The Reconciliation Option
The way forward for repealing and replacing Obamacare becomes clearer.


James C. Capretta

At that point, the president and his allies had two choices. They could compromise with Republicans and bring back a bill to the Senate that could garner a large bipartisan majority. Or they could ignore the election results in Massachusetts and pull an unprecedented legislative maneuver, essentially switching from regular order to reconciliation at the eleventh hour, thereby bypassing any need for Republican support. As they had done at every other step in the process, the Democrats chose the partisan route. They created a separate bill, with scores and scores of legislative changes that essentially became the vehicle for a House-Senate conference on the legislation. That bill was designated a reconciliation bill. Then they passed the original Senate bill through the House on the explicit promise that it would be immediately amended by this highly unusual reconciliation bill, which then passed both the House and Senate a few days later, on an entirely party-line vote.

So what goes around, comes around. Obamacare is in law — with all of its trillion-dollar spending and taxes now part of CBO’s “baseline” budget projections. Reconciliation was created for the express purpose of giving Congress an expedited process for making changes to just this kind of spending and tax policy. Obamacare is thus a very ripe target for budget cutting, and that means reconciliation.

It’s true that Obamacare includes some provisions that, on their own, might be considered non-budgetary, but not nearly as many as some may think. The entire machinery of the coverage provisions — the individual mandate, the Medicaid expansion, the employer requirements — is entirely fueled by federal money (in the form of both subsidies and penalties). Moreover, the state exchanges and the regulatory apparatus they are intended to impose are also financed by federal taxpayers. Repeal of all of these provisions, which are the guts of Obamacare, is plainly a budgetary matter, and therefore appropriate in reconciliation. For the rest, creative legislative drafting can solve many problems. Senator Conrad’s contention that Obamacare shouldn’t be repealed in reconciliation because Obamacare reduces, not increases, the budget deficit doesn’t stand up to scrutiny. For starters, the supposed deficit reduction originally found by CBO is vanishing rapidly. In the original cost estimate, CBO said the health-related provisions of Obamacare would reduce the deficit by $124 billion over ten years. Of that, $70 billion was supposed to come from an initial “surplus” of premiums paid into a voluntary long-term care insurance program, called “CLASS” (Community Living Assistance Services and Supports). Opponents said all along that this was a budget gimmick of the worst kind — which the Obama administration now implicitly admits, because they themselves have pulled the plug on the program. There will be no CLASS surplus, or a CLASS program at all. So there goes more than half of the supposed ten-year deficit reduction from Obamacare.

Meanwhile, Treasury’s inspector general tells us the tax collection from the so-called “tanning tax” is also coming in way under projections. Throw in the fact that the high-risk pools are massively underfunded, the Medicare cuts are unrealistic, and the employer dumping will far exceed what CBO projected, and you have a budget buster of enormous proportions.

But even if CBO continues to play along with the Obamacare-as-deficit-cutter fairy tale, that still doesn’t preclude Congress from repealing it in reconciliation. All the House and Senate would have to do is couple repeal with some strategic cuts in spending (including, perhaps, retention of some cuts that were enacted in Obamacare itself). The total package would then be estimated to cut the deficit and therefore fall well within the normal boundaries of a reconciliation bill.

Obamacare was jammed through Congress against the wishes of a majority of the electorate. Voters took it out on those controlling Congress in the 2010 midterm election, which was a Republican rout of historic magnitude. The opposition to Obamacare remains just as strong today as it was last year, which means the 2012 election could produce a similar result. Except that, unlike 2010, in the aftermath of the coming election there could very well be a straightforward and unimpeded path for delivering on repeal and replace, as the voters are demanding.

— James C. Capretta is a fellow at the Ethics and Public Policy Center. He was an associate director at the Office of Management and Budget from 2001 to 2004.