Senate Republicans have decided to repeal Obamacare’s individual mandate as part of their effort to reform the tax code. And they may have made their job harder in doing so.

According to the Congressional Budget Office, repealing the mandate would save approximately $338 billion over 10 years. Republicans want to use those savings to help offset the cost of lowering taxes in their reform effort. And they believe that the benefits of doing so outweigh any costs associated with injecting healthcare into the debate over tax reform.

But it’s too early to tell if their gambit will work.

Regardless of where one comes down on the individual mandate, repealing it as part of tax reform is a risky move. Doing so appeases conservatives in the House of Representatives and Senate. But conservatives were never a threat to oppose the tax bill simply because it did not include a provision repealing the individual mandate.

In contrast, the change in plan could antagonize moderates such as Sens. Susan Collins, R-Maine; Lisa Murkowski, R-Alaska; and John McCain, R-Ariz. And unlike the conservatives, these members have been widely considered to be among those most likely to oppose the GOP tax plan in the first place.

Given their concern, the GOP’s gambit may backfire. Republicans can only lose two of their members and still pass tax reform in the Senate on a party-line vote. Sen. Ron Johnson, R-Wis., became the first GOP senator to announce opposition to the tax reform bill, so the party can only lose one more senator and still pass tax reform.

In an attempt to reassure concerned members, leaders reportedly committed to passing a bipartisan Obamacare fix sponsored by Sens. Lamar Alexander, R-Tenn., and Patty Murray, D-Wash., designed to mitigate the consequences of repealing the individual mandate on Obamacare’s insurance markets. Efforts to pass Alexander-Murray have been unsuccessful to date due to conservative opposition.

If the reports are accurate, leaders appear to be betting that agreeing to pass Alexander-Murray in exchange for securing the votes to pass tax reform will not push conservatives to oppose the latter in protest of the former. If all goes to plan, a combination of moderate Republicans and Democrats will vote to pass Alexander-Murray over the objections of conservatives only after tax reform passes on a party-line vote.

The only problem with the plan is that it depends on Democrats to succeed, and they do not appear to be on board now. Without Democratic votes, the Senate cannot pass Alexander-Murray. And without Alexander-Murray, moderate Republicans will be less likely to support attaching a repeal of Obamacare’s individual mandate to the tax bill. And without the savings from repealing the mandate, Republicans will be forced to look elsewhere for ways to pay for their tax cuts.

Recognizing this, Minority Leader Chuck Schumer, D-N.Y., quickly signaledthat Democrats would not support Alexander-Murray if the price of doing so is to facilitate passage of the Republican tax plan. While Schumer may be bluffing, it is important to remember that his threat does not have to be carried out to be successful. Rather, success only depends on enough Republicans believing that the Democrats will follow through in the end. Schumer’s threat thus does not have to be tolerable to rank-and-file Democrats. It only must appear tolerable.

Both parties in the Senate routinely attempt to manipulate each other’s expectations of how they will behave in the future. They do so by making threats aimed at persuading members of an opposing party that it is in their interest to adopt certain behaviors or refrain from specific actions, and that failure to do so will result in even worse outcomes.

In threatening to oppose Alexander-Murray, Schumer is signaling to Republicans concerned about repealing the individual mandate that voting for a tax reform bill containing such a provision will roil the insurance markets. Schumer’s goal is to deter enough Republicans from supporting the tax bill so that it is defeated. And if enough Republicans believe him, he could succeed.

Notwithstanding Schumer’s threats, to include an individual mandate repeal in the tax bill will confront Republicans with additional challenges once the legislation makes it to the Senate floor. At that point, any senator may offer an amendment to strike the mandate provision in the underlying bill and to offset the cost of doing so by raising the top income tax rate for millionaires (or billionaires). By forcing votes on amendments like this, Democrats can frame Republican efforts to reform the tax code as an out-of-touch party taking away healthcare from millions of people to pay for tax cuts for the wealthy. That the Republicans’ messaging in the tax debate thus far has focused on fairness and relief for lower- and middle-income Americans suggests they are especially sensitive to this attack.

Senate Republicans may still prevail in the end. But it is going to take some high-stakes brinksmanship to do so given their decision to drop Obamacare into the tax debate.

Image by Pixelbliss


Featured Publications