Conservatives object to Obamacare replacement proposal tax credits

(Bloomberg) — Some conservative House Republicans are objecting to a major part of the Obamacare replacement outline presented to them by party leaders, underscoring the party's continuing inability to agree on an alternative to the health plan program created by the Affordable Care Act.

The proposal would let Americans who lack insurance buy coverage with refundable tax credits they can receive before the end of a tax year. House Ways and Means Chairman Kevin Brady said he and other leaders presented the idea during Thursday's private conference of the House GOP.

Some conservatives say they oppose the idea because it could amount to a new government subsidy by allowing people to receive a larger credit than they pay in taxes. They prefer a mechanism that would preclude people from getting any more money than they paid in taxes.

"I don't like the refundable tax credit," says Rep. Ted Yoho of Florida. "I don't want people getting money back."

"This is Obamacare light," Yoho said, adding that he told Brady about his views.

Rep. Trent Franks of Arizona said tax credits "should be predicated on those taxes paid in, not a refundable tax credit, because it can so easily become a major and unstoppable entitlement."

The proposal does not make it clear whether the drafters believe "Obamacare repeal" means repeal all of the Affordable Care Act statutory package, or only certain parts that affect Medicaid and the commercial health insurance market.

The dispute over tax credits is one of many issues facing Republican leaders as they seek agreement on how to fulfill their promise to repeal and replace Obamacare.

Also discussed Thursday were a proposal to cap the tax break for employer-provided health insurance, and efforts to restructure Medicaid. Republicans are set to face their constituents during a week-long congressional recess next week.

There's no legislative language yet, so it's too early to count votes for or against a health care plan. But with 239 Republican members in the House and virtually no hope of Democratic support, the GOP can only afford to lose 21 of their own lawmakers on a bill.

"I think there's not the votes there to pass refundable tax credits," said Rep. Mark Meadows of North Carolina, chairman of the Freedom Caucus of about 40 conservative members. He said it could be a "new entitlement program" and may be subject to fraud.

Asked if that calculus would change if President Donald Trump backs refundable tax credits, Meadows said, "No, it does not."

Rep. Dave Brat of Virginia said, "The refundable tax credit piece is problematic because then you'll have health care run at the federal government level where everything is insolvent." And he said Democrats will "bid up" the tax credits over time.

House Speaker Paul Ryan backs refundable tax credits. (Photo: Ryan's office)

Speaker Ryan

The idea of refundable tax credits has been endorsed by House Speaker Paul Ryan of Wisconsin and was included in legislation introduced in recent years by new Health and Human Services Secretary Tom Price, a former House member and Ryan ally.

Ryan of Wisconsin told reporters Thursday that the House GOP will announce its plan to replace Obamacare after returning from next week's recess.

Other ideas that GOP leaders proposed to their members at the Thursday meeting were giving states per-capita funds for Medicaid coverage, another source of tension; creating high-risk pools and increasing tax advantages for health savings accounts.

A competing proposal from Sen. Rand Paul of Kentucky and Rep. Mark Sanford of South Carolina, backed by the conservative Freedom Caucus, includes an individual tax break that can't lead to a refund. But that has its own problems.

Without a refundable tax credit, the question that will be asked is: "What are you going to do about low-income people?" said Rep. Phil Roe of Tennessee. "If you don't have any money it's hard to buy something," he said.

'Better Way'

Other Republicans defended the tax credit as necessary.

"A tax deduction is not appropriate for all Americans because not all Americans pay the tax because they don't make enough money," said Rep. Leonard Lance of New Jersey. "So a refundable credit may be a better way to proceed." He said the GOP's goal is to "provide access to as many as possible."

Rep. Carlos Curbelo of Florida said he supports a refundable tax credit, arguing that Congress can address concerns about fraud by sending the money straight to insurers to guarantee that it's used for health care.

Paul said a new refundable tax credit would essentially be "a subsidy by another name." He added, "Obamacare had subsidies — if we call them refundable tax credits, have we really done anything other than change the name?"

At his weekly press conference Thursday, Ryan sought to distinguish his proposed tax credits from the tax credits in the Affordable Care Act, which are also refundable and can be provided in advance of an individual's final tax return.

'Do what you want'

"A tax credit is: You get the freedom to do what you want and buy what you need, and your choice," Ryan said. "The Affordable Care Act is the opposite of that. The Affordable Care Act is: the government makes you buy this" and provides a subsidy.

Brady of Texas said no final decisions have been made on whether the GOP health care replacement will include a refundable tax credit or something else.

"We're under that discussion," Brady said.

Lawmakers on both sides of the aisle are taking their health care discussions back in their districts. Sanford said he accepted a request to appear at a town hall Saturday outside Charleston, South Carolina, from a local chapter of "Indivisible," a group that has been coordinating protests at Republican members' town halls.

But Rep. John Katko of New York said in a statement Friday he won't attend a town hall and won't let outside groups "hijack service to my district or disrupt meaningful engagement with my constituents."

Meanwhile, Democratic members of Congress plan 85 "protect-our-health care events" across the country Saturday, and about 100 pro-Obamacare events over next week, House Minority Leader Nancy Pelosi of California said Friday.

— With assistance from Anna Edney.

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