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Commentary

The $35 Billion Windfall from Delaying Obamacare’s Individual Mandate by One Year Could Restore National Institutes of Health Funding for a Decade


     
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To recap the events that led to the so-called “government shutdown”:

Beltway wisdom held that if the House Republican majority had passed a “clean” Continuing Resolution (CR) for the period October 1 through December 15, which would have funded the government at the current levels, Senate Majority Leader Harry Reid would have immediately passed it through the Senate and President Obama would have signed it.

Instead, the House Republican majority voted to defund all of Obamacare via the CR. Senator Reid promised to strip the anti-Obamacare resolution out. This was followed by Senator Ted Cruz’s ultimately unsuccessful filibuster. The House followed up with a CR which would have delayed all of Obamacare by one year and fully repealing the medical-device excise tax, which the Senate immediately rejected. In its third attempt, the House passed a CR which would delay only Obamacare’s individual mandate to buy health insurance by one year, and would force Congressional staff to buy health insurance on Obamacare exchanges without extra subsidies unavailable to ordinary Americans.

Having already conceded significant ground on Obamacare, the House figured that the Senate would be ready to negotiate. Speaker Boehner appointed members of a conference committee (which includes both House and Senate members). However, Senator Reid decided to abandon the legislative process, leading to the so-called government shutdown and a war of words waged over the airwaves.

Democratic Senators’ unwillingness to delay the individual mandate for a year is remarkable. The public understands that the mandate gives the government the power to fine citizens (without trial) for not purchasing government-approved health insurance. The mandate is very unpopular. A poll conducted by Gallup during the final phase of the litigation which led to the Supreme Court’s 2012 decision upholding most of Obamacare found that 72 percent of respondents—and 56 percent of Democrats—believed that the mandate is unconstitutional.

Even better: Delaying the mandate by just one year would reduce the federal deficit by over $35 billion, according to the Congressional Budget Office (CBO). Freed from fear of the individual mandate, Americans would be less likely to buy expensive health insurance on the Obamacare exchanges (which have suffered embarrassing glitches during their first week of operation). This would stop the hemorrhaging of about $28 billion of subsidies through the exchanges. Further, because Americans would keep more of their wages as taxable income, income and payroll tax receipts would increase by about $8 billion.

If more Americans appreciated this fiscal windfall, the mandate would surely become even more unpopular. Although many Americans would like to reduce the deficit, others might prefer to spend the revenue on other government activities. If House Republicans were willing to pass a new version of the CR that spent some of this revenue, it would surely increase the odds of passage in the Senate. Extrapolating from a July 2012 analysis of Obamacare by CBO, here are options for a revenue neutral delay of the individual mandate by one year:

  • Restore Obamacare’s cuts to traditional (fee-for-service) Medicare for two years—2014 and 2015;

  • Restore Obamacare’s cuts to Medicare Advantage for two and three quarter years—until about September 2016;

  • Delay Obamacare’s increase in the Medicare payroll tax by two years—2014 and 2015;

  • Delay Obamacare’s taxes on medical devices, prescription drugs, and health insurance by about two and a half years—until about July 2016; or

  • Delay Obamacare’s taxes on so-called “Cadillac” health plans by about six and one quarter years—until about April 2020.

And these are only Obamacare benefits. There is also the opportunity to ease some of the spending cuts enacted via the Budget Control Act of 2011 (as amended by the American Taxpayer Relief Act of 2012), better known as the “sequester”. According to the President’s Office of Management and Budget (OMB), the sequester will cut discretionary defense spending by $54 billion and discretionary non-defense spending by $34 billion in 2014. So, the windfall from delaying Obamacare’s individual mandate would allow Congress to relieve the sequester’s entire impact on discretionary non-defense spending, or almost two thirds of the defense cuts, for one year.

Of course, not every Republican Congressman who voted to delay Obamacare’s individual mandate will want to restore funding to every discretionary non-defense program to pre-sequester levels, even for one year. However, it is generally agreed (even by conservatives), that the sequester is a blunt tool. Much discretionary non-defense spending enjoys broad support as serving the public good.

For example, the National Institutes of Health (NIH) suffered a sequestration cut of $1.55 billion in 2013. The NIH is not just another government bureaucracy. It oversees the distribution of grants, awarded on a competitive basis, to scientists in universities and private non-profit research institutions across the nation. So, the windfall from delaying Obamacare’s individual mandate by one year could likely restore the NIH’s funding cuts for at least the remaining eight years of the sequester—through 2021—with some money left over.

Digging through the details of the sequester’s cuts would surely find many other such opportunities for spending at least some of the $35 billion responsibly, in ways agreeable to both Republican and Democratic legislators. There is really no excuse for keeping the government shut down instead of delaying Obamacare’s individual mandate by one year.


John R. Graham is Senior Fellow at The Independent Institute.






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