In Critical Test Of Tax Reform Bill, Senate Narrowly Approves Motion To Start Debate With 52-48 Vote

Update (5:55PM EST): After a full day of debating the GOP tax reform bill, the Senate has now approved a motion to...drum roll please...debate the GOP tax reform bill.  As we detailed below, this was the first big test for the GOP"s tax bill before the entire Senate and it narrowly passed with a vote of 52-48.  No Democrats voted in favor of the procedural motion to begin debate and all Republicans towed the party line.

Of course, the GOP"s efforts to repeal and replace Obamacare also managed to survive this very same procedural vote earlier this year only to be killed at the last minute by John McCain. Which begs the question of whether the current tax reform bill will finally hand the Trump administration its first legislative victory or if it will meet the same fate as the numerous healthcare failures that preceded it...we should know later this week when the Senate is expected to vote on the legislation.

* * *

Update (3:15PM EST): Senator Lisa Murkowski (R-AK), who was a key swing vote against several Obamacare repeal and replace bills earlier this year, has confirmed that she will vote in favor of the Senate"s tax bill.

Alaska"s Sen. @lisamurkowski will vote YES on the GOP tax bill, her office tells me.

— Garrett Haake (@GarrettHaake) November 29, 2017

Meanwhile, an earlier holdout on the procedural vote expected to be held within the next couple of hours, Senator Steve Daines (R-MT), has just confirmed that he"s now a "yes"...at least for the motion to proceed to debate.

[1/2] There has been some good progress for Main Street businesses in the tax cut bill. I was able to secure more than 60 billion in tax cuts for Main Street businesses. These Main Street businesses will be able to provide more jobs and higher wages in Montana and across the

— Steve Daines (@SteveDaines) November 29, 2017

[2/2] country. I"ve seen enough progress to vote yes to move the debate forward.

— Steve Daines (@SteveDaines) November 29, 2017

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Update (2:45PM EST): Although no official time has been provided, according to The Hill, Senator Tom Tillis (R-NC), who presided over the Senate floor during lunch, said he expected a vote on the tax bill in the 4 - 5pm EST timeframe.

Meanwhile, Senator Susan Collins (R-ME) has just confirmed she will support the procedural vote for tax reform today but is still on the fence regarding her final support of the legislation.

*GOP SENATOR COLLINS SAYS SHE WILL BE A "YES" ON TAX BILL MOTION TO PROCEED

*SEN. COLLINS SAYS SHE"S NOT YET A `YES" ON FINAL VOTE ON TAXES

* * *

Just yesterday a 12-11 party-line vote in favor of the tax reform bill by the Senate budget committee allowed Mitch McConnell to breathe a temporary sigh of relief after earlier objections by GOP members left many wondering whether the bill would even make it out of committee. 

Now, the controversial legislation is set for its first key test before the entire Senate after McConnell just confirmed that a crucial procedural vote intended to allow debate on the bill has been scheduled for later this afternoon.

As expected, McConnell says the Senate will vote later today on the Motion to Proceed to the GOP tax reform bill.

— Frank Thorp V (@frankthorp) November 29, 2017

Of course, the bill will need at least 50 votes to pass, with Vice President Mike Pence breaking a potential tie; Republicans hold 52 seats in the chamber, and no Democrats are expected to support the bill.

As the Wall Street Journal notes, key, last-minute modifications to the bill that allow for tax increases in the event of deeper deficits managed to attract the support of several key Senators who had previously been on the fence.

One group of senators that were on the fence and now appear set to support the bill are lawmakers concerned about the federal deficit. Led by Sens. Bob Corker (R., Tenn.), James Lankford (R., Okla.) and Jeff Flake (R., Ariz.), the group has been working on a plan to trigger automatic tax increases if the tax cuts lead to deeper deficits. By Wednesday, the deficit hawks sounded optimistic and said the details of a deal were closer to being worked out.

 

New details about the design of the fallback plan could mitigate some concerns. Republicans briefed on the plan said that it could be designed in a way to keep the backup plan from activating in the event of an economic recession. For it to work, the government would have to distinguish between a slowdown in tax revenue caused by tax cuts and a slowdown that is a normal feature of the economic cycle.

 

“We’re writing in a protection from recession so that way if there is a recession, the trigger turns off,” Mr. Lankford said on CBS. “The second part of that is if we do this large tax cut and we broaden the base of what’s happening economically, we better not have a recession at that point. This should actually charge up the economy.”

Meanwhile, Trump seemed confident yesterday after describing a GOP meeting on the legislation as "somewhat of a lovefest."

Trump calls today"s meeting with Republican senators "very special" and "somewhat of a lovefest" pic.twitter.com/QMc5kzBkz1

— Aaron Rupar (@atrupar) November 28, 2017

Of course, not all Republicans are onboard with the "lovefest" just yet at Senator Steve Daines (R-MT) still has some reservations over the treatment of pass-through income and Senators Mike Lee (R-UT) and Marco Rubio (R-FL) would like a slightly higher corporate tax rate to help fund a larger child tax credit for low-income families.

Still, not every Republican is ready to vote yes. Sen. Steve Daines (R., Mont.), who is concerned about the treatment of partnerships and other “pass-through” entities whose earnings pass through to individual owners’ tax forms, said that he wasn’t quite ready to cast a vote to allow the tax debate to begin.

 

Separately, Republicans were planning to try to make more changes to the tax bill by offering amendments later this week.

 

Sens. Mike Lee (R., Utah) and Marco Rubio (R., Fla.) are proposing an amendment to the tax bill that would increase the child tax credit for low-income families and pay for it by setting the corporate tax rate at 22%, instead of 20%.

 

That amendment would make the child tax credit fully refundable against payroll taxes and index the tax credit to inflation. Refundable tax credits go to households that don’t pay income taxes.

Passage of this key procedural vote today could setup the Senate to pass whatever modified version of the bill comes out of debate by Thursday or Friday of this week.

We will provide updates on this crucial procedural vote as they develop throughout the day.

Goldman Still Sees 65% Chance Of Tax Reform Passing; Expects Senate To Make These Changes...

