO concluded that:

  • Enrollment in the individual market would be 1 million lower in 2018 and 3 million lower in 2026, due to more employers continuing to offer coverage, while some otherwise uninsured individuals would choose to enroll in individual coverage due to lower premiums.
  • Employer based coverage would increase by 1 million in 2018 and 4 million in 2026, primarily because employers would be more likely to offer—and employees more likely to accept—group health coverage in states with insurance waivers.
  • The uninsured would decrease by 2 million in 2020 and 1 million in 2026, “primarily attributable to lower premiums for non-group coverage.” CBO concluded that, while coverage would be less robust under the waivers, “more people would choose to enroll rather than be uninsured.”

Administrative Complexity:          CBO included several passages noting the complexity and potential administrative/implementation challenges associated with the bill. It assumed that the state insurance waivers would not actually go into effect until 2020, as states would need time to prepare for same. For instance, CBO noted that Obamacare subsidies—which would remain in effect in 2018 and 2019 under the bill—are linked to the second-lowest cost silver plan. Determining the second-lowest cost silver plan in a state waiving some or all Obamacare regulations—where insurers could practice medical underwriting for individuals without continuous coverage—would require “substantial additional regulations or guidance.”

Further, because states accepting waivers would have to define qualified health plans beginning in 2020, those states would have to administer the tax credit program. The uncertainties surrounding whether and how states could administer the new programs led CBO to conclude that in waiver states “eligible people would initially be slower to take up the offer of tax credits, more claims would be made by people who are ineligible, and payments would be made for policies that do not qualify as insurance.”

Lessons of the AHCA Collapse

Like the British evacuation of Dunkirk more than seven decades ago, Friday’s abrupt decision to halt proceedings on the American Health Care Act (AHCA) prior to a House vote represented victory only in that it averted an even costlier defeat—an embarrassing floor vote seemingly destined to fail, or passage of a bill unloved by wide swathes of the public and lawmakers alike.

Whether that decision is ultimately viewed as a “deliverance”—as Winston Churchill dubbed the 1940 Dunkirk evacuation—will depend in no small part on whether lawmakers can, both individually and collectively, learn the right lessons from an entirely predictable defeat.

Republicans Need to Remember How to Govern

Leadership outlined its strategy—such as it was—in a February 27 Wall Street Journal article: “Republican leaders are betting that the only way for Congress to repeal the Affordable Care Act is to set a bill in motion and gamble that fellow GOP lawmakers won’t dare to block it.”

Irrespective of what one thinks of the bill’s policy particulars—whether the bill represents a positive, coherent governing document and vision for the health care system—this thinking demonstrates that Republicans have to re-learn not just how to govern, but also how to legislate.

As a legislative strategy, the House’s gambit represented a puerile cross between the “chickie run” in “Rebel Without a Cause” and Hans Christen Andersen’s “The Emperor’s New Clothes.” Daring lawmakers to challenge the process, and attempting to bully and browbeat them into submission—“testosterone can get you in trouble,” as Rep. Mark Sanford (R-SC) reportedly noted during one meeting—does not a durable process make. Unsurprisingly, that process broke down after a mere 18 days.

In circumstances such as these, there is a fine line between learning lessons and pointing fingers. Focusing on the personalities behind the legislative failure would only further enflame tensions, while serving little productive purpose. On the other hand, understanding the reasons the legislation was in many ways doomed from the start can help prevent future calamities. Of the flawed premises that lay behind the legislative strategy, three seem particularly problematic.

1. Starting with the House

The House’s decision to consider the legislation first seemed ill-considered at the time, given the difficulties the chamber encountered the last time it moved first on repealing Obamacare. In the fall 2015, Congress considered and passed, but President Obama vetoed, repeal legislation under special budget reconciliation procedures. Passing the bill represented a “dry run” testing what a Republican Congress could do to dismantle Obamacare, but for the Democratic president who remained in the White House.

But as I noted the week after last November’s election, the House’s 2015 repeal reconciliation bill suffered from numerous procedural flaws. That legislation originally repealed Obamacare’s Independent Payment Advisory Board (IPAB), even though such Senate procedures meant that this provision, with an incidental fiscal impact, could not remain on a budget reconciliation bill. The House-reported legislation also increased the deficit in the years beyond the 10-year budget window, subjecting it to a potentially fatal point-of-order in the Senate.

Given that near-death experience fewer than 18 months ago, it made much more sense for the Senate to take the lead in crafting a reconciliation measure. At minimum, House staff needed to solicit greater feedback from the Senate regarding that chamber’s procedures during the drafting process, to ensure they wrote the bill consistent with the Senate’s budget reconciliation rules. Neither happened.

House leadership claimed they wrote their bill to comply with the Senate’s reconciliation rules. But experts in Senate procedure could readily see that AHCA as released suffered from multiple procedural flaws, several potentially fatal to the entire bill. Last week, days before its scheduled floor consideration, the relevant House committees released a managers amendment re-drafting the measure’s tax credit, precisely because of the procedural flaws in the initial version.

All of which makes one wonder why the House insisted on initiating action. The Senate not only has more detailed and arcane procedures to follow than the House, Republicans also hold a narrower majority in the upper chamber. While no more than 21 of 237  House Republicans (8.9 percent) can defect on a bill passing solely with Republican votes, no more than two of 52 Senate Republicans can defect in the upper chamber, a much narrower (3.9 percent) margin.

2. The Unrealistic Timetable

The day before House leadership released a document outlining their vision for what became AHCA, I published a lengthy analysis of the legislative environment. I concluded that any legislation featuring either comprehensive changes to Medicaid or a refundable tax credit—the former I generally favored, the latter I did not—just could not pass in the timetable allotted for it:

The likelihood that House Republicans can get a comprehensive “repeal-and-replace” bill—defined as one with either tax credits, Medicaid reform, or both—1) drafted; 2) cleared by the Senate parliamentarian; 3) scored favorably by CBO [the Congressional Budget Office]; and 4) with enough Member support to ensure it passes in time for a mark-up on March 1—two weeks from now—is a nice round number: Zero-point-zero percent.

Likewise the chances of enacting a comprehensive ‘repeal-and-replace’ bill by Congress’ Easter recess. It just won’t happen. For a bill signing ceremony for a comprehensive ‘repeal-and-replace’ bill, August recess seems a likelier, albeit still ambitious, target.

Nothing in the above passage proved inaccurate. House leadership even skipped steps in the process I outlined—going forward with markups without a CBO score, and not writing the bill to comply with Senate procedure until just before a scheduled House vote—yet still couldn’t meet their targets. This would lead most people to believe those targets were just too ambitious.

Two vignettes show the problems caused by the sheer haste of the process. First, the managers amendments released last Monday night had to be re-written on Tuesday night. In both cases, the House committees had to submit second-degree amendments “to address drafting issues,” because the original managers amendments had no fewer than ten separate drafting errors among them.

Second, the managers amendment included an extra pot of funds to increase the refundable tax credits given to those near retirement age. However, the legislation created that pot of money not by increasing the refundable credits, but by lowering thresholds for a deduction available to those who itemize medical expenses on their tax returns.

The decision to provide the additional funds through a deduction, rather than by adjusting the credits themselves, was almost certainly driven by the mechanics of budgetary scoring, and ultimately the bill’s timetable. While the Joint Committee on Taxation (JCT) could estimate the relatively straightforward financial effects of a deduction quickly, altering the tax credit levels for individuals aged 50-64 would create knock-on effects—would more individuals take the credit, would more individuals retire early and drop employer-sponsored coverage, etc.—taking CBO staff a week or more to model.

