The GOP Tax Bill Doesn't Repeal Obamacare's Individual Mandate

But a future version might.


Tom Williams/CQ Roll Call/Newscom

House Republicans released sweeping tax reform legislation this morning. The draft legislation tweaks everything from individual rates to the child tax credit to corporate taxes and the treatment of companies' offshore earnings. One thing it doesn't touch, however, is Obamacare's individual mandate.

Although President Trump tweeted yesterday in favor of repealing the mandate as part of the tax overhaul, and some reports suggested that the idea was in play as the bill went through a last-minute rewrite process this week, the version released this morning would leave the health law's coverage requirement in place—at least for now.

The health law's mandate has come up in the context of tax reform in part because, thanks to a 2012 Supreme Court ruling, it is treated as a tax penalty, administered by the IRS, and in part because it could be a way for Republicans to make the difficult math of tax reform work.

Somewhat counter intuitively, eliminating that tax penalty would raise federal revenue, at least on paper. Getting rid of the mandate would result in savings of about $416 billion over the next decade, according to the Congressional Budget Office (CBO). That money could then be used to offset rate reductions in the tax reform bill.

For Republican tax writers, this could be a big deal, because the biggest problem they face is finding pay-fors that will make the tax bill math add up. Almost all of the delays and headaches so far have stemmed from a lack of politically plausible offsets, with contentious ideas like the border adjustment tax and caps on 401k contributions ending up scrapped. Passing tax reform is almost entirely about finding offset that won't make too many GOP legislators (or voters) upset. That's why I think we could end up seeing a repeal of the mandate in a future draft of the bill.

Repealing the mandate might look like a win-win for congressional Republicans, since virtually all of them oppose the individual mandate, and most want to see a tax reform bill passed with deep rate reductions and matching offsets. But it's a little more complicated than that.

The reason why CBO assumes that eliminating the mandate would produce savings is that the budget office expects that doing so would result in about 15 million fewer people signing up for Medicaid or subsidized health insurance under Obamacare. Since the federal government would no longer be paying for that coverage, the result would be significant savings.

But what the failed effort to repeal Obamacare this summer demonstrated was that there is little appetite in the Senate for any legislation that is projected to substantially reduce insurance coverage. Republicans couldn't cobble together the 50 votes necessary to pass any health care bill at all, in large part because of concerns about coverage. Having been thoroughly stymied on the previous legislative initiative, GOP leaders are hoping to avoid tying the already-difficult tax reform effort to a debate about coverage numbers.

One potential wrinkle is that there is some disagreement amongst health policy experts about whether the mandate is really as powerful a requirement as CBO's estimates indicates. States that have tried implementing Obamacare-style regulations governing preexisting conditions have seen their individual markets swiftly collapse. But unlike Obamacare, none of those states had a system of subsidies in place.

The question, then, is whether health coverage sign-ups are driven more by the incentives provided by subsidies or by the penalty of the mandate. Conservative health policy expert Avik Roy has argued that CBO's estimate is inflated, and so have analysts from Avalere Health, which consults on Obamacare. Even CBO has noted that the relevant studies all have difficulty disentangling the mandate from Obamacare's other coverage effects.

Of course, if the mandate is less effective than what CBO projects, and eliminating it would have smaller effects on insurance coverage, then the savings to the federal government would be smaller as well, which would make it less useful for the purposes of tax reform. It's one or the other.

Republicans avoided touching the mandate in the initial legislation because they didn't want to dredge up the debates that killed the Obamacare repeal effort. Passing tax reform will be trying enough on its own. But I would not be too surprised if an individual mandate repeal eventually ends up as part of the tax overhaul.

Although the tax reform draft has only been available for a few hours, it is already running into skepticism and opposition from lobbyists, activists, and even Republican legislators. Reports already suggest that the bill might be heavily rewritten over the weekend before next week's mark up.

Which means that Republicans will most likely be looking, once again, for offsets that aren't obviously political non-starters. And repealing the individual mandate, an idea favored by the president, will be one of the few that's left that hasn't been tried.

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15 responses to “The GOP Tax Bill Doesn't Repeal Obamacare's Individual Mandate

  1. Yes, but is it a floor wax or a dessert topping? Or…BOTH!?!!??!

  2. That money could then be used to offset rate reductions in the tax reform bill.

    The current acceptable phrasing is “pay for those tax cuts”.