After a wave of GOP defections in recent days and waffling on timing, Goldman"s economics team apparently still sees a 65% chance of a tax reform bill being enacted by "early 2018," but warns that the final bill may look nothing like the one recently proposed by the House.

As we pointed out yesterday (see: The Republican Tax Plan Will Crush These Housing Markets), Goldman fully expects the Washington D.C. swamp, led by realtors and homebuilders in this case, to attack various components of the House"s bill, including efforts to slash the mortgage deduction cap, but don"t think those efforts will be enough to tank tax reform altogether.

Political opposition to the bill seems likely to result in changes to the bill, particularly in the Senate, but it is less likely to block enactment of a tax bill altogether. The National Association of Realtors (NAR), National Association of Home Builders (NAHB), National Federation of Independent Businesses (NFIB), and anti-tax groups such as the Club for Growth have opposed the current House proposal for various reasons.

 

That said, we believe this is more likely to result in changes to the bill in the Senate rather than a failure to pass a tax bill at all.

 

These changes—for example, raising the proposed principal cap on mortgage interest deductibility and potentially making the treatment of pass-through income more generous than the initial House proposal—could crowd out other priorities, but don’t seem likely to block passage entirely. There is also a more fundamental political motivation, which is that many congressional Republicans would like to enact at least one piece of major legislation prior to the 2018 midterm election.

So, what does Goldman see changing in the Senate bill?  Here"s a recap:

Mortgage Deduction: We expect the Senate to be more generous on mortgage interest than the House’s proposed $500k cap on principal on which interest can be deducted. This might involve an initial proposal to set the principal cap at $750k, or possibly keeping the deduction as it is today (principal is deductible on mortgage principal of $1 million and home equity debt of $100k). A $750k cap might raise about one-quarter of the roughly $300bn over 10 years the $500k limitation would raise.

 

SALT: By contrast, we expect the Senate to be less generous on state and local tax deductions, potentially proposing to eliminate all state and local tax deductibility, whereas the House has proposed to allow up to $10k in property taxes to be deducted (no state/local income taxes would be deductible).

 

Estate tax repeal: The House proposal would double the amount exempted from the estate tax for the next five years, and then repeal the tax altogether after 2023. We do not expect estate tax repeal to have adequate support in the Senate, which might free up a bit less than $100bn (compared with the House bill) for other purposes.

 

The corporate tax rate: The Senate’s version of tax reform legislation looks likely to propose a 20% corporate tax rate, but we continue to believe it is likely this will be phased in rather than taking effect immediately in 2018. Our expectation is that the final House-Senate compromise will phase in the corporate rate reduction because of fiscal constraints; we also believe there is a good chance the rate will be higher than 20% and that it will potentially end up around 25%.

 

Interest deductibility: The House has proposed limiting corporate interest deductibility to 30% of EBITDA. It is unclear what approach the Senate will take on interest deductibility, but some limitation looks likely to be proposed, in our view. One alternative that has been discussed in the past is to limit the deduction to a share of overall interest expense (e.g., 70% or 80% of interest could be deducted). This would have the advantage of reducing the disruption to the most highly levered firms, and might also potentially allow for grandfathering of existing debt.

 

Base-erosion measures: The House proposal has a few measures aimed at preventing the shifting of corporate profits from the US to other lower-tax countries. One is a 10% minimum tax on foreign earnings (more precisely, 50% of foreign profits above a normal return on capital would be taxed as US income at the 20% corporate rate, for an effective rate of up to 10%). A second measure would impose a 20% excise tax on related-party cross-border transactions (discussed below). We expect the Senate to include a measure aimed at preventing base-erosion in the Senate bill as well, potentially including the foreign minimum tax, but expect the Senate to take a different approach than the proposed 20% excise tax, which has already changed in the House in any case.

Meanwhile, rumors have surfaced of late that suggest the Trump administration delayed an executive order repealing Obamacare"s individual mandate on hopes that it could be wrapped into the Senate"s tax reform bill...Goldman is skeptical...

Probably not, but it looks like it could be included in the House bill before it passes. There are two reasons this could be an attractive option. First, many Republican voters see ACA repeal to be at least as high a priority as tax reform, so combining the issues would allow Republican leaders to take action on aspects of both. Second, mandate repeal has been estimated in the past to reduce the deficit by more than $300bn over ten years because it would reduce enrollment in subsidized health insurance. This would allow tax writers to fill the hole that has been created by scaling back other revenue raisers already, and the further scaling back that is likely to occur as the process moves forward. However, there is an even stronger argument against including mandate repeal, which is simply that repeal of the individual and employer mandate—so-called “skinny repeal”—failed to pass the Senate over the summer and including it in tax reform could simply sink both efforts. So if it is included in an early version of tax reform, repeal still seems likely to be dropped before tax reform becomes law.

Of course, the much bigger issue is whether the Senate will be able to overcome a very narrow Republican majority while passing a bill that complies with "Reconciliation Rules" and the "Byrd Rule."

Yes, this is one of the reasons we expect the bill to change. “Reconciliation” bills need only 51 votes to pass the Senate if they remain within fiscal targets in the budget resolution and do not violate any existing Senate rules. A violation takes 60 votes (and therefore Democratic support) to overcome. The recent budget resolution allows for a tax cut of up to $1.5 trillion over ten years. After recent changes to the bill in the House, the bill is now estimated to increase the deficit by $1.57 trillion over ten years. A second procedural obstacle is the Senate’s “Byrd Rule”, which prohibits reconciliation legislation from raising the deficit after ten years. The House provisions are mostly permanent, which would violate the Byrd Rule. This leaves the Senate with two options: offset the cost of tax relief with base-broadening or other measures after ten years, or make the tax relief temporary. We expect the Senate bill to do some of each by partially offsetting tax reductions and then allowing whatever has not been offset to expire. This means that the more structural elements of the bill would likely be permanent, such as the limitation on individual itemized deductions and the shift to a territorial tax system for foreign corporate income, while at least some of the tax relief, including individual and corporate rate reductions, would expire after ten years.

So what say you?  Will tax reform mark the Trump administration"s first major legislative victory or will John McCain spoil the party once again?