So, rather than “wasting” time coming up with a policy and finding out the effects of said policy, prior to House passage, congressional staff instead created a $90 billion “slush fund” and pledged to sort the details out later.

Just before Obamacare’s passage in March 2010, former House Speaker Nancy Pelosi infamously said “we have to pass the bill so that you can find out what is in it.” House Republicans took her multiple steps further: By including a “slush fund” designed to change later in the process, and proceeding to both committee markups and a vote on House passage without a final CBO score, congressional leadership guaranteed that anyone who voted for AHCA would not by definition have known what was intended to be in the bill, let alone the fiscal effects of such policies.

The end result was a group of members in vulnerable districts who voted for the bill in committee without a CBO score—and could suffer serious, if not fatal, political consequences for having done so. Some of these moderates hold substantial disagreements with conservatives on how to structure an Obamacare repeal. But it was not conservatives that compelled the moderates to cast a tough vote for the legislation in committee without a CBO score analyzing the bill’s fiscal and coverage impacts—it was the hyper-aggressive timetable.

3. Unproductive White House Coordination

While publicly President Trump and others made statements insisting that his administration was “100 percent behind” the House Republican plan, the divisions within the administration were an open secret on Capitol Hill. From staff to officials, many had misgivings about the policy behind the bill, the legislative tactics and strategy, or both.

Those differences helped affect the ultimate outcome. Ryan attempted to turn his legislation into a “binary choice”—either support this bill, or support Obamacare—granting conservatives some concessions during the drafting process, but few thereafter. By contrast, factions within the administration attempted to woo conservatives and fought House leadership, which resisted making changes.

Ironically, had the administration halted negotiations sooner, and demanded an immediate vote earlier last week, they might have had a better chance of winning that tally. (Whether that victory would have ultimately proved Pyrrhic is another story, but they might have eked out a victory nonetheless.) But because the White House and congressional leadership weren’t on the same page, the former’s negotiations with conservatives left moderates to slowly trickle away from the bill, such that by Friday, it was virtually impossible to find a coalition to reach 216 votes whichever way leadership turned.

Even as the momentum slowly sapped from the bill, the administration and Capitol Hill leaders remained at odds on tactics. The New York Times reported on Saturday that some in the administration wanted to hold a House vote, even an unsuccessful one, to find out who opposed President Trump. But making such a demand misunderstands the dynamic nature of votes in the House of Representatives.

While AHCA might have passed narrowly, it would not have failed narrowly. Once a critical mass of 30 or so Republican “noes” signaled the bill’s clear failure, members would have abandoned the politically unpopular legislation en masse—likely with the implicit or explicit support of House leadership. Having witnessed these “jailbreak” votes in the House, it’s possible that, had the White House forced the issue, the bottom could have fallen out on support for the bill. As a tactic to snuff out disloyal behavior, calling a vote on a doomed bill would have yielded little in the way of political intelligence—only more political damage.

Underneath Tactical Errors Is Philosophical Disagreement

Beneath the obvious tactical errors lie some fundamental disagreements within the Republican party and the conservative movement about Obamacare, the future of our health-care system, and even the role of government. As I have written elsewhere, those differences do not represent mere window-dressing. They are as sizable as they are substantive.

That divide between ‘repealers’ and ‘replacers’ represents a proxy for the debate between reducing costs and maximizing coverage.

On the one hand, the conservative wing of the party has focused on repealing Obamacare, and lowering health costs—namely, the premiums that have risen substantially under the law. By contrast, moderates and centrists remain focused on its replacement, and ensuring that those who benefited from the law continue to have coverage under the new regime.

That divide between “repealers” and “replacers” represents a proxy for the debate between reducing costs and maximizing coverage, a debate that precedes Obamacare by several decades, if not several generations. Some have argued that facts on the ground—the individuals gaining coverage as a result of Obamacare—necessitate an approach focused on maintaining coverage numbers.

Others believe that “repeal means repeal,” that Republicans ran, and won, elections on repealing the law—including as recently as five months ago—and that breaking such a deeply ingrained pledge to voters would represent political malpractice of the highest order.

The drafters of the House bill attempted to split the ideological divide, in part by retaining the popular parts of Obamacare while minimizing the law’s drawbacks. Both the House bill and the Better Way plan that preceded it maintained Obamacare’s restrictions on pre-existing conditions, its requirement that insurers cover dependents under age 26, and its prohibition on annual and lifetime limits for health insurance.

But policy decisions come with trade-offs, and in health care in particular those trade-offs can prove troublesome. Barack Obama did not wish to impose a mandate to purchase health insurance, having fought against one during his 2008 primary campaign; but CBO scoring considerations forced him to endorse one in the bill that became Obamacare. Similarly, the “popular” insurance regulations that Republican leadership maintained in its bill were the same ones that raised premiums so appreciably when Obamacare went into effect.

The AHCA approach of repealing Obamacare’s mandates and subsidies while retaining most of its insurance regulations created what Yuval Levin, a policy wonk close to Ryan, called a “twisted, fun-house mirror approach” to prior conservative health policy that yielded “substantive incoherence.” Dropping the individual mandate while retaining most of the insurance regulations created a CBO score that showed substantial coverage losses while failing to lower premiums appreciably—the worst of all possible policy outcomes.

The ideological divisions within the Republican Party, and the incoherent muddle of legislation that attempted to bridge the two, may have been overcome had the House released its bill the morning after the election, on November 9. But it did not release the bill on November 9, or on December 9, or on January 9, or even on February 9. The House introduced its bill on March 6, with the goal of passing legislation through both chambers by April 6. That timetable didn’t envision reconciling ideological differences so much as it hoped to steamroll them. It was all-but-guaranteed not to end well.

Lessons For the Future

What then of the future? One can only but hope that Republicans follow the example of Kipling’s poem “The Lesson,” written during the Boer War: “Let us admit it fairly, as a business people should; We have had no end of a lesson: It will do us no end of good.”

But what are those lessons, and what good might result from heeding them? While the policy differences within factions of the Republican Party are sizable, the only way to bridge them lies through an open, transparent, and deliberative process—negotiating outcomes among all sides from the start, rather than imposing them from on high through fiat.

If, as President Reagan famously noted, “personnel is policy,” so too then process provides a key to optimal policy making. A good process by itself cannot create good policy, but bad process will almost assuredly result in bad policy outcomes. In the short- and long-term, five principles can provide the initial glimmer of a path forward from last Friday’s dark outcome.

1. Let the Senate Lead

The procedural details surrounding budget reconciliation, and the narrower margins in the upper chamber, both augur toward the Senate re-starting any action on health care. As a practical matter, tensions remain far too high—with tempers short, friendships among members and staff frayed, and patience thin—for the House to initiate any legislative action for at least the next few weeks.

On upcoming legislation ranging from appropriations to tax reform to additional action regarding Obamacare, the “world’s greatest deliberative body” will have to exercise its deliberative powers. The ideological gaps are no less narrow in the House than in the Senate—can Mike Lee and Susan Collins reach consensus on a path forward regarding Obamacare?—but the recriminations and scars of the past month smaller.

If the Senate, with its smaller margins and arcane procedures, can deliver a quality policy product, the House, having seen its legislation sink in mere weeks, might be much more inclined to adopt it as its own.

