The G.O.P. Health Care Plan’s Fatal Flaw

http://www.nytimes.com/2017/03/16/opinion/the-gop-health-care-plans-fatal-flaw.html

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Senator Robert Byrd helped save the Affordable Care Act once already. In December 2009, the wizened West Virginia Democrat overcame fragile health to cast a crucial vote for the act’s passage. It was one of the last votes in the career of the Senate’s longest-serving member: Just weeks after President Obama signed the Affordable Care Act into law, Byrd died at age 92.

Now, nearly seven years after his death, Senator Byrd may ensure that the Affordable Care Act, also known as Obamacare, lives another day. One of Byrd’s many legislative accomplishments over a half-century in the Senate was the eponymous “Byrd rule,” which governs the process of budget reconciliation. Republicans on Capitol Hill are trying to use the reconciliation process to repeal and replace the Affordable Care Act. The Byrd rule stands in their way.

Reconciliation is a fast-track process that allows budget-related legislation to pass the Senate without the prospect of a filibuster. The Byrd rule prevents reconciliation from being used to pass any measure for which the budgetary effects — “changes in outlays or revenues” — are “merely incidental to the non-budgetary components.” Republicans know they lack the 60 votes to break a filibuster in the Senate, so they designed their repeal-and-replace bill to satisfy the Byrd rule’s requirements. Yet there is a surprising flaw in their design — one that has so far drawn little notice, but that Senate Democrats will surely seize on.

The flaw is found in a provision of the bill with the innocuous title “Encouraging Continuous Health Insurance Coverage.” Under that provision, individuals who go without coverage for more than two months must pay a penalty the next time they buy health insurance. The penalty is equal to 30 percent of their new plan’s premium. Significantly, individuals must pay this 30 percent penalty to their new insurer, not to the federal government.

And therein lies the problem. If the penalty were paid to the federal government, as with the individual mandate penalty under the Affordable Care Act, the provision would comply with the Byrd rule because it would have an obvious positive budgetary effect: Penalty payments would increase federal revenues. But the drafters of the repeal-and-replace bill chose not to adopt that approach, lest the penalty look too much like the Obamacare mandate. Instead, they are hoping that the threat of a future penalty averts an insurance market “death spiral,” in which healthy individuals run for the exits and the sick are left behind.

The logic behind the penalty is clear enough, but the budgetary effects are not. On the one hand, the specter of the penalty will cause some healthy individuals to keep buying insurance, which means they can qualify for refundable tax credits under the Republican plan. More people claiming tax credits means less federal revenue. On the other hand, the penalty will cause some uninsured individuals to remain uninsured even when they become sick, and so will disqualify them for tax credits. Fewer people claiming tax credits means more federal revenue. The penalty’s overall budgetary effect is ambiguous — and incidental to the goal of keeping healthy individuals in the market. In other words, its impact goes beyond just taxes and spending.

The problem for Republicans is that the Byrd rule does not allow these sorts of non-budgetary measures to pass through reconciliation and avoid the filibuster. If the repeal-and-replace bill passes the House and reaches the Senate, a Democratic senator will raise a point of order to strike the penalty provision for violating the Byrd rule.

The Senate’s nonpartisan parliamentarian, Elizabeth MacDonough, will then decide whether the budgetary effects of the provision are “merely incidental.” Ms. MacDonough has enforced the Byrd rule strictly in the past and will almost certainly say that the penalty provision violates the rule here as well. Indeed, one Senate Republican aide has already acknowledged that the bill will flunk the Byrd rule test.

Republicans in Congress — and in the White House — thought they were poised to deal a final deathblow to Obamacare. Much to their surprise and to their chagrin, Robert Byrd may come to the law’s rescue once again.