Trump Drafting Executive Order To Kill Obamacare"s Individual Mandate, Report

After having previously cut so-called "cost reduction subsidies" (see: Trump To Scrap Crucial Obamacare Insurer Subsidy) and the marketing budget for Obamacare, Trump is now reportedly ready to also repeal the legislation"s controversial "individual mandate" which taxes people who choose to forego health insurance.

According to the Washington Examiner an executive order has already been drafted to scrap the mandate but has not yet been executed only due to ongoing GOP debates over whether or not to include the repeal in the pending tax bill.

The Trump administration has prepared an executive order that would unravel Obamacare"s individual mandate, but has put it on hold to see whether it might be included in the Republican tax bill instead, a GOP senator told the Washington Examiner.

 

According to the senator, an executive order is sitting with the Office of Management and Budget waiting for approval. President Trump decided to delay the executive order after Sen. Tom Cotton, R-Ark., pushed for the inclusion of the individual mandate repeal in the tax bill, and has been supportive of its inclusion in statements he has made on Twitter.

Of course, including the individual mandate repeal in the tax legislation is intended create billions in budget savings and offset lower tax receipts but it could come with the unfortunate side effect of alienating potential mainstream GOP votes in the Senate who refused to support the Obamacare repeal efforts earlier this year.

Including repeal of the individual mandate in the tax bill instead of through executive order would create billions in budget savings that Republicans need to pay for tax cuts. According to a Congressional Budget Office report published in December 2016, repeal of the individual mandate would save $416 billion over a decade, since it would mean fewer subsidy payments to people who sign up. A new CBO report is expected Monday.

 

The repeal is not currently in the tax bill, known as the Tax Cuts and Jobs Act, but House Speaker Paul Ryan said this weekend that it was on the negotiation table among House Republicans.

 

"We have an active conversation with our members on a whole host of ideas on things to add to this bill and that"s one of the things being discussed," he said.

 

The senator who spoke to the Washington Examiner, who asked to remain anonymous, thinks colleagues could embrace repeal in the tax bill, because the revenue generated "pays for so many tax cuts."

According to the Washington Examiner, Trump cannot repeal the individual mandate through executive order, but he can broaden "hardship exemptions," which under Obamacare are left to the discretion of the administration. The exemptions allow customers to have ways to get out of paying the fine for not having coverage, which is $695 per adult or 2.5 percent of income, whichever is higher.

The Obama administration created hardship exemptions for a range of situations, including if someone filed for bankruptcy, experienced a flood, death of a family member, domestic violence or a shut-off notice from a utility company.

Of course, it"s only a matter of time until Nancy Pelosi and/or Chuck Schumer take a stage somewhere to tell us precisely how many people will die as a result of Republicans even talking about an "individual mandate" repeal.

Trump To Scrap Crucial Obamacare Insurer Subsidy

Just hours after signing an executive order that implicitly begins unwinding ObamaCare, Politco reports, citing two people familiar with the matter, that President Trump plans to cut off critical subsidy payments to insurers selling Obamacare coverage.

Earlier today, Trump signed an executive order expanding access to more loosely regulated insurance options with low premiums, a move that could undermine the ACA insurance markets.

“We’ve been hearing about the disaster of Obamacare for so long,” Trump said in signing the order at a White House ceremony. “For a long time, I’ve been hearing repeal, replace, repeal, replace.”

He then said that the order is "starting that process" to repeal ObamaCare.

It will be the "first steps to providing millions of Americans with ObamaCare relief."

And now, as Politico reports, the process appears to accelerating as Trump"s decision to end the payments, estimated at $7 billion this year, marks the president"s most aggressive move yet to dismantle Obamacare after months of failed GOP repeal efforts on Capitol Hill.

As Reuters notes, Trump has repeatedly threatened to stop the payments, which are made directly to insurance companies to help cover out-of-pocket medical expenses for low-income Americans enrolled in individual healthcare plans under Obamacare.

The move is likely to draw lawsuits and may put pressure on Congress to appropriate funding for the subsidies.

This latest move is likely to throw healthcare markets into chaos, and will infuriate Democrats - effectively closing the "Chuck and Nancy" channel of communications - leaving a deal to avert government shutdown on or after Dec 8th (when the currenct extension deal runs out) increasingly doubtful.

Trump Signs Executive Order To Begin Unwinding Obamacare

Having failed to repeal (or replace) Obamacare in the Congress on three separate occasions, on Thursday morning Trump took matters into his own hands, when as previewed last night, the President signed an executive order to begin the process of unwinding Obamacare, paving the way for sweeping changes to health-insurance regulations that would allow an expansion of less-comprehensive health plans.

“We’ve been hearing about the disaster of Obamacare for so long,” Trump said in signing the order at a White House ceremony. “For a long time, I’ve been hearing repeal, replace, repeal, replace.”

He then said that the order is "starting that process" to repeal ObamaCare. It will be the "first steps to providing millions of Americans with ObamaCare relief."

JUST IN: Pres. Trump signs health care executive order, taking his first steps to fulfill vow to dismantle Obamacare https://t.co/QczMLFcWHH pic.twitter.com/UwLbNAVHPA

— CNN International (@cnni) October 12, 2017

The order will direct federal agencies to take actions aimed at providing lower-cost options and fostering competition in the individual insurance markets, according to the Wall Street Journal. The specific steps included in the order will represent only the first moves in his White House’s effort to strike parts of the law, the officials said adding that the order is just the beginning of the administration’s actions related to the health law. Furthermore, it will be months, rather than weeks, for even the most simple changes in the executive order to take effect, and the order leaves key details to the Labor Department, in particular, to determine after a formal rule-making process, including the solicitation of public comment.

While Trump’s order seeks to expand the ability of small businesses and other groups to band together to buy health insurance through what are known as association health plans (AHPs), and also lifts limits on short-term health insurance plans, in some ways the order"s impact remains a mystery as the full extent of the effects will not be immediately clear. The executive order largely does not make changes itself; rather it directs agencies to issue new regulations or guidance. Those new rules will go through a notice and comment period that could take months, officials said.

“The policies outlined in the executive order are the beginning of the actions the administration will take to provide relief to people harmed by Obamacare,” said Andrew Bremberg, director of the administration’s domestic policy council, on a call with reporters earlier Thursday. “You should expect additional actions coming from the administration in months to come.”