2. Listen

House leadership rightfully notes AHCA had its origins in the Better Way policy white paper released last June. Prior to that document’s release, leadership staff spent significant time and effort reaching out to members, interest groups, the think-tank community, and others to gain thoughts and feedback on their proposals.

But actual legislation is orders of magnitude more complex than a white paper. Moreover, Better Way and AHCA deviate from each other in multiple important respects. The Better Way proposal includes numerous provisions—incentives for wellness, conscience protections for health care professionals, and proposals to repeal sections of Obamacare regarding Medicare, and Medicare Advantage—never included in AHCA, or mentioned in any great detail as part of the House’s “three-phase” approach.

Meanwhile, AHCA doubles the funding for grants to states when compared to the Better Way proposal, and uses significantly different parameters for the state grants than the 2009 House Republican alternative to Obamacare referenced in the Better Way document.

It’s possible to speculate on why House leadership made all these changes, but leadership itself made very little attempt to communicate exactly why they made them, or even that they were making them at all. Saying that Better Way led to AHCA is like saying the Model T led to the DeLorean. The former are both health-care proposals just as the latter are both cars, but each differ in significant ways.

The process that led from Better Way to AHCA was almost as significant as the process that led from the Model T to the DeLorean, but was opaque to all but a few closely held staff. Even lawmakers who understood and supported every single element of the Better Way plan could rightfully feel whipsawed when presented with AHCA, told it was a “binary choice,” and they had to publicly support it within a few weeks of its introduction, or otherwise they would be voting to keep Obamacare in place and undermine a new president.

When the Republican Study Committee unveiled its health-care legislation in 2013, its public release culminated a months-long process of consultation and scrutiny of the legislative text itself. RSC staff reached out to dozens of policy experts (myself included), and spent hours going through the bill line-by-line to make sure the legislation would accomplish its intended goals, while keeping unintended consequences to a minimum.

AHCA would have benefited immensely from this type of under-the-radar analysis, rather than subjecting legislation not yet ready for prime time to the intense scrutiny that came with a white-hot political debate and a hyper-accelerated timeline.

3. Trust Experts

A note at the bottom of page 25 of a leaked draft of AHCA provides an important hint toward a larger issue. The bracketed note, in a passage regarding per capita cap reforms to Medicaid, calls for staff to “review with CMS [the Centers for Medicare and Medicaid Services] any conforming amendments required.”

Congressional staff I spoke with over the past few weeks questioned whether anyone within the relevant agencies had in fact reviewed the legislation, to provide the technical expertise necessary to ensure that AHCA could be implemented as written, and would actually result in a workable health-care system.

Games of legislative hide-and-seek and talk of ‘binary choices’ preclude the received wisdom of all but the select few participating in the policy-making.

At the time the legislative process began, the Department of Health and Human Services (HHS) had relatively few political appointees—no more than a few dozen out of about 150 total spots filled, and a CMS administrator not confirmed until the week prior to the scheduled House vote. The combination of a stretched staff and mistrust between political and career appointees within the agencies could well have limited the exchange of critically important details regarding how to draft, and implement, the legislation.

In addition to working with career personnel at the agencies, congressional staff should also utilize the institutional knowledge of their predecessors. While working for the House Republican Conference in 2009, I made it a point to start the Obamacare debate by finding out what I didn’t know, reaching out to those who had gone through the “Hillarycare” debate 15 years prior. My idea came from an unlikely source—former senator Tom Daschle, who in his 2008 book “Critical” described how lawmakers went through a “Health Care University” of policy seminars in 1993. In trying to replicate those seminars for both members and staff, I hoped we could obtain some of the collective wisdom of the past that I knew I lacked.

As I had previously noted in November, most of the senior Republican health-care staff working on Capitol Hill during the Obamacare debate in 2009-10 have moved on to other posts. But they, and others like them, are not far removed from the process. Based on my experience, most would gladly offer technical guidance and expertise; in many cases, even the lobbyists would do so with “client hats” removed, in the hopes of arriving at the best possible product.

But reaching out in such a manner requires a deliberative and inclusive process; games of legislative hide-and-seek and talk of “binary choices” preclude the received wisdom of all but the select few participating in the policy-making.

4. Be Honest

The House Ways and Means Committee’s section-by-section summary of AHCA illustrates the dilemma lawmakers faced. Page three of the document, discussing verification of eligibility for the new tax credit, states that “the Secretary of the Treasury is empowered to create a system—building upon already developed systems—to deliver the credit.”

There’s just one minor detail missing: The “already developed systems” for verifying eligibility Ways and Means referenced are Obamacare eligibility systems. This goes a long way toward explaining the omission: If the House is using an Obamacare eligibility system to deliver a refundable tax credit (also included in Obamacare), how much of the law is it really repealing?

Capitol Hill leadership could never reconcile the inherent contradictions in their product. On MSNBC, Ways and Means Chairman Kevin Brady (R-TX) called AHCA “the best opportunity to deliver on our promise to repeal the awful law of Obamacare”—eliding the fact that the bill explicitly retains and utilizes portions of that “awful law.” When pressed, leadership staff relied upon absurd, legalistically parsed statements, afraid to admit that the bill retained portions of Obamacare’s infrastructure.

These Clintonian definitions—“It depends upon what the meaning of the word ‘repeal’ is”—do nothing but build mistrust among members and staff alike. At least some in the policy community felt that House leaders were relying upon Elizabeth MacDonough, the Senate’s parliamentarian, as a de facto human shield—claiming the House couldn’t repeal portions of Obamacare under budget reconciliation, when in fact leadership wouldn’t, for policy or political reasons.

The fact that House leaders claimed their bill comported with reconciliation requirements, yet had to re-write major portions of AHCA at the last minute because it did not, gives added credence to this theory.

Whenever “repeal-and-replace” legislation comes back before Congress, the leaders and committees preparing the legislation should include a list of all the major provisions of Obamacare not repealed by the measure, along with clear reasons why. Even if some members want a more robust repeal than that offered, transparency would at least prevent the corrosive mistrust—“You’re not being up-front about this, so what other things are you hiding?”—that comes from an opaque process.

5. Be Humble

More than perhaps any bill in recent memory, AHCA represented a feat of legislative hubris. As a policy matter, Obamacare imposed a more sweeping scope on the nation’s health-care system. But the tactics used to “sell” AHCA—“We’re doing this now, and in this way. Get on board, or get out of the way”—were far more brutal, and resulted in a brutal outcome, an outcome easily predicted, but the one its authors did not intend.

There is a different approach, one I’ve seen on display. Some job interviews are thoroughly unremarkable, but two during my tenure on Capitol Hill stand out—the chief of staff who described himself as a “servant leader,” one who ensures all the members of the team have the tools they need to succeed; and the legislative director who told me, “We want to make sure you have a voice.” Of course I took both jobs, and felt myself privileged to work in such inclusive and empowering environments.

In some ways, the process that led to AHCA represents the antithesis of servant leadership, with members being given a virtual ultimatum to support legislation many neither liked nor understood. But in its purest form, public service should be just that—service—to one’s constituents, and, in the case of elected congressional leaders, to the members who chose them.

A more humble, inclusive, open, and transparent process will not guarantee success. The policy differences among the disparate Republican factions are real, and may not ultimately be bridgeable. But an opaque, authoritarian, and rushed process will almost certainly guarantee failure, as it did in the case of AHCA.

