The Republicans are having trouble reaching consensus on a plan to replace the Affordable Care Act (ACA), and the Democrats understandably are not inclined to help. Searching for areas of agreement at this point seems like a waste of legislators’ valuable time. Perhaps a more productive approach would be for each member of Congress to ask, “What do I want so much that I would be willing to accept something I really loathe in exchange?” Here are two suggestions.
Fee-For-Service Medicare Versus Medicare Advantage
What Speaker of the House Paul Ryan (R-WI) and some other congressional Republicans presumably want for Medicare is premium support—a system in which traditional fee-for-service (FFS) Medicare is treated as just another health plan that competes on a leveled playing field with Medicare Advantage plans. Democrats seemingly would like for the Medicare program to be placed on firm financial footing, rather than dealing with annual Trustees’ reports announcing the wavering date when the trust funds will be exhausted. Both sides know that the simplest way to provide a sound financial foundation for the Medicare program, although not the most efficient, is to raise payroll taxes for Part A (possibly adding a means-tested out-of-pocket premium) and increase income taxes and premiums for Parts B and D.
Republicans like the privately administered Medicare Advantage health plans and loathe tax increases. Democrats love the traditional government-administered FFS Medicare plan but probably have noticed that FFS Medicare is bleeding market share to Medicare Advantage plans. As part of the trade, astute Democrats might propose a change in the Medicare entitlement legislation such as tiered cost sharing and reference pricing that cannot be overridden by Medigap coverage that would give traditional FFS Medicare more flexibility to compete with Medicare Advantage plans. The question is whether both sides love or loathe premium support more than they love or loathe tax and premium increases. Proposing such a tradeoff would force them to decide.
Tax Deductibility Versus Premium Assistance
The second issue is premium assistance. The federal government currently provides billions of dollars in premium assistance—to the wealthy. Ryan and some other congressional Republicans presumably want to limit or even eliminate the tax deductibility of health insurance premiums, especially for wealthy people.
Let’s lay aside the irony that in this case it’s the Republicans—the party that usually is blamed for favoring the rich and despising tax increases—who are trying to raise taxes on the wealthy. The Democrats say they want to ensure that there are adequate subsidies for low-income people to have meaningful health insurance. When the government favors some goods and services over others by allowing them to be purchased with pre-tax dollars it’s called a tax expenditure. The tax deductibility of health insurance premiums is the largest tax expenditure in the federal budget—more than $216 billion in 2016. The deduction is inflationary and worth nothing or next to nothing for poor people. It’s welfare for the well-to-do.
The Democrats have been in a tight spot on this one ever since then presidential candidate Barack Obama vilified John McCain (R-AZ) for proposing a limit on the tax deductibility of premiums during the 2008 campaign, but they now could score a twofer by helping the Republicans get rid of the regressive deduction on the condition that the resulting tax revenue is used to provide premium subsidies to people who really need them—primarily young, healthy, poor, working people who the Republicans could characterize as self-employed entrepreneurs. As part of the deal, the Republicans could negotiate more flexibility on ACA regulations they blame for making premiums more expensive, such as “essential” benefits and less restrictive rate bands on premiums.
Waiting for Democrats and Republicans to find something they agree on and can take credit for is a reliable way of assuring that nothing good ever happens. And if there’s one lesson the Republicans should learn from the ACA, it is that forcing major legislation through on a strictly partisan vote is disastrous. Things inevitably will go wrong, and when they do, the other side will be of no help. Instead of seeking common ground, both sides should mull over things they really loathe (and for which they could blame the other side) but could accept in exchange for things they really love (and for which they could take credit).