Critics however warned that the order could undermine the stability of ObamaCare markets by opening up skimpier, cheaper plans that would divert healthy people away from ObamaCare plans. They also warn that the policies outlined in the order will end up pulling healthier people out of Obamacare’s existing markets, which have strict requirements on what services have to be covered, such as maternity or mental health coverage. The result would be fewer people in the Affordable Care Act’s markets, and the ones who remained could be sicker - driving up premiums, and forcing more people to look elsewhere for coverage.

Democrats warn that the order is part of Trump’s larger plan to “sabotage” the health law and accomplish on his own what Congress could not; democrats have already been crying foul about administration cutbacks to outreach about the coming ObamaCare enrollment period, which begins Nov. 1, including a 90 percent cut to the advertising budget.

"Having failed to repeal the law in Congress, the president is sabotaging the system, using a wrecking ball to singlehandedly rip apart our health care system," Senate Democratic Leader Charles Schumer (N.Y.) said in a statement. "If the system deteriorates, make no mistake about it, the blame will fall squarely on the president"s back," he added.

Which, of course, is convenient for Obama"s signature legacy law, which was already sending premiums soaring over the past few years: now that Trump is doing what he can to undo Obamacare, he will become the scapegoat for everything that was wrong with the law in the first place. The bottom line is simple: if premiums continue rising - which they likely will - it will be Trump"s fault now.

By boosting alternative insurance arrangements that would be exempt from some key ACA rules, the change would provide more options for consumers. But health-insurance experts say it could raise costs for sicker people by drawing healthier, younger consumers to these alternative plans, which could be less expensive and offer fewer benefits.

“It would essentially create a parallel regulatory structure within the individual and small group markets that is freed from the various consumer protections established,” said Spencer Perlman, a policy analyst with Veda Partners, a Bethesda, Maryland-based advisory firm. “The end result could be a death spiral for ACA-compliant plans.”

Which, if the Democrats are right, is precisely what Trump hopes to accomplish.

No matter what the final outcome of Trump"s EO, one thing is clear: at least 12.7 million taxpayers will be happy with the outcome. As Bloomberg reports, according to the Internal Revenue Service, 12.7 million taxpayers claimed a health-care coverage exemption on their tax forms, some because they couldn’t find an affordable plan. Condeluci said people are sitting on the sidelines because the individual market is too costly.

“Now, there might be an option for them,” he said.

Of course, another 12 or so million will be less than excited: about 83% of the 12.2 million people in the Obamacare marketplace receive subsidies, i.e., premium tax credits, to help cover the cost of insurance premiums, according to the Centers for Medicare and Medicaid Services. For those who don’t get subsidies, the coverage can be expensive. The average monthly premium for a family of four with a $60,000 annual income was $1,090, or $13,080 a year for a mid-level “silver” plan, according to a 2016 report from the U.S. Department of Health and Human Services.

Angry Rand Paul Strikes Back: "I Won't Be Bribed Or Bullied" On Obamacare Repeal Bill

Throughout the week President Trump has taken repeated shots at Senator Rand Paul for his continued resistance to the so-called Graham-Cassidy Obamacare repeal bill.  Among other things, Trump defined Paul as a "negative force when it comes to fixing healthcare" and said that he would forever by remembered as "the Republican who saved ObamaCare."

"Rand Paul is a friend of mine but he is such a negative force when it comes to fixing healthcare. Graham-Cassidy Bill is GREAT! Ends Ocare!"

"Rand Paul, or whoever votes against Hcare Bill, will forever (future political campaigns) be known as "the Republican who saved ObamaCare.""

Rand Paul is a friend of mine but he is such a negative force when it comes to fixing healthcare. Graham-Cassidy Bill is GREAT! Ends Ocare!

— Donald J. Trump (@realDonaldTrump) September 20, 2017

Rand Paul, or whoever votes against Hcare Bill, will forever (future political campaigns) be known as "the Republican who saved ObamaCare."

— Donald J. Trump (@realDonaldTrump) September 22, 2017

But it seems as though Trump"s latest attack this morning struck a nerve with Senator Paul as he has fired back with a tweet storm of his own saying that it"s disingenuous to call "a bill that KEEPS most of Obamacare" a "repeal" bill before concluding that he will not be "bribed or bullied" by the President"s twitter feed.

"No one is more opposed to Obamacare than I am, and I"ve voted multiple times for repeal.  The current bill isn"t repeal."

"I won"t vote for Obamacare Lite that keeps 90% of the taxes & spending just so some people can claim credit for something that didn"t happen."

"Calling a bill that KEEPS most of Obamacare "repeal" doesn"t make it true. That"s what the swamp does. I won"t be bribed or bullied."

No one is more opposed to Obamacare than I am, and I"ve voted multiple times for repeal. The current bill isn"t repeal.

— Senator Rand Paul (@RandPaul) September 22, 2017

Calling a bill that KEEPS most of Obamacare "repeal" doesn"t make it true. That"s what the swamp does. I won"t be bribed or bullied.

— Senator Rand Paul (@RandPaul) September 22, 2017

Of course, while the Graham-Cassidy bill continues to flood headlines, it was all but killed earlier this afternoon when Senator John McCain announced that he "cannot in good conscience vote for Graham-Cassidy."

I cannot in good conscience vote for Graham-Cassidy. A bill impacting so many lives deserves a bipartisan approach. https://t.co/2sDjhw6Era pic.twitter.com/30OWezQpLg

— John McCain (@SenJohnMcCain) September 22, 2017

Meanwhile, with Lisa Murkowski (R-AK), Susan Collins (R-ME) and Mike Lee (R-UT), among others, still saying they"re on the fence, The Hill pointed out that Senators Graham and Cassidy have gone "into overdrive" to design "special accommodations" to win over holdouts.

Graham told a meeting of conservative activists last week that special accommodations would have to be made in the bill for Alaska to win over Murkowski. The senator asked the groups to understand, and to not make a stink if concessions were made.

The Graham-Cassidy proposal would convert ObamaCare’s subsidies and funds for Medicaid expansion into block grants that would be given to states to design their own programs.