Listening Is Crucial

Ultimately, the failure to legislate on AHCA lay in a failure to listen to the policy concerns of Members, and to the warning signs present from the start. One can only hope that Republicans learn from this proverbial mule-kick, and start listening to each other more carefully and more closely. That process can yield the wisdom and judgment that comes from understanding, which can only help to heal the many breaches within the party following the events of recent weeks.

On November 8, Republicans received an important gift from voters—the chance to serve the country. Recovering from last week’s setback will require leaders of a humbled party to recommit themselves to service, both to the American people and to each other, in service of a common good. The chance to serve the American people is solely within the public’s gift. That gift, if and when squandered, will likely not be renewed for a long time.

This post was originally published at The Federalist.

Will the “Byrd Bath” Turn into a Tax Credit Bloodbath?

While most of official Washington waits for word—expected early this week—from the Congressional Budget Office (CBO) about the fiscal effects of House Republicans’ “repeal-and-replace” legislation, another, equally critical debate is taking place within the corridors of the Capitol. Arcane arguments behind closed doors about the nuances of parliamentary procedure will do much to determine the bill’s fate in the Senate—and could lead to a vastly altered final product.

In recent days, House leaders have made numerous comments highlighting the procedural limitations of the budget reconciliation process in the Senate. However, those statements do not necessarily mean the legislation released last week comports with all of those Senate strictures. Indeed, my conversations with more than half a dozen current and former senior Senate staff, all of whom have years of expertise in the minutiae of Senate rules and procedure, have revealed at least four significant procedural issues—one regarding abortion, two regarding immigration, and one regarding a structural “firewall”—surrounding the bill’s tax credit regime.

It is far too premature to claim that any of these potential flaws will necessarily be fatal. The Senate parliamentarian’s guidance to senators depends on textual analysis—of the bill’s specific wording, the underlying statutes to which it refers, and the CBO scores (not yet available)—and arguments about precedent made by both parties. Senate staff could re-draft portions of the House bill to make it pass procedural muster, or make arguments to preserve the existing language that the parliamentarian accepts as consistent with Senate precedents.

Nevertheless, if the parliamentarian validates even one of the four potential procedural problems, Republicans could end up with a tax credit regime that is politically unsustainable, or whose costs escalate appreciably.

In 2009, Democratic Sen. Kent Conrad famously opined that passing health care legislation through budget reconciliation would make the bill look like “Swiss cheese.” (While Democrats did not pass Obamacare through reconciliation, they did use the reconciliation process to “fix” the bill that cleared the Senate on Christmas Eve 2009.)

In reality, it’s much easier to repeal provisions of a budgetary nature—like Obamacare’s taxes, entitlements, and even its major regulations—through reconciliation than to create a new replacement regime. The coming week may provide firsthand proof of Conrad’s 2009 axiom.

The ‘Byrd Rule’ and Abortion

The Senate’s so-called “Byrd rule” governing debate on budget reconciliation rules, named after former Senate Majority Leader and procedural guru Robert Byrd (D-WV), consists of not one rule, but six. The six points of order (codified here) seek to keep extraneous material out of the expedited reconciliation process, preserving the Senate tradition of unlimited debate, subject to the usual 60-vote margin to break a filibuster.

The Byrd rule’s most famous test states that “a provision shall be considered extraneous if it produces changes in outlays or revenues which are merely incidental to the non-budgetary components of the legislation.” If the section in question primarily makes a policy change, and has a minimal budgetary impact, it remains in the bill only if 60 senators (the usual margin necessary to break a filibuster) agree to waive the Byrd point of order.

One example of this test may apply to the House bill’s tax credits: “Hyde amendment” language preventing the credits from funding plans that cover abortion. Such language protecting taxpayer funding of abortion coverage occurs several places throughout the bill, including at the top of page 25 of the Ways and Means title.

The question will then occur as to what becomes of both the credit and the Hyde protections. Some within the administration have argued that the Department of Health and Human Services (HHS) can institute pro-life protections through regulations, but administration insiders doubt HHS’ authority to do so. Moreover, most pro-life groups publicly denounced President Obama’s March 2010 executive order, which he claimed would prevent taxpayer funding of abortion coverage in Obamacare, as 1) insufficient and 2) subject to change under a future administration. How would those pro-life groups view a regulatory change by the current administration any differently?

Two Procedural Problems Related to Immigration

A similarly controversial issue—immigration—brings an even larger set of procedural challenges. Apart from the separate question of whether the current verification provisions in the House bill are sufficiently robust, any eligibility verification regime for tax credits faces not one, but two major procedural obstacles in the Senate.

Of the six tests under the Byrd rule, some are more fatal than others. For instance, if the Hyde amendment restrictions outlined above are ruled incidental in nature, then those provisions merely get stricken from the bill unless 60 Senators vote to retain them—a highly improbable scenario in this case.

Page 37 of the Ways and Means title of the bill requires creation of a verification regime for tax credits similar to that created under Sections 1411 and 1412 of Obamacare. As Joint Committee on Taxation Chief of Staff Tom Barthold testified last week during the Ways and Means Committee markup, verifying citizenship requires use of a database held by the Department of Homeland Security’s Bureau of Citizenship and Immigration Services (CIS).

That admission creates a big problem: The tax credit lies within the jurisdiction of the Senate Finance Committee, but CIS lies within the jurisdiction of the Senate Homeland Security and Governmental Affairs Committee. And because the Finance Committee’s portion of the reconciliation bill can affect only programs within the Finance Committee’s jurisdiction, imposing programmatic requirements on CIS to verify citizenship status could exceed the Finance Committee’s scope—potentially jeopardizing the entire bill.

The verification provisions in Sections 1411 and 1412 of Obamacare also require using  Social Security numbers, triggering another potentially fatal blow to the entire bill. Senate sources report that, during drafting the original reconciliation bill repealing Obamacare in the fall of 2015, Republicans attempted to repeal the language in Obamacare (Section 1414(a)(2), to be precise) giving the HHS secretary authority to collect and use Social Security numbers to establish eligibility. However, because Section 1414(a)(2) of Obamacare amended Title II of the Social Security Act, Republicans ultimately did not repeal this section of Obamacare in the reconciliation bill because it could have triggered a point of order fatal to the legislation.

If both the points of order against the verification regime are sustained, Congress will have to re-write the bill to create an eligibility verification system that 1) does not rely on the Department of Homeland Security and 2) does not use Social Security numbers. Doing so would create both political and policy problems. On the political side, the revised verification regime would exacerbate existing concerns that undocumented immigrants may have access to federal tax credits.

But the policy implications of a weaker verification regime might actually be more profound. Weaker verification would likely result in a higher score from CBO and JCT—budget scorekeepers would assume a higher incidence of fraud, raising the credits’ costs. House leaders might then have to reduce the amount of their tax credit to reflect the higher take-up of the credit by fraudsters taking advantage of lax verification. Any reduction in the credit amounts would bring with it additional political and policy implications, including lower coverage rates.

Concerns over the Tax Credit Firewall

Finally, the tax credit “firewall”—designed to ensure that only individuals without access to other health insurance options receive federal subsidies—could also present procedural concerns. Specifically, pages 27 and 28 of the bill make ineligible for the credit individuals participating in other forms of health insurance, several of which—Tricare, Veterans Administration coverage, coverage for Peace Corps volunteers, etc.—lie outside the Finance Committee’s jurisdiction.

