President Obama has managed to defend his signature health care law’s generous system of taxpayer-funded benefits from attacks in Congress and the courts, but Capitol Hill is finally beginning to eat away at Obamacare’s financial foundations.
The year-end spending bill that Congress just approved and Mr. Obama reluctantly signed delays three taxes written into the 2010 law to pay for new benefits and to keep a cap on exploding health care costs overall.
The bill also puts a big kink in the safety valve that was supposed to help limit insurers’ losses if they took part in Obamacare.
But the changes have had no effect on the millions of new Obamacare customers or Medicaid enrollees — only on the president’s promise that his health care program wouldn’t add to the deficit.
“I just think that’s the way laws work. No one remembers how we paid for the tax cuts that [President George W. Bush] did, and no one remembers how we paid for Part D,” said Gary Claxton, a vice president at the nonpartisan Kaiser Family Foundation, who referred to Mr. Bush’s Medicare prescription drug benefit program enacted in 2003.
Many of the president’s fellow Democrats linked arms with Republicans last week in support of an “omnibus” spending bill that delays Obamacare’s “Cadillac” tax on generous employer plans for two years, intended as a major brake on rising health care costs, meaning the tax won’t take effect until 2020. The package also rolled back a 2.3 percent excise on medical device sales for two years and the health insurers tax for one year.
All told, the Joint Committee on Taxation estimated that the rollbacks will cost the government $36 billion over the next decade.
That isn’t a giant dent in a system likely to cost more than $1 trillion over that time, but it signals a Congress eager to nullify some of the pain, even if lawmakers aren’t willing to eliminate benefits from Obamacare.
“Congress tried to pay for this thing — something apparently they’ve forgotten about, given what’s happened over the past few days,” said Timothy Jost, a law professor at Washington and Lee University who closely tracks the health care law.
The first rollbacks came just a year after Obamacare was enacted, when Republicans took control of the House and wrote legislation scrapping tax reporting rules that would have required businesses to fill out a tax form every time they paid a vendor $600 or more.
Congress also raised the cap on the amount of money Obamacare customers have to repay to the government if the users claim too much government assistance.
Fending off attacks
Mr. Obama has acquiesced to Congress’ fiscal tweaks but has fended off every effort to repeal or cut benefits from the law.
His administration this year beat back a challenge before the Supreme Court that would have yanked vital subsidies from customers in 34 states that declined to set up their own health insurance exchanges where residents could shop for private plans.
Congressional Republicans will try a major repeal again in January with final approval of a budget bill that would phase out the exchange subsides and cancel the expansion of Medicaid.
Republicans used “fast track” budget procedures to avoid a Democratic filibuster in the Senate, meaning this is the first broad repeal from the Republican-dominated Congress that will even reach the president’s desk since the legislation was signed in 2010.
Mr. Obama, though, will almost certainly veto the measure and Congress doesn’t have the votes to override him.
Next up for Congress could be a permanent repeal of the Obamacare taxes — which would break the president’s vow that the law wouldn’t add to the deficit.
“The ACA has cost a lot less than what has anticipated,” Mr. Claxton said. “In the short term you don’t need [the repealed taxes]. In the long term, it’s a lot of money.”
The Cadillac tax is a big chunk of that money. The 40 percent excise tax on the cost of health coverage above $10,200 for an individual and $27,500 for a family was supposed to raise $91 billion from 2016 to 2025, and grow even more over time as health care costs rose and the excise roped in more workers. The nonpartisan Kaiser Family Foundation had estimated that 26 percent of companies would be affected by the tax in its first year and that 42 percent of employers would be paying it a decade later.
Mr. Obama’s aides reportedly told top Democrats on Capitol Hill in early December that the president was prepared to veto the entire spending bill if the Cadillac tax was delayed or eliminated.
The White House eventually dropped that threat, but labor unions that initially backed the administration and its health care law argued that the tax would unfairly punish many of their workers who negotiated generous health care coverage in place of higher wages.
The bigger threats to Obamacare’s operations are the tweaks to the “risk corridor” program, designed to help insurers who lose money while taking part in the health care law. The law requires the administration to make full payments, but Congress cut the subsidy as part of a 2014 spending deal.
Congressional Republicans were able to keep that mandate in the recent spending package, meaning the administration won’t be able to tap taxpayers’ money as they try to keep insurers afloat and interested in Obamacare.
“By protecting taxpayers from bailing out insurers, we’ve saved $2.5 billion this year alone and will likely save billions more down the road,” said Rep. Joseph R. Pitts, Pennsylvania Republican and chairman of the Energy and Commerce subcommittee on health. “My hope is that we can continue to build on this progress.”