Right now it looks like an uphill battle to change Murkowski’s mind.

“I’d say the chances are less than 30 percent. Alaska doesn’t do very well in this bill. Her governor is lukewarm on it and her insurance commissioner is not for it,” one Senate GOP aide added.

Graham on Wednesday downplayed the notion that Alaska would fare better than other states in the bill but nevertheless acknowledged that something would have to be done to accommodate the state’s high costs.

“What we’re going to do is not deny Alaska the uniqueness of Alaska, but that’s it,” he said, according to The Washington Post.

So, while Lindsey Graham seems to still be optimistic...

I’m excited about solutions we have found in Graham-Cassidy-Heller-Johnson. We press on.

— Lindsey Graham (@LindseyGrahamSC) September 22, 2017

...all signs indicate that "Obamacare Repeal 3.0" has once again been nothing but a colossal waste of time.

There's Good News And Bad News For Obamacare Buyers In Iowa

The "good news" is that if you"re an Obamacare buyer anywhere in Iowa there is still one provider willing to sell you healthcare insurance, which wasn"t the case just a few weeks back when it looked like large areas of the state would have no providers at all.  The bad news is that your rates are going up 57% so you"re probably not going to be able to afford insurance anyway.

As the Des Moines Daily Register points out today, Medica is the only healthcare insurance provider still willing to offer Obamacare plans in the state of Iowa and they"re hiking rates by 57% in 2018 just to make it economically feasible.  Of course, Medica was also very clear to point out that it"s all Trump"s fault.

Iowans who buy their own health insurance through the Affordable Care Act exchange would see their rates increase nearly 57 percent next year under a revised rate proposed Wednesday.

The proposal is 13 percentage points higher than previously was estimated by Medica, the one remaining carrier selling individual policies in Iowa next year.

Medica attributed the additional increase to uncertainties over federal health care subsidies, the insurer said in a release.

“We remain hopeful the federal government will fund the cost-sharing reductions, but we are working with the Iowa Insurance Division to help consumers understand the implications of lack of this funding,” Geoff Bartsh, Medica vice president of individual and family business, said in a statement. “We regret the disruption this creates for consumers.”

Perhaps Medica didn"t notice but the Trump administration hasn"t even decided to cut federal subsidies yet...maybe we can all agree it"s just a little disingenuous to be blaming something that hasn"t even happened yet?

But, if federal subsidies are cut, even the CBO recently found doing so would cause a 20% increase in Obamacare premiums in 2018, no where near Medica"s 57% increase. Here are the highlights from the CBO report:

- The fraction of people living in areas with no insurers offering nongroup plans would be greater during the next two years and about the same starting in 2020;

- Gross premiums for silver plans offered through the marketplaces would be 20 percent higher in 2018 and 25 percent higher by 2020—boosting the amount of premium tax credits according to the statutory formula;

- Most people would pay net premiums (after accounting for premium tax credits) for nongroup insurance throughout the next decade that were similar to or less than what they would pay otherwise—although the share of people facing slight increases would be higher during the next two years;

- Federal deficits would increase by $6 billion in 2018, $21 billion in 2020, and $26 billion in 2026; and ? The number of people uninsured would be slightly higher in 2018 but slightly lower starting in 2020.

Meanwhile, Doug Ommen, Iowa"s insurance commissioner, pointed out the real reason Obamacare premiums are soaring in his state...healthy, young, working people who don"t qualify for subsidies simply can"t afford it and the result is a deteriorating risk pool that grows exponentially more expensive to insure with each passing year.

State Insurance Commissioner Doug Ommen said Wednesday that many middle-class Iowans will choose to forgo health insurance rather than pay the "extraordinarily high premiums."

"While those that are subsidized may not feel the full impact of this additional increase as their contribution is capped based on a percentage of their income," Ommen said, "those middle-class Iowans who do not receive federal subsidies and are paying the full premium cost out-of-pocket are forced to make very difficult choices."

Perhaps the smart thing for the Trump administration to do would be to leave the federal subsidies in place.  That way when Obamacare fails under it"s own weight there will be no ambiguity as to what caused it. 

Two Charts Prove Obamacare Is Not "Stabilizing" In 2018

As the Obamacare repeal and replace effort raged on in Congress over the past six months, several Democrats and even some of the original Obamacare architects stepped forward to argue that the crippling premium increases from 2014 through 2017 were just a 1x market adjustment and that everything would miraculously "stabilize" in 2018.

Well, according to data from the Kaiser Family Foundation, that prediction isn"t playing out exactly as expected.  Taking a look at 21 of the bigger healthcare markets in the United States, Kaiser found that premiums submitted so far for 2018 are increasing at an average rate of 17% YoY and ranging up to 49% in Wilmington. 

Now, we understand that the term "stabilizing" is somewhat subjective but we"re not sure that rates spiking at 10.5x prevailing inflation rates, on average, would reasonably fit anyone"s definition.

 

Meanwhile the 4-year rate increases from 2014 to 2018 are even more staggering...

 

And while Democrats continue to boast about overall Obamacare enrollments, the "off-exchange market" (i.e. people who make too much money to quality for subsidies and whose premiums are required to subsidize everyone else who does qualify) contracted by 2.1mm in 2016, or a 29% drop.  With those kind of declines, it"s only a matter of time until there are no more "rich" fools in the pool willing to continue subsidizing a broken system. More from the National Review:

Also, MFA published the same report in 2016, facilitating a year-over-year comparison. The on-exchange market fell from 12,681,874 to 12,216,003 individuals, a reduction of 465,871 or 4 percent. However, the off-exchange market fell from 7,520,939 to 5,361,451, a reduction of 2,159,488 or 29 percent. In other words, enrollment is steady among those who receive subsidies but declining dramatically among those who do not.

 

Much has been made of the question of whether the individual markets are in a “death spiral.” Given that the on-exchange market enrollment is relatively stable, there is clearly not a death spiral in the subsidized market. However, with a reduction in the unsubsidized market of 29 percent in just one year, that pattern certainly looks like one we would expect in a market spiraling down.

Of course, it"s all Trump"s fault now...