If the Senate parliamentarian advises for the removal of references to these programs because they lie outside the Finance Committee’s jurisdiction, then participants in those programs will essentially be able to “double-dip”—to receive both the federal tax credit and maintain their current coverage. As with the immigration provision outlined above, such a scenario could significantly increase the tax credits’ cost, requiring offsetting cuts elsewhere, which would have their own budgetary implications.

Senate sources indicate this “firewall” concern could prove less problematic than the immigration concern outlined above. While the immigration provision extends new programmatic authority to the administration to develop a revised eligibility verification system, the “firewall” provisions have the opposite effect—essentially excluding Tricare and other program recipients from the credit. However, if the parliamentarian gives guidance suggesting that some or all of the “firewall” provisions must go, that will have a significant impact on the bill’s fiscal impact.

Broader Implications Of These Procedural Problems

Both individually and collectively, these four potential procedural concerns hint at an intellectual inconsistency in the House bill’s approach, one Yuval Levin highlighted in National Review last week. House leaders claim their bill was drafted to comply with the Senate reconciliation procedures. But the bill itself contains numerous actual or potential violations of those procedures and amends some of Obamacare’s insurance regulations, rather than repealing them outright, making their argument incoherent.

Particularly on Obamacare’s costly insurance regulations, there seems little reason not to make the “ol’ college try,” and attempt to repeal the major mandates that have raised premium levels. According to prior CBO scores, other outside estimates, and the Obama administration’s own estimates, the major regulations have significant budgetary effects.

Republicans can and should argue to the parliamentarian that the regulations’ repeal would be neither incidental nor extraneous—their repeal would remove the terms and conditions under which Obamacare created its insurance subsidies in the first place, thus meeting the Byrd test. If successful, such efforts would provide relief on the issue Americans care most about: Reducing health costs and staggering premium increases.

On the tax credit itself, Republicans may face some difficult choices. Abortion and immigration present thorny—and controversial—issues, either of which could sink the legislation. On the bill’s tax credits, the “Byrd bath,” in which the parliamentarian gives guidance on what provisions can remain in the reconciliation bill, could become a bloodbath. If pro-life protections and eligibility verification come out of the bill, a difficult choice for conservatives on whether to support tax credits will become that much harder.

This post was originally published at The Federalist.

A Status Update on Repeal

With Congress heading towards its first recess at week’s end, it’s time to summarize where things stand on one of Republicans’ top objectives—repealing Obamacare—and might be headed next. While those who want further details should read the entire article, the lengthy analysis below makes three main points:

  1. Congress faces far too many logistical obstacles—the mechanics of drafting bill text, procedural challenges in the Senate, budgetary scoring concerns, and political and policy disagreements—to pass a comprehensive “repeal-and-replace” bill by late March, or indeed any time before summer;
  2. Congressional leaders and President Trump face numerous pressures—both to enact other key items on their agenda, and from conservatives anxious to repeal Obamacare immediately, if not sooner—that will prevent them from spending the entire spring and summer focused primarily on Obamacare; therefore
  3. Congressional leaders will need to pare back their aspirations for a comprehensive “repeal-and-replace” bill, slim down the legislation to include repeal and any pieces of “replace” that can pass easily and swiftly with broad Republican support, and work to enact other elements of their “replace” agenda in subsequent legislation.

What Has Happened In the Last Month

Before the New Year, congressional leaders had endorsed a strategy of repealing Obamacare via special budget reconciliation procedures, using legislation that passed Congress (but President Obama vetoed) in late 2015 and early 2016 as a model. Subsequent efforts would focus on crafting an alternative to the law, whose entitlements would sunset in two or three years, to allow adequate time for a transition.

Due to Trump’s intervention and angst amongst some Republicans toward moving forward with a repeal-first approach, congressional leaders pivoted. Various press reports in the last week suggest House committees are drafting a robust “replace” package that will accompany repeal legislation. This “repeal-and-replace” bill will use the special reconciliation procedures that allow budget-related provisions to pass with a 51-vote majority (instead of the usual 60 votes needed to break a filibuster) in the Senate, with non-budgetary provisions being considered in subsequent pieces of legislation.

The press reports and strategic leaks from House offices attempt to show progress towards a quick markup—a March 1 markup date was floated in one article—and enactment before Congress next recesses, in late March. But these optimistic stories cannot hide two fundamental truths: 1) Enacting comprehensive “replace” legislation along with repeal will take far longer than anyone in Congress has yet admitted; and 2) Leadership does not have the time—due both to other must-pass legislation, and political pressure from the Right to pass repeal quickly—necessary to fashion a comprehensive “repeal-and-replace” bill.

He may not realize it at present, but in going down the simultaneous “repeal-and-replace” pathway, President Trump made a yuuuuge bet: holding the rest of legislative agenda captive to the rapid enactment of such legislation. Once it becomes more obvious that “repeal-and-replace” will not happen on its current timetable—and that other key elements of the Republican agenda are in jeopardy as a result—it seems likely that Speaker Ryan, President Trump, or both will scale back the “replace” elements of the “repeal-and-replace” bill, to allow it to pass more quickly and easily.

Adding Layers of Complexity

But every element added to a piece of legislation makes it that much more complex. Republicans have an easy template to use for repealing Obamacare: the reconciliation bill that already passed Congress. That bill has been drafted, passed procedural muster in the Senate, and received both a favorable budgetary score and enough votes for enactment.

Conversely, crafting “replace” policies will require more time, conversations with legislative counsel (the office in Congress that actually drafts legislation), discussions about policy options for implementation, and so forth.

House Republicans did engage in some of these conversations when compiling their Better Way agenda last spring. But that plan ultimately did not get translated into legislative language, and the plan itself left important details out (in some cases deliberately).

It seems plausible that House Republicans could fairly easily incorporate some elements of their “replace” agenda—for instance, HSA incentives or funding for high-risk pools—into a repeal reconciliation bill. There are several “off-the-shelf” (i.e., previously drafted) versions of these policy options, and the budgetary effects of these changes are relatively straight-forward (i.e., few interactions with other policy elements).

But on tax credits and Medicaid reform, House Republicans face another major logistical obstacle: Analysis by the Congressional Budget Office (CBO). Longtime observers and congressional historians may recall that CBO was where Hillarycare went to die back in 1994. While Republicans are not necessarily doomed to face a similar fate two decades later, the idea that budget analysts will give “repeal-and-replace” a clean bill of fiscal health within a fortnight—or even a month—defies both credulity and history.

Running the CBO Gauntlet

As someone who worked on Capitol Hill during the Obamacare debate eight years ago, I remember the effect when CBO released one of its first scores of Democrats’ legislation. As the New York Times reported on June 17, 2009, in a piece entitled “Senate Faces Major Setback on Health Care Bill”: “The Senate Finance Committee is delaying its first public drafting session on major health care legislation until after the July Fourth recess, a lengthy setback but one that even Democrats say is critically needed to let them work on reducing the costs of the bill…. The drafting session had been scheduled for Tuesday. But new cost estimates by the Congressional Budget Office on health care proposals came in much more expensive than expected, emboldening critics and alarming Democrats.”

Given the role CBO played in delivering Hillarycare a mortal blow in the 1990s, and the more than nine-month gap between the initial (horrible) CBO scores of Obamacare and that law’s enactment, House leadership’s implication that its “repeal-and-replace” legislation can move straight to passage by receiving a clean bill of health from CBO on the first go-round seems highly unrealistic.