  3. Why cut spending when all everyone wants is more free money for their preferred programs and they’re willing to vote for it?

    This is why our Republic is doomed, simply put.

    ‘Reform’ is like putting a Band-Aid on a crumbling dam, you might be ‘doing something’ but one thing you aren’t doing is fixing the problem.

    1. ___% cut across the board. Try to choose a number that balances the budget.

      You’re welcome, Republicans.

      1. But why would they ever do that when cutting spending makes smiles turn upside down? That might mean they lose their job!

        Lets face it, if the populace wants to spend everyone’s savings into oblivion the government will happily comply.

    2. Although the tax reform draft has only been available for a few hours, it is already running into skepticism and opposition from lobbyists, activists, and even Republican legislators. Reports already suggest that the bill might be heavily rewritten over the weekend before next week’s mark up.

      So there wasn’t enough pork and crony capitalism? Good to know. I’m sure that will be corrected post haste.

  4. the biggest problem they face is finding pay-fors that will make the tax bill math add up.

    They already found them: moderately high income citizens ($200-400K couples) who live in high tax states with high priced houses who used to itemize. In other words, Californians.

    Rich people (over 500K incomes) will get a yuge tax cut. Middle class people will get a small tax cut (quick, what’s 25 percent of that slight increase in the standard deduction after you remove all the personal exemptions?) But people in the upper middle/high lower class brackets will get hit with a double whammy of no itemized deductions AND a higher tax bracket, jumping from 28 to 35 percent.

    1. So, Doctor’s? Yet one more incentive to become literally anything other than a Doctor.

      1. Which might have something to do with that shortage of doctors we’ve had for decades. And it keeps getting worse.

        1. You can thank the American Medical Association, among many others, for helping to keep the supply low for that one. You are absolutely correct that there is a critical shortage of primary care Doctor’s in these United States though, which is why it’s so patently amusing to hear people talk about expanding access to an ever-shrinking profession.

          What is the most amusing is that we’re saying that the government needs to be the one to pay Doctors (well ok, now ‘us’ but a lot of people) but then the government turns around and says ‘ok, we’ll pay you less than you were making but we’re also going to tax the shit out of you too’.

          Not a lot of people who are smart enough to become a Doctor are retarded enough to think that’s a good deal. True story.

          1. Just passing tort reform and going to a loser pays system would do wonders for economy and the prospects of prospective physicians.

        2. The only reason the mandate was required in the first place is because Obama loaded his “Obamacare” with a lot of stuff that people who are buying health insurance for themselves usually don’t buy because of cost. Note that even Medicare does not meet (all) the requirements of Obamacare. Medicare offers 60 days of hospital coverage with another 60 days of “lifetime” one time coverage where the patient pays over $300 a day for his or her extended hospital stay. Even my own Medicare Advantage Plan only covers 90 days before running out. This is the same for every Medicare Advantage I know of. Therefore neither Medicare or Medicare Advantage plans meet the Obamacare standard. I doubt that most private plans prior to Obamacare did either. Obamacare requires “unlimited” coverage period. I doubt that plans of this nature even existed prior to Obamacare requiring this. I might note however that the State of Michigan does have this sort of coverage for those involved in automobile accidents.

          I believe we should repeal Obamacare and allow people to buy what they can afford. Doctor Rand Paul has suggested that the solution is large group buy in plans which would cost considerably less than private individual plans do. Hopefully President Trump will “adopt” Dr. Paul’s plan as a better solution to replace Obamacare…

  5. This is what comes from not passing actual budgets, and trying to use reconciliation instead of steamrollering the democrats with the ‘only two speeches in a legislative day’ rule.
    Grow a pair, pass real budgets, cut out entire departments out of the federal piggy bank, and get on with it before November 2018.
    Hint: Dept of Education. HUD. HHS. Dept of Transportation. “Homeland Security”. Dept of Energy.
    80% of the IRS, because simple taxes don’t need an army of accountants.

  6. The Senate needs to adjust Senate rules for all bills only requiring 51 votes. Pass this tax reform and repeal ObamaCare.

    Then if the Republicans ever lose control of the Senate, change the Senate rules to require 75 votes to pass anything and require 99 votes to change any Senate rules.

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