Why Obamacare Repeal Failed

Authored by Taylor Lewis via Mises Canada blog,

"Farewell the plumed troop and the big wars

That make ambition virtue! O, farewell!” – Othello

Republicans lost, big league. On the one solid promise they’ve repeated ad nauseam for seven years and running, the party of Reagan came up short.

The Affordable Care Act, otherwise known as Obamacare, is here to stay. Congressional Republicans, despite a million vows to the contrary, failed to repeal it. Disagreement within the ranks proved too much; members couldn’t find a way to reconcile their rhetoric with practice.

Ironically enough, the man who gave a brief flicker of hope to Obamacare opponents was the same who snuffed it out: Senator John McCain.

Recently diagnosed with glioblastoma, McCain returned to Washington in time to vote for the motion to proceed with debate on a possible repeal package. In the wee hours of Friday morning, he cast the deciding “nay” vote on what was marketed as “skinny repeal,” an amendment to abolish some of the worst parts of Obamacare, including the individual mandate.

Just like that, McCain went from Senate savior to Judas Iscariot. In a press statement, the Arizona senator expressed concern that, despite Speaker of the House Paul Ryan’s assurances, the amendment would be immediately passed by the House and sent to President Trump’s desk. McCain was far from the only senator to voice reserve over this prospect.

McCain’s objection gets to the absurdity of the whole repeal effort: Republicans, failing to pass out an outright Obamacare repeal, were willing to pass a bill they openly hoped would not become law, but would only go to conference with the House and emerge as new legislation entirely.

The McCain gambit demonstrated just how out of sync the Republican strategy on reforming health care is. It was so bad that Politico copy-editors wrote the headline “Senate Republicans hope their own Obamacare repeal won’t become law” and weren’t inaccurate. The desperation to pass something, anything, is lawmaking at its most juvenile.

As one Twitter observer put it, “McCain voted NO so other GOP Sens who shared his view could vote YES last night to let them save face w/conservative base voters.” I can’t think of a more apt description.

The Republicans’ failure of vision and action leaves Obamacare the little law that could. Through multiple court challenges, numerous elections, and a totally united opposition government threatening to extirpate it for good, President Obama’s crowning achievement remains.

Now, every American who cast a GOP ballot in the hopes of de-socializing health care is shaking their head at this shameful acquiescence. Republicans deserve their scorn, but those casting blame are not entirely innocent. Culpability rests on both sides of the aisle: Voters should have never expected a clean and easy slicing away at an entitlement program. And, more so, GOP candidates should have never portrayed the effort as a cinch.

But even while entitlements may be a dependency-causing drug, Republicans still managed to squander what was a stars-aligned opportunity. Coming away from November with full control of Congress and the White House created an imperative to act. Premiums have steadily increased under Obamacare since its inception. The government-run exchanges are a mess, with insurers abandoning them faster than the Titanic. Iowa only has one insurer, Medica, operating on the state exchange. States like Arizona (McCain’s home state!) only have a few insurers. An analysis from the Kaiser Family Foundation finds that by the end of 2017, one third of U.S. counties will have only one insurer.

Price and availability statistics provide ample reason for reform. But Republicans were helped by something more: A prime example of the dangers of government-administered health care. The heart-wrenching case of little Charlie Gard made world headlines by putting the cruelty of Britain’s National Health Service on full display. Charlie was diagnosed with encephalomyopathic mitochondrial DNA depletion syndrome, which left him unable to breathe on his own while slowly destroying his organs. Gard’s parents wanted to seek experimental treatment in America, but the hospital refused to release their child.

Charlie was taken off life support the day of the failed Obamacare repeal vote, drawing his last breath shortly after. At the end, the hospital even denied the parents’ request to take Charlie home so he could live his last few moments away from the sterile ward walls.

While propriety says children shouldn’t be political props, the Gard story was impossible to escape. And even with its sad ending as a backdrop, Republicans still couldn’t muster the will to undo America’s largest entitlement program since Medicare.

Conservative commentators are at a loss to explain how Republicans could bungle such a huge opportunity. The answer, though, is easy, but it’s not an easy one to face for those who derive an income from drafting talking points.

Many of Obamacare’s main aspects were Republican-devised and first implemented by a Republican governor. As Matthew Walther writes, Obamacare is, at its heart, a “plan devised by the Heritage Foundation in the ’90s that is messy but not ipso facto unacceptable. The only problem is that it was passed by a guy with a D behind his name.”

Republicans were never going to repeal a Republican health care plan. For all their talk of free-markets, the last thing any GOP politicians will do is support an entirely unfettered marketplace in any service. Like it or not, Obamacare is a midway point between wholly private enterprise and a single-payer, government-run health care system.

Does this failure mean the Republican Party is finished? Surely, seven years of a failed promise will spell doom at the ballot box, right?

Hardly. A new Gallup poll shows that, for the first time ever, Obamacare has majority support from Americans. In a revealing New York Times dispatch from Doylestown, Pennsylvania, rural Trump-backers have come to terms with Obamacare. “As much as I was against it,” said one fiscally conservative voter, “at this point I’m against the repeal.” One restaurant owner commented, “I can’t even remember why I opposed it.”

Come 2018, it’s hard to see amnesia’s muddying effect dissipating.

Senate Releases Full Text Of "Skinny" Obamacare Repeal Bill, Vote Expected After Midnight

With the Senate healthcare vote expected sometime between midnight and 2am, moments ago the full text of the Senate "Skinny" bill which may or may not pass, has been released. Here is the summary version of what is hereby known as the "The Health Care Freedom Act":

• REPEAL THE INDIVIDUAL MANDATE — Obamacare"s individual mandate forced the American people to purchase insurance they frequently didn"t want, couldn"t afford or actually use. This plan permanently protects Americans from this onerous mandate.


• REPEAL THE EMPLOYER MANDATE — Obamacare"s employer mandate too often forced job creators to forgo hiring new workers or keep an employee"s hours low. This anti-jobs mandate is repealed for eight years, which provides employers a greater incentive to hire more employees.