Just like any player moving up from the minor leagues will need time to adjust to big-league pitching, so too will any legislation with as many moving parts as a comprehensive “repeal-and-replace” bill require several, and possibly significant, adjustments and tweaks to receive a CBO score Republicans find acceptable.

While House Republicans’ Better Way plan included a much less complicated and convoluted formula for providing insurance subsidies than Obamacare, they may face other difficulties in achieving a favorable CBO score, particularly regarding to the number of Americans covered under their refundable tax credit regime. These include the following.

No Mandate:  While conservatives view the lack of a requirement to purchase insurance as a feature of any Obamacare alternative, CBO has a long history of viewing a mandate’s absence as a bug—and will score legislation accordingly. In analyzing health reform issues in a December 2008 volume, CBO published an elasticity curve showing take-up of health insurance based on various levels of federal subsidies. The curve claimed that, even with a 100 percent subsidy—the federal government giving away health insurance for “free”—only about 80 percent of individuals will actually obtain coverage. In CBO’s mind, unless the government forces individuals to buy insurance, a significant percentage will not do so.

President Obama didn’t want to include a mandate in Obamacare, not least because he campaigned against it. But CBO essentially forced Democrats to include one to receive a favorable score on the number of Americans covered. If Republicans care about matching the number of individuals insured by Obamacare (some view it as more of a priority than others), the lack of a mandate will cost them on coverage numbers. Alternative mandate-like policies such as auto-enrollment may mitigate that gap, but CBO may not view them as favorably—and they come with their own detractors.

Age-Rated Subsidies: Obamacare uses income as a major factor in calculating its insurance subsidy amounts, which creates two problems. First, because subsidies decline as individuals’ income rises, Obamacare effectively discourages work. CBO has previously calculated that, largely because of these work disincentives, the law will reduce the labor supply by the equivalent of 2.5 million full-time jobs.

Second, the process of reconciling projected income to actual earnings creates administrative complexity. It poses large paperwork burdens on the Internal Revenue Service and taxpayers alike, and requires some individuals to forfeit their refunds and pay back subsidies at tax time.

House Republicans have proposed a simpler system of insurance subsidies, based solely upon age. However, because the subsidies are solely linked to age, low-income individuals receive the same subsidy as millionaires. While much more transparent and fair, this system also does not target resources to those who would need them most. To borrow an analogy, it spreads the peanut butter (i.e., insurance subsidies) more evenly, but also more thinly, over the proverbial piece of bread (i.e., Americans seeking insurance). Given CBO’s beliefs about the likelihood of individuals purchasing insurance outlined above, this change could also cost Republicans significantly in the coverage department.

Medicaid Reform: Republicans have consistently argued that providing states with additional flexibility to manage their Medicaid programs in exchange for a defined federal contribution will allow them to reduce program spending in beneficial ways. Rhode Island’s innovative global compact waiver provides an excellent example of providing better care within an overall budget on expenditures.

However, CBO analysts have publicly taken a different view. In analyzing per capita spending caps for Medicaid—the policy option House Republicans are reportedly incorporating into their alternative—last December, CBO wrote that “States would take a variety of actions to reduce a portion of the additional costs that they would face [from the caps], including restricting enrollment. For people who lose Medicaid coverage, CBO and the staff of the Joint Committee on Taxation estimate that roughly three-quarters would become uninsured.”

CBO has therefore made rather clear that it will score reforms to Medicaid as increasing the number of uninsured.

Speaker Ryan may have pushed for the comprehensive “repeal-and-replace” strategy in part to appease Republican members of Congress who want to see their alternative to Obamacare provide as many Americans with insurance as current law. But it seems highly improbable that CBO will score any Republican tax credit proposal as covering as many Americans as Obamacare. It is also not outside the realm of possibility for CBO to score an alternative as covering fewer Americans than the pre-Obamacare status quo.

The first two CBO scoring issues nixed any attempt by House Republicans to include tax credits as part of their alternative to Obamacare in 2009, when I worked in House leadership. Sources tell me unfavorable scores also nixed House Republicans’ attempt to include a refundable tax credit when the party was crafting responses to a potential Supreme Court ruling striking down the law’s subsidies in 2015. It therefore ranges from likely to certain that an initial CBO score of a comprehensive “repeal-and-replace” bill will go over about as well as it did for Republicans in 2009 and 2015—with generally poor coverage figures compared to Obamacare.

In theory, Republicans could work to surmount some of these obstacles and achieve more robust coverage figures. But such efforts would require time to sort through policy options—time that Republicans don’t currently have—and money to fund insurance subsidies, even though Republicans don’t have an obvious source of funding for them.

Pay-For Problems

Over and above the purely technical problems associated with scoring a “repeal-and-replace” bill, other issues present both policy and political concerns. To wit, if Republicans include refundable tax credits in their plan, how exactly will they finance this new spending? The possibilities range from unpalatable to implausible.

  • They could try to keep some of Obamacare’s tax increases to fund their own spending. But key Republican lawmakers and key constituency groups have strongly supported repealing all of Obamacare’s tax hikes. It seems unlikely that a bill that failed to repeal all of the law’s tax increases could gather enough votes for passage.
  • They could include their own revenue-raisers after repealing all of Obamacare’s tax hikes. For instance, House Republicans could limit the value of employer-provided health coverage. But while economists of all political stripes support such efforts as one key way to reduce health costs, members of the business community would likely oppose this measure, judging from recent news stories. Unions and the middle class likely wouldn’t be keen either. Moreover, by using limits on employer-provided health coverage as a new source of revenue rather than reforming the tax treatment of health insurance in a revenue-neutral way, Republicans would repeal Obamacare’s tax increases, but replace them with other tax increases—an unappetizing political slogan for the party to embrace.
  • They could use Medicaid reform to fund the credits, but that causes the potential problems with coverage numbers outlined above, and will likely generate additional squabbling among governors and states over the funding formula, as outlined in greater detail below.
  • They could use the remaining savings after repealing Obamacare’s tax increases and entitlements—which in the 2015/2016 reconciliation bill totaled $317.5 billion—to fund a new insurance subsidy regime. But such a move raises both policy and political problems. While Republicans could re-direct the $317.5 billion in savings during the first ten years to pay for insurance subsidies, the subsidies would likely have to expire after a decade. Creating a permanent new entitlement (the subsidies) funded by temporary savings would result in a point of order in the Senate—one that takes 60 votes, which Republicans do not have, to overcome—because budget reconciliation bills cannot increase the deficit in any year beyond the ten-year budget window. Thus any subsidies funded by the reconciliation bill’s savings would have to sunset by 2026—a far from ideal outcome. On the political side, the savings in last year’s reconciliation bill came from keeping Obamacare’s reductions in Medicare spending. If Republicans turn around and use that money to fund a new subsidy regime, they would be “raiding Medicare to fund a new entitlement”—the exact same charge Republicans used against Democrats to great effect during the debates over Obamacare.

To put it bluntly, while some Republicans may want to include refundable tax credits in their Obamacare alternative, they have no clear way—and certainly no pain-free way—to fund these credits. Even if they do push forward despite the clear obstacles, finding the right blend among the options listed above will require conversations among members and constituency groups, and multiple rounds of CBO scores for various policy options—all of which will take much more time than House leadership currently envisions.

Then There Are the Political Obstacles

Layered on top of the pay-for difficulties lie other political obstacles preventing quick enactment of a comprehensive “repeal-and-replace” package.

