The under-covered story of ACA 'repeal and delay': An immediate multi-billion-dollar tax cut?

Topics: Politics and Policy, Elections, 2016, Health Care Reform, Finance

By Josh Zeitlin, Editor

Several media outlets have reported that GOP lawmakers are coalescing around a plan to immediately repeal parts of the Affordable Care Act (ACA) but delay the effects of the repeal bill for two or three years.

But if past GOP repeal plans are any guide, that description might be missing some major details. Hundreds of billions of dollars of details.

The partial ACA repeal plan that the House and Senate passed earlier this year (before it was vetoed by President Obama) would have delayed scrapping the law's Medicaid expansion and insurance subsidies until 2018.

However, it would have immediately repealed the ACA's individual and employer mandates, as well as new taxes that help fund the law, including several taxes that apply directly to the health care industry.

That includes the law's Medicare tax surcharge, annual fee on health insurers, and taxes on investment income, manufacturers and importers of prescription drugs, and indoor tanning services, among other provisions. All told, the Congressional Budget Office (CBO) earlier this year projected that repealing the law's tax provisions would amount to a tax cut worth more than $550 billion over 10 years—perhaps complicating GOP efforts to fund any ACA replacement.

'Pay attention to what the statute does tomorrow'

One key caveat: There's a lot of uncertainty about the future of the ACA and Republican repeal efforts.

The repeal bill that Republicans put forward next year may look different from the one they passed earlier this year. "They were making a point last time around. They are making a law this time around," Douglas Holtz-Eakin, president of the American Action Forum and a former CBO director, tells American Health Line. Holtz-Eakin served as the director of domestic and economic policy for John McCain's presidential campaign.

But University of Michigan law professor Nicholas Bagley tells American Health Line that any reconciliation bill will likely immediately repeal the ACA's tax provisions. Bagley stresses that it's key to "pay attention to what the statute does tomorrow, not what it promises to do three years down the line," given that it's uncertain whether Republicans would further delay repealing the ACA's coverage provisions if they needed additional time to pass a replacement plan.

The consequences for the GOP's strategy and for replacing the ACA

Bagley argues that the desire to scrap the ACA's tax provisions has played a role in the GOP's strategy to immediately repeal the ACA, even without having a replacement plan in place.

"However ambivalent Republicans may be about health reform, they are not at all ambivalent about big tax cuts to the wealthy," Bagley wrote earlier this year in a post titled "It's the taxes, stupid." And of the tax cuts from repealing the ACA, a majority—$346 billion over 10 years from eliminating the Medicare and investment income taxes—would go toward those making more than $200,000 a year, he notes.

Obama urges Republicans to consider consequences of ACA repeal >>>

However, Holtz-Eakin disagrees that the ACA's tax cuts are a driver of the GOP's strategy to immediately repeal the law. "I don't think it's the [ACA's] taxes," he tells American Health Line. "I think there's a political imperative to repeal Obamacare the first chance they can ... They would repeal and replace if they had agreed upon a replacement plan, but they haven't. So they need some time to do that."

Bagley also tells American Health Line that scrapping the ACA's tax provisions likely will make it harder to pass a replacement plan. "If you get rid of the very taxes that Obamacare has used to finance its coverage expansion, what kind of taxes are Republicans willing to impose in order to finance their replacement version? They run up against some very hard problems of budget math," he says.

But Holtz-Eakin disagrees. "I don't think it matters [that the taxes would be repealed]," he says.

He adds, "If you look at the replacement plans that have been offered, whether they are Burr, Hatch, Upton, or what Tom Price did—any of the things that have come out as complete repeal and replace propositions—they get rid of all [the ACA's] taxes, and they cover the subsidies in those plans in some other way. So I don't think those taxes are integral to their thinking."