• PROVIDE FLEXIBILITY TO STATES (1332 WAIVERS)— States can access additional flexibility to use waivers that exist in current law to provide more options for consumers to buy the health insurance they want. It also allows the Department of Health and Human Services to approve waivers faster.


• INCREASE HSA CONTRIBUTIONS — Increase contribution limits to tax-free Health Savings Accounts for three years to help pay for out-of-pocket health costs and expensive prescription medications.


• REPEAL THE MEDICAL DEVICE TAX — Both Democrats and Republicans have opposed this tax on medical innovation. The legislation repeals this tax for three years.


• FUND COMMUNITY HEALTH CENTERS — Prioritize health funding for Community Health Centers across the country.

The full bill also includes a provision for defunding Planned Parenthood, which is the reason for the community health center language.

As the NYT reports, after three days of debate, Republican leaders had little to show for it and were struggling to devise even a stripped-down plan on which at least 50 of the 52 Senate Republicans could agree. The Senate majority leader, Mitch McConnell of Kentucky, was doing whatever he could to secure votes and win Senate approval on Friday for a bill that would repeal at least a few provisions of the Affordable Care Act. That raised the spectacle of senators pressed by their leaders to vote on legislation that some of them despise, with a promise that a “yes” would not really be approval, just a vote to start House-Senate negotiations on something better.

Senators Lindsey Graham South Carolina, John McCain of Arizona and Ron Johnson of Wisconsin, all Republicans, simply demanded ironclad assurances from House leaders that the bill would not be enacted.

“I’m not going to vote for a bill that is terrible policy and horrible politics just because we have to get something done,” Mr. Graham said, calling the stripped-down bill a “disaster” and a “fraud” as a replacement for the health law.

Five GOP senators,  Sens. Lindsey Graham (S.C.), David Perdue (Ga.), Ron Johnson (Wis.), Mike Rounds (S.D.) and Ted Cruz (Texas), spoke with Ryan via phone in Sen. John Cornyn"s leadership office outside of the Senate floor. 

"Yes, he said, listen why would we want to own a bill that increases premiums and doesn"t fix ObamaCare — that"s all I wanted to hear from him," Graham told reporters when asked if Ryan guaranteed the House wouldn"t pass a paired down Senate repeal bill.

Pressed if he would vote "yes" on the Senate GOP healthcare bill after his conversation with Ryan, Graham said he would. Johnson added that "of course" the talk with Ryan was enough to assuage his concerns.  "We just wanted to hear it right from Paul. ... We got that assurance. He said we could tell you — this is going to go to conference," the conservative GOP senator said.

Johnson added that any bill that passes the Senate "will not pass the House. This will go to conference. ... That"s what we got." Johnson and Graham, as well as GOP Sens. Bill Cassidy (La.) and John McCain (Ariz.),  warned earlier Thursday that they could not support moving forward with a "skinny" repeal bill until they got a guarantee that the House would not leapfrog a conference with Senate and pass the bill.

Paul issued a statement saying the House was "willing" to go to conference on the healthcare bills, but that it was up to Senate Republicans to first show they could pass a bill. 

McCain told reporters while heading into the Senate chamber for a pair of votes that Ryan"s statement wasn"t sufficient. He then appeared to walk that back slightly, telling Bloomberg that he declined to say how he would vote, saying he wanted to talk to his state"s governor.

Earlier, Sen, Shelley Moore Capito told reporters while leaving the GOP caucus room that she "didn"t know how to interpret" Ryan"s statement.

Senate Majority Leader Mitch McConnell (R-Ky.) will need 50 of 52 GOP senators to support the "skinny" repeal proposal, which he unveiled on the Senate floor on Thursday night

Some further observations on the bill from Politico"s Burgess Everett (via Twitter):

• McConnell says the bill "restores freedom to Americans, that Obamacare took away."


• McConnell is selling the skinny bill as good policy and also as a path to conference.


• This bill was not designed for Collins and Murkowski, so GOP looking for everyone that voted to open debate to support the skinny bill.


• Murphy: "This is nuclear grade bonkers what is happening here"

Some more from NBC"s Frank Thorp (via Twitter):

• Sen Rounds on mtg with @SpeakerRyan: "He acknowledged that this particular bill was designed to get us to conference..."


• More Rounds: "(@SpeakerRyan) said we will bring it to conference. And we asked, can we say that publicly, and he said, yes."


• Sen Rounds: "(Speaker Ryan) has given us about as good of an assurance as you can get that he intends to send this to conference."


• The vote series including the vote on the "skinny repeal" bill is expected to happen around midnight tonight.

Having been written off earlier, it increasingly looks as if the bill may just have enough support to pass, with the tie-breaking vote from Mike Pence who is expected to be present for a potential vote later.

The full text of the pared-down "skinny bill" is below (link):

Can Republicans Actually Pull It Off: Senate GOP Consdering "Scaled-Down" Healthcare Bill

While ahead of today"s Senate healthcare vote it was nothing but noise and chaos, gradually things are crystallizing, and there is a small chance Senate Republicans may just be able to pull it off.

According to GOP aides quoted by The Hill, Senate Republicans are considering passing a dramatically scaled-down version of their ObamaCare repeal bill as a way to pass something and set up negotiations with the House. The "skinny bill" proposal is intended to be something all Republicans can agree on, allowing something to pass and setting up a conference committee with the House.

As The Hill adds, the scaled-down bill would likely just repeal ObamaCare"s individual and employer mandates and the medical device tax and represents a far narrower measure than the most recent Senate replacement bill, which also scaled down ObamaCare"s subsidies and cut Medicaid.

The consideration of the scaled down measure is a sign of how much trouble Senate Republicans are having coming to agreement on any more significant bill.

The scaled-down bill will likely be revealed after the initial two votes on both a repeal-only measure and the latest replacement bill, fail as expected. Republicans also will need to gather enough votes to start debate, and it is still unclear if they have those votes. Still, John Cornyn, the No. 2 Senate Republican, was optimistic when he floated a conference committee with the House on Monday evening. “I think if you want to get a result that may be a selling point."

And in a sign that things may be starting to move in Trump"s favor, ealier today Sen. Rand Paul said Tuesday that he will vote in favor of the Senate healthcare.  Paul tweeted that he will vote in favor of a motion to proceed to a debate on healthcare because Mitch McConnell told him the chamber would take up the 2015 ObamaCare repeal bill previously passed by Congress.