Medicaid: With 16 Republican governors ruling states that expanded Medicaid under Obamacare, and 17 Republican governors in states that did not, the fate of Medicaid expansion remains one of the thorniest questions surrounding repeal. Many states that did expand wish to keep their expansion, while states that did not do not want to be disadvantaged by making what they view as the conservative choice to turn down the new spending from Obamacare. Lawmakers have admitted they have yet to craft a solution on this issue. Attaching Medicaid reform to a “repeal-and-replace” measure will only complicate matters further, by giving states another issue (namely, the new funding formula for the per capita spending caps) to fight over.

House-Senate Differences: While House Republicans gear up to pass a comprehensive “repeal-and-replace” package, reports last week also indicated that Senate leadership still intends to consider legislation more closely resembling the 2015/2016 reconciliation bill. If Speaker Ryan continues to craft a “repeal-and-replace” bill while Majority Leader McConnell pushes “repeal-and-delay,” something will have to bring the two leaders to an agreement reconciling their disparate approaches.

Insurers: Those opposed to the “repeal-and-delay” strategy initially advocated by congressional leaders cited the needs of insurers as reason to pass a full “replacement” of Obamacare concurrent with repeal. Insurers will need to start submitting bids for the 2018 plan cycle by spring, and will want some certainty about how next year’s landscape will look before doing so. Hence the call for a full “repeal-and-replace,” to give insurers fast reassurances about the policy landscape going forward.

But if “full replace” will take until summer to pass—as it almost invariably will—then that argument gets turned on its head. In such circumstances, Congress should act swiftly to include some type of high-risk pool funding for those with pre-existing conditions, to prevent the insurer community from ending up with an influx of very sick, very costly enrollees.

Passing a repeal bill with high-risk pool funding may provide insurers with less certainty than a full “repeal-and-replace” measure, but it would yield infinitely more certainty than Congress arguing until September over the details of “full replace,” with the entire legal and regulatory realm in limbo as insurers must prepare for their 2018 plan offerings.

Conservatives: Some conservatives have philosophical objections to refundable tax credits, or indeed to any “replacement” legislation. Sen. Mike Lee this week called including “replacement” provisions on a repeal bill a “horrible idea.” Lee was one of three Republicans (the others being Ted Cruz and Marco Rubio) who in fall 2015 pushed for more robust repeal legislation, issuing a statement demanding that year’s reconciliation measure include the greatest amount of repeal provisions possible consistent with Senate rules. After the conservatives laid down their marker, the Senate ultimately passed, and the House ratified, the reconciliation measure repealing the law’s entitlements and all of Obamacare’s tax increases.

Some within the party have acknowledged the fractious nature of the “replace” discussions. Ramesh Ponnuru has publicly worried that some conservatives agnostic or skeptical on the merits of a “replace” plan would do nothing following repeal, and therefore wants to link repeal with replace, to force conservatives to vote for a vision of “replace.”

Such maneuvering pre-supposes that conservatives will swallow a “replace” plan they dislike to repeal Obamacare, a dicey proposition given conservatives’ success at obtaining a more robust repeal measure in 2015. It also pre-supposes that conservatives will stand idly by while leadership takes the months necessary to create full-scale “replace” legislation.

If the process continues to drag on in the House, it would not surprise me one bit were conservatives to introduce a discharge petition to force a House floor vote on the 2015/2016 reconciliation bill. Conservatives in the House Freedom Caucus and the Republican Study Committee, likely in conjunction with outside conservative groups, would turn the discharge petition into a litmus test for Republican members of Congress: Are you for repeal—and repeal in the form of legislation that virtually all returning Republicans voted for one short year ago—or not?

While a discharge petition needs 218 member signatures before its sponsor can force a floor vote, the mere introduction of a discharge petition would increase the pressure on House leadership to move quickly on repeal. Moreover, it would highlight the fact that neither Speaker Ryan nor President Trump can afford to spend the entire spring and summer slogging through a long legislative process regarding Obamacare.

Now We Come to the Opportunity Costs

Most of this year’s major action items require the Obamacare reconciliation bill to pass. Once and only once that legislation passes can Congress pass a second budget, allowing for a second budget reconciliation measure to move through the Senate. Specific items held in limbo due to the Obamacare debate include the following.

Tax Reform: Republicans want to use the second reconciliation bill to overhaul the tax code. (President Trump may also want to use the tax reform bill to finance his planned infrastructure package.) But because the current budget does not include reconciliation instructions regarding revenues, Congress must pass another budget with specific reconciliation instructions before tax reform can move through the Senate with a simple (51-vote) majority. But before Congress passes another budget, it must first pass the reconciliation bill (i.e., the Obamacare bill) related to this budget.

Debt Limit: The current suspension of the debt limit expires on March 15. While the Treasury can use extraordinary measures to stave off a debt default for several months, Congress will likely have to address the debt limit prior to its August recess. As with tax reform, the debt limit (and spending and entitlement reforms to accompany same) can be enacted with a simple majority in the Senate via budget reconciliation. But, as with tax reform, doing so first requires passing another budget, which requires enacting the Obamacare reconciliation bill.

Appropriations: The current stopgap spending agreement expires on April 28. Congress will need to pass another spending measure by then—quite possibly including a request by the president for additional border security funds—and begin considering spending bills for the new fiscal year that starts September 30. Here again, passage of these legislative provisions would be greatly aided by passage of another budget to set fiscal parameters, but that cannot happen until the Obamacare reconciliation bill is on the statute books.

As other observers have begun noting, many of the major “must-pass” and “want-to-pass” pieces of legislation—tax reform; Trump’s infrastructure package; a debt limit increase; appropriations legislation; funding for border security—remain essentially captive to the Obamacare “repeal-and-replace” process. The scene resembles the airspace over New York during rush hour, with planes circling overhead while one plane (the Obamacare bill) attempts to land. Unfortunately, the longer the planes circle, one or more of them will run out of fuel, effectively crashing major pieces of the Trump/Ryan agenda due to legislative inaction and neglect.

The Available Political Options

With a legislative process for “repeal-and-replace” likely to take months longer than currently advertised, and a series of other competing priorities contingent on it, Speaker Ryan and President Trump face three options.

Punt: Focus on passing the other agenda items first, and come back to Obamacare later;

Plow Ahead: Remain on the current course, knowing that Obamacare will jeopardize much of Trump’s and Ryan’s other agenda items; or

Pivot/Pare Back: Return to something approaching last year’s reconciliation bill, and postpone major “replace” legislation until a future reconciliation measure.

Given the current environment, the third option seems the clear “least bad” outcome. The first would represent a major political setback, effectively admitting defeat on the president’s top agenda item and betraying Republicans’ seven-year-long commitment to repeal that conservatives sharply opposed to Obamacare will never forget, and may never forgive. The second jeopardizes, if not completely sacrifices, most of the party’s legislative agenda, including items the president will want to tout in his re-election bid.

Therefore, it seems likely that Ryan, Trump, or both will eventually move to pare back the current comprehensive “repeal-and-replace” legislation towards something more closely resembling the 2015/2016 repeal reconciliation bill.

The legislation may include elements of “replace,” but only those with a clear fiscal nexus (due to the Senate’s rules regarding reconciliation) and broad support among Republicans. HSA incentives and funding for high-risk pools might qualify. But more robust provisions, such as Medicaid reforms or refundable tax credits, will likely get jettisoned for the time being, to help pass slimmed down legislation yet this spring.

