How Republicans Could Use Reconciliation on Obamacare

Most political handicappers give Republicans at least an even-money shot at regaining a Senate majority in the 2014 midterm elections, which would almost certainly give Republicans control of both houses of Congress. My previous column for Morning Consult outlined what a Republican Senate might mean for Obamacare. As Election Day nears, this column will take a closer look at how Republicans may use budget reconciliation as the mechanism for repealing or amending the Affordable Care Act, also known as Obamacare.

Congress last employed the budget reconciliation process in 2010 as part of an unusual, weeklong, two-step process of passing and amending Obamacare. After the Senate passed its bill by a party-line 60-40 margin, but before the House could pass its own bill, the special election in Massachusetts of Republican Senator Scott Brown cost Democrats their filibuster-proof 60-vote majority. Because there were still significant policy differences between each chamber’s approach, Democrats were forced to use budget reconciliation to iron out as many of the sticking points between the House and Senate versions as possible. The advantage of using budget reconciliation is that a budget reconciliation bill only requires 51 votes in the Senate and therefore cannot be filibustered – a fact that will not be lost on Republicans if they begin the next Congress with 51 or more seats in the Senate.

Considering that Republicans have roundly criticized Senate Democrats in recent years when they have failed to pass a budget, one should assume that a Republican-controlled Congress would produce its own budget resolution by next summer. However, a budget resolution is just the first step in the budget process. It’s a resolution, not a bill, so it does not go to the President for a signature or veto. The budget resolution simply sets targets and deadlines for the other Congressional committees with jurisdiction over taxes and entitlement programs.

This isn’t to suggest that the process of developing a budget resolution is easy – if it were, Congress would probably more often hit its official April 15 deadline for producing a resolution. But the thorniest substantive and political decisions around the budget take place during the next step in the process — the months-long, multi-committee process of “reconciling” tax and entitlement policy with the targets in the budget resolution.

In this budget reconciliation process, Republicans could try to repeal Obamacare in one fell swoop. For several reasons, however, full repeal through budget reconciliation would be virtually impossible in the next Congress.

First, budget reconciliation is a process reserved for legislation that has a significant impact on taxes or entitlement spending. Provisions that do not have a more-than-incidental relationship to the budget can be struck from a budget reconciliation bill unless 60 Senators vote to keep the provision – and not even the most optimistic Republican believes the party will hold 60 Senate seats next year. As a result, many elements of Obamacare could survive a budget reconciliation process in the next Congress, perhaps even the changes to insurance market rules that are one of the cornerstones of the law.

Second, Republicans have yet to coalesce around the “replace” half of their promise to “repeal and replace Obamacare.” That’s not to say conservatives have not offered ideas to replace Obamacare that even liberals have described as “serious” proposals. These include a plan developed by Senators Richard Burr, Tom Coburn and Orrin Hatch; a set of reforms authored by Avik Roy of the Manhattan Institute; and an alternative offered by the 2017 Project, to name three. But no one in Republican health policy circles would argue that any of these plans represents a consensus among conservatives.

Third, and most obviously, President Obama would veto any budget reconciliation bill that repeals Obamacare. While the President’s signature is not required on a Congressional budget resolution, as noted earlier, a budget reconciliation bill must be signed into law by the president.

Republicans know all of this, of course. But a Republican majority in Congress will still proceed with budget reconciliation next year, and they cannot simply ignore Obamacare in the process. So what can Republicans do, if full repeal is impossible?

Expect Republicans to use the budget reconciliation process to target some of the most unpopular provisions of the bill, such as the individual and employer mandates and the various tax increases included in Obamacare to offset the cost of the law. For instance, CBO attributed $170 billion in savings to a recent proposal to delay by five years the schedule of penalties for people who do not comply with the individual mandate. Republicans could use these savings to offset the revenues that would be lost by doing away with the medical device tax, eliminating or reducing some of the penalties related to the employer mandate, restoring the previous limits on pre-tax savings in flexible spending arrangements, and so on. It shouldn’t surprise anyone to know that these ideas and many others have been under quiet discussion since before the ink from President Obama’s signature was dry.

Would President Obama sign a budget reconciliation bill that included provisions like these? It’s impossible to say, without knowing what other provisions might be in the bill, what the political climate will be one year from now, or the answers to a host of other variables.

But what might happen next year in a budget reconciliation process still matters, regardless of whether the president vetoes the first reconciliation bill to cross his desk. Whether or not Republicans succeed at first, what happens in the budget reconciliation process in the next Congress may set the basis for eventual changes to Obamacare, if history is any guide.

Consider the three presidential vetoes of budget reconciliation bills since the current budget process was legislated into being in 1974. The landmark welfare reforms of 1996 rose from the ashes of the Balanced Budget Act of 1995 and the related government shutdown battles between President Clinton and Speaker Gingrich and the House Republicans. And the tax cuts in the 1999 and 2000 budget reconciliation bills, vetoed by President Clinton, were at the core of the 2001 tax package signed into law by President Bush.

So if Republicans take full control of Congress in 2015, what happens in the budget reconciliation process will be important, regardless of the initial outcome. After all, the vast majority of the major changes in federal healthcare policy over the past 35 years have taken place through budget reconciliation – from TEFRA and COBRA in the 1980s to HCERA (the Obamacare reconciliation “sidecar”) in 2010. The first set of major changes to Obamacare will be no different – whether they happen next year or not.

Stephen Northrup is a partner in the bipartisan healthcare lobbying firm Rampy Northrup. He served as health policy director for the Senate Committee on Health, Education, Labor and Pensions for then-Chairman Mike Enzi (R-Wyo.), and founded Rampy Northrup in 2014 after co-chairing the healthcare lobbying practice at the Podesta Group.



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