“If this is indeed the plan, I will vote to proceed and I will vote for any all measures that are clean repeal.”

This morning, @SenateMajLdr informed me that the plan for today is to take up the 2015 clean repeal bill as I"ve urged.

— Senator Rand Paul (@RandPaul) July 25, 2017

If this is indeed the plan, I will vote to proceed and I will vote for any all measures that are clean repeal.

— Senator Rand Paul (@RandPaul) July 25, 2017

As The Hill writes, Paul has pushed for a vote on the 2015 bill, which repeals large parts of ObamaCare"s requirements and regulations, instead of the GOP repeal-and-replace plan that Republicans have been working on this year. Even with Ryan"s approval it remains unclear if McConnell has the 50 votes he needs to proceed to debate.

In a major hurdle to the 2015 repeal bill, it would need 60 votes, and will likely fail because it won"t get the support of Democrats and some Republicans. However, the floated "skinny bill" just may be able to squeek through...

CBO Says McConnell Healthcare Bill Would Slash Deficits By $420 Billion, Leave 15 Million Uninsured

Another day, another CBO score for another version of the GOP"s healthcare bill. This time, the agency estimates that McConnell"s "Better Care Reconciliation Act" legislation would lower the federal budget deficit by $420 billion over the next 10 years by reducing spending for Medicaid and subsidies for nongroup health insurance.

As The CBO notes, those effects would be partially offset by the effects of provisions not directly related to health insurance coverage (mainly reductions in taxes), the repeal of penalties on employers that do not offer insurance and on people who do not purchase insurance, and spending to reduce premiums and for other purposes.

Compared with the June 26 cost estimate for a previous version of the legislation, this cost estimate shows savings over the next 10 years that are larger - as well as estimated effects on health insurance coverage and on premiums for health insurance that are similar. The current version of the legislation would result in greater deficit reduction mostly because it would retain certain taxes that the previous version of the legislation would have eliminated. The description of the legislation and of CBO and JCT’s methodology and results that appeared in the agencies’ previous estimate largely applies to this one as well.

Effects on the Federal Budget

CBO and JCT estimate that enacting this legislation would reduce federal deficits by $420 billion over the 2017–2026 period (see figure below). That reduction is the net result of a $903 billion decrease in direct spending partly offset by a $483 billion decrease in revenues.

However, the other side of the coin is that, according to CBO and JCT’s estimates, in 2018, 15 million more people would be uninsured under this legislation than under current law.

The increase in the number of uninsured people relative to the number under current law would reach 19 million in 2020 and 22 million in 2026. In 2026, an estimated 82 percent of all U.S. residents under age 65 would be insured, compared with 90 percent under current law.

Full Scoring below:

What The Senate's Healthcare Fiasco Means For Trump Policies: Goldman Explains

Now that Trump"s hope to replace Obamacare is dead indefinitely following last night"s mini rebellion in the Senate , and only the possibility of repeal remains although even that is not likely, pundits are asking what this means for Trump"s overall agenda, and whether it will accelerate or further delay (or block outright) the implementation of any other Trump proposal, chief among which is budget resolution, increasing the government debt ceiling and passing tax reform. Regarding the latter, the stakes are especially great because as Bank of America explained earlier, "there is a general consensus that without tax reform the GOP could lose their majority in the House."

Still, for a market that has gotten used to ignoring everything out of Washington, if not virtually all newsflow, the reaction will likely be delayed because as BMO"s Ian Lyngen writes, investors will likely “start looking at the issue more closely in the coming weeks, but don’t expect any visceral market response till the 11th hour from either Congress or the markets." Still, they warn that “the broader implications of this health-care failure may reverberate a bit more over time than markets may be currently assuming."

So while we wait for the market response, what happens next? Overnight Goldman"s chief political analyst Alec Phillips writes that while Congress may still pass a health bill, it just won"t be this one and notes that the "enactment of much more narrowly-focused health legislation is still possible this year, in light of problems facing the individual insurance market for 2018."

What is more interesting are Phillips" thoughts on the previously discussed GOP Budget which was released this morning, and about which he says that despite recent legislative setbacks, Goldman "continues to believe that a tax bill is more likely than not to become law in 2018, though there remain many unanswered questions."

Finally, the impact on debt ceiling negotiations, where as the CBO recently calculated the Treasury will run out of cash in mid-October. Here Goldman appears unduly optimistic, writing that "while there has been some discussion of a debt limit increase prior to the August congressional recess, we continue to believe an increase is much more likely to be approved in late September or very early October, potentially in combination with enactment of spending authority for FY2018, which will be necessary to avoid a partial shutdown of the federal government." On this topic, Bank of America released an interesting take on the upcoming negotiations, seen through the perspective of Game Theory, saying that "the risk is increasing that a Game of Chicken will be played out in Washington this September, with serious market consequences"  and warns that only a crisis "will bring about tax reform which in turn will be followed by a resumption of the Trump trades."

* * *

Here is Goldman"s full take, from Alec Phillips

The Fiscal Policy Outlook: Still Waiting

Healthcare: Congress May Pass a Health Bill, Just Not This One

Enactment of a broad health reform bill like the House-passed Affordable Health Care Act (AHCA) or the Better Care Reconciliation Act (BCRA) pending in the Senate looks unlikely this year, but some type of health legislation still looks possible before year end. Senate Majority Leader McConnell has announced a delay of this week’s planned procedural vote on the BCRA, as a result of Sen. McCain’s (R-Ariz.) expected absence. The delay was a setback but the effort faces bigger challenges; as it currently stands the bill is short at least four votes—Senators Collins (R-Maine) and Paul (R-Ky.) announced their opposition last week, and Senators Lee (R-Utah) and Moran (R-Kan.) announced their opposition late on July 17. Additional opposition looked likely once the Congressional Budget Office (CBO) released a revised estimate of the effects of the bill: Senators Flake (R- Ariz.) and Heller (R-Nev.) are expected to face potentially competitive elections in 2018 and had not committed to support it, while Sens. Capito (