Time’s a Wastin’

To sum up: The likelihood that House Republicans can get a comprehensive “repeal-and-replace” bill—defined as one with either tax credits, Medicaid reform, or both—1) drafted; 2) cleared by the Senate parliamentarian; 3) scored favorably by CBO; and 4) with enough member support to ensure it passes in time for a mark-up on March 1—two weeks from now—is a nice round number: Zero-point-zero percent.

Likewise the chances of enacting a comprehensive “repeal-and-replace” bill by Congress’ Easter recess. It just won’t happen. For a bill signing ceremony for a comprehensive “repeal-and-replace” bill, August recess seems a likelier, albeit still ambitious, target.

Republicans have already blown through two deadlines on “repeal-and-replace”: the January 27 deadline for committees to report reconciliation measures to the House and Senate Budget Committees, and the President’s Day recess, the original tentative deadline for getting repeal legislation to President Trump’s desk. Any further delays will accelerate both conservative angst and the same types of process stories from the media—“Republicans arguing amongst themselves on repealing Obamacare”—that plagued Democrats from the summer of 2009 through the law’s enactment.

Some may find this analysis harsh, or even impertinent. Some may want to take issue with my assumptions—Newt Gingrich would no doubt dispute CBO’s scoring methods, long and loudly. But policy-making involves crafting solutions given the way things are, not the way we wish them to be. And every day that goes by while Congress remains on the current “repeal-and-replace” pathway—which seems increasingly like a strategic box canyon—will only jeopardize the success of other critical policy priorities.

For all his wealth, Trump gets the same amount of one thing as everyone else: Time. For that reason, his administration and Speaker Ryan should re-assess their current strategy on Obamacare—the sooner the better. Time’s a wastin’, and the entire Republican agenda is at stake.

This post was originally published at The Federalist.

How Would Hillary Clinton Pay for Her Obamacare “Fix?”

In a recent interview with the Des Moines Register, Hillary Clinton outlined several elements of Obamacare that she said she would seek to change as president. Her proposals illustrate how the fiscal impact of the law could increase significantly from what was expected when the legislation passed in March 2010.

Among the things Mrs. Clinton cited was “how to fix the family glitch.” In short, if an individual qualifies for “affordable” health insurance through an employer, that person’s family will not qualify for federal insurance subsidies–even if the employer does not offer family coverage or if family coverage is unaffordable for the household.

Supporters of the health-care law may call this a “glitch,” but it is far from an unintended consequence. This provision has worked exactly how Congress wrote it into the Affordable Care Act. As I noted in an earlier Think Tank post, the Joint Committee on Taxation outlined the specifics behind this policy in a footnote on Page 33 of a 157-page summary of the law released the week of its passage. While some congressional Democrats have attempted to argue since then that the provision, as codified by the Internal Revenue Service, was “simply incongruent” with the text, or a “wrong interpretation of the law,” the legislative history indicates otherwise. The provision may have harsh consequences for affected families, but its inclusion was deliberate.

When Congress considered the legislation in 2010, the bill needed to adhere to President Barack Obama’s September 2009 pledge that it would “cost around $900 billion over 10 years.” But to keep the total cost of insurance subsidies—the “gross cost of coverage provisions” in Table 4 here—under $1 trillion, lawmakers made numerous tough choices. For instance, Congress delayed the start of subsidized insurance from January 2013 to January 2014. Congress increased Medicaid payment rates to improve access—but let that increase expire after two years. To pay for higher levels of upfront spending on insurance subsidies, Congress included provisions that slow their growth after 2019—a back-dated reckoning that future Congresses, and families, will have to contend with. And Congress passed—whether lawmakers knew it or not—the “family glitch” provision.

As I wrote in January, undoing all these fiscal constraints will cost money. Mrs. Clinton and other supporters of the law have wish lists of enhanced benefits, but proposals to pay for this new spending have been scarce. Moreover, to the extent that skeptics have likened Obamacare to a subprime mortgage—with “teaser” provisions passed in 2010 and a balloon payment still to come—the long lists of additional spending proposals, with few instances of budgetary restraint, will reinforce those comparisons.

This post was originally published at the Wall Street Journal Think Tank blog.

King v. Burwell and Congressional Intent on Insurance Subsidies

In the big case to be argued before the Supreme Court on Wednesday, supporters of the health-care law maintain that nonpartisan congressional analyses of Obamacare make clear that lawmakers intended on making subsidies available to individuals in all states, even if the precise language is open to interpretation.

But  in at least one other case, the law’s supporters took the opposite tack—ignoring a bipartisan congressional analysis that came up with a conclusion they didn’t like.

Here is what’s happening:

King v. Burwell, the case to be heard Wednesday, centers on the legality of insurance subsidies being provided in states that use the federal HealthCare.gov platform. Some congressional sponsors of the health-care law have said that they clearly intended to make subsidies available to individuals in all states, regardless of whether states used their own or the federal insurance exchange.

In op-eds and amicus briefs, several members of Congress have argued that an Internal Revenue Service rule proposed in August 2011 and finalized in May 2012 that extended subsidies to individuals in both state- and federally run insurance exchanges was consistent with their intent at the time the health-care law was passed. The Congressional Budget Office “came to the same conclusion,” five lawmakers wrote in the Washington Post last October. The legislators say that because CBO assumed that subsidies would be available in all 50 states, as expressed by CBO scores for the bill when it passed, Congress’s intent was clear. But on a different issue of interpretation, several of the law’s authors undermined that logic.

The issue that prompted the about-face involves the “family glitch” related to eligibility for insurance subsidies. If one parent is offered health insurance through an employer, the entire family does not qualify for subsidies to purchase coverage through the marketplace. In March 2010, the same week the health-care bill was signed into law, the Joint Committee on Taxation issued an analysis of the legislation that said, in part, that even though “family coverage costs more than 9.5 percent of income, the family does not qualify for a tax credit regardless of whether the employee purchases self-only coverage or does not purchase self-only coverage through the employer.”

The same August 2011 proposed rule that prompted King v. Burwell also included Treasury proposals to codify the “family glitch,” consistent with the March 2010 technical explanation provided by the Joint Committee on Taxation. Yet Reps. Sander Levin and Henry Waxman—who, respectively, chaired the House Ways and Means Committee and the House Energy and Commerce Committee when the ACA was passed—wrote to Treasury in December 2011 complaining about this interpretation of the statute. Their letter argued that the Treasury interpretation of the glitch was “simply incongruent” with congressional intent and a “wrong interpretation of the law.”

When it came to the exchange subsidies, the Congressional Budget Office undertook no textual analysis of the statutory provisions at dispute in King v. Burwell. But the Joint Tax Committee did. It released a contemporaneous analysis of the provisions at issue with respect to the “family glitch.” Although Mr. Levin and Mr. Waxman say CBO’s silence suggests a presumption that subsidies should be available in all 50 states, they disregarded the contemporaneous analysis by the Joint Committee on Taxation.

Now, the former House committee chairmen could have been unaware of the JCT analysis at the time the law was passed. They could wish to argue for the most generous subsidy regime possible, regardless of the law’s technical specifics. There may be some other policy or political explanation.

But this situation highlights the pitfalls of claims regarding a law’s intent. All types of retrospective analyses could turn into self-justifying ones—which may provide little use to courts attempting to discern what a statute actually means.

This post was originally published at the Wall Street Journal Think Tank blog.