Ted Cruz and Mark Meadows Propose to Restart Cycle of GOP Health Care Mendacity

Conservatives are mad that Paul Ryan’s ObamaCare replacement, the American Health Care Act, is not as conservative as they would like. They don’t think the bill will provide what Paul Ryan says it will provide, and they don’t think it can pass Congress. Ted Cruz, conservative Republican Senator from Texas, and Mark Meadows, conservative Republican House Representative from North Carolina and chairman of the House Freedom Caucus, have an op-ed in the Wall Street Journal which levels these charges and proposes a bill that will not provide what they say it will provide, and will not pass Congress.

The first paragraph gives you an idea of how much integrity the authors will argue with. Here are the first two sentences:

Republicans have a historic opportunity to follow through on our promise to repeal ObamaCare. The recent elections that focused on the law’s repeal — 2010, 2014, and 2016 — were massive GOP victories.

This reminds me of the old joke mathematicians make about how lawyers argue: “All odd numbers are prime! Think about it: 3, 5, 7, 11,…all of ‘em!” You might notice that, as with the lawyer’s list of odd numbers, Cruz and Meadows have conspicuously left one number out: 2012. 2012 was definitely an election year. That election also focused heavily on the law’s repeal. Mitt Romney, despite having husbanded a similar bill into law in Massachusetts, ran on a platform of repealing Obamacare. This was a major focus of the campaign. For some reason Cruz and Meadows don’t mention it.

What’s even more shockingly dishonest is how Cruz and Meadows argue for their own plan. They begin thusly:

First, we must lower insurance premiums. Nothing matters more. The current House bill would not achieve this, because it doesn’t repeal all of ObamaCare’s insurance mandates. Of the few it addresses, the bill delays their repeal. We must abolish ObamaCare’s insurance mandates immediately;

They later continue:

The insurance mandates are a primary driver of [rising premiums]. If we leave these mandates in place or delay their repeal, premiums will remain too high for too long, as studies by the Congressional Budget Office and others have shown.

Almost anyone reading “mandate” here is going to think that Cruz and Meadows are referring to the “individual mandate” that everyone get health insurance or else pay a penalty. But they can’t mean that. For one thing, the House bill does repeal the ObamaCare individual mandate immediately. Even more importantly, the repeal of the mandate is the main reason the CBO thinks premiums would rise in 2018 and 2019. Here is a quote from the CBO’s report:

In 2018 and 2019, according to CBO and JCT’s estimates, average premiums for single policyholders in the nongroup market would be 15 percent to 20 percent higher than under current law, mainly because the individual mandate penalties would be eliminated, inducing fewer comparatively healthy people to sign up.

So Cruz and Meadows must mean something different by “insurance mandates,” even though 99% of people, even of people who follow the health care debate closely, think of “mandate” as meaning “individual mandate.” What I am guessing they mean instead are two rules that restrict what kinds of plans insurance companies can offer: 1) under ObamaCare, insurance policies must cover at least essential health benefits such as emergency care, mental health benefits, hospitalization, and so on (you can read the rest on the linked page). Republicans don’t like this rule, especially because it includes maternity care, which they find ridiculous. 2) ObamaCare limits annual out-of-pocket spending (that is, money spent on health care outside of premium costs) to $6,000. Cruz and Meadows would like to eliminate these rules, which would allow insurance companies to offer plans which much less coverage. These plans would indeed have lower premiums, but are not really what people think of when you say “we must lower insurance premiums.”

Cruz and Meadows have more ideas, all of which serve to comfort the rich and afflict the poor. They want to expand health savings accounts, which allow people to spend income on health care without having it taxed first. This is a benefit entirely for the middle and upper-classes, who pay higher tax rates on their income and who have money available to put towards these accounts.

They also want to change the tax credits in the AHCA to be non-refundable. This requires some explaining. About 45 percent of Americans do not pay income tax. Most of these people are poor (although in some years this group has included Donald Trump). A tax credit is a deduction off of your income tax. So if you owe $3,000 and get a tax credit for $1,000, then you only have to pay $2,000. But if you owe $0 and get a tax credit for $1,000, you still owe $0. A refundable tax credit solves this problem — if you owe $0 and have a refundable tax credit for $1,000, you get a check from the government for $1,000. By making the AHCA tax credits non-refundable, Cruz and Meadows would be taking the tax credit away from the bottom half of the income distribution.

But wait! say Cruz and Meadows. We are aware of this problem and don’t want to be mean to poor people. So we will allow the tax credits to reduce payroll tax liability:

We should implement nonrefundable tax credits, which can be deducted from payroll taxes for lower earners. Anyone who gets a paycheck has a large amount withheld by payroll taxes. Thus, this nonrefundable credit would benefit lower-income individuals by letting them keep more of what they earn.

Cruz and Meadows are right that lower-income individuals do pay payroll taxes. The employee’s share of these taxes (presumably Cruz and Meadows’ tax credits would not be deducted from the employer share) is 7.65% (6.2% for the Social Security tax, 1.45% for the Medicare tax). Say you’re a 64-year -old making $20,000 a year. Under the AHCA, you would get a $4,000 refundable tax credit. You pay payroll taxes of $20,000*(.0765) = $1,530. So even wiping out your entire payroll tax bill would not be worth even half as much as the AHCA credit. That’s not to mention the Obamacare subsidy, which depends also on the cost of health insurance in your area, but for most low-income 64-year-olds is many thousands more than the AHCA credit.

But that’s not even the worst thing about deducting the credit from payroll taxes. Payroll taxes are expressly devoted funding sources for Social Security and Medicare. Deducting these credits from payroll taxes means diverting money away from Social Security and towards this new program. For Cruz and Meadows, this is a two-fer: not only do you get to reduce the credit that poor people get, you also get to de-fund Social Security and Medicare at the same time.

The final part of Cruz and Meadows’ plan is that the Medicaid expansion should be wound down immediately, instead of starting 2020, and states should be able to institute work requirements immediately. Even aside from the amount of suffering this would impose on people dependent on Medicaid, this, like much of the rest of the plan, is a political non-starter. As I’ve written before, the AHCA is more vulnerable from the left than the right, in particular because of the AHCA’s treatment of Medicaid. Cruz and Meadows want instead to pull the bill farther to the right, making it even more difficult to pass.

So Cruz and Meadows have proposed a plan that would not succeed in its purported goal to lower premiums in the way most people understand that promise, and has no chance of passing Congress. In this respect it is just like the AHCA. But this is not an accident — the original promises of the AHCA were formulated in a time when the GOP had no hope of actually passing laws, because it assumed that there would be no Republican president to sign them. They could therefore promise the moon without taking responsibility for governing. Cruz and Meadows are now in the same position — both of them, but especially Cruz, are so loathed by Republican leadership that they have no chance of being able to write and pass their own health care legislation. They can therefore promise the moon while proposing policies that would not provide it. But they do get to reassert their conservative bonafides, which will win them the admiration of voters unaware of the policy details and wealth donors who approve of them. If Cruz and Meadows manage to defeat the AHCA, it’s not implausible that Meadows could replace Ryan as Speaker, find himself needing to #RepealAndReplace, propose something that looks very much like the AHCA, and end up reading a Cruz-authored op-ed in the WSJ decrying the Meadows plan as insufficiently conservative. Then, another cycle of Republican mendacity on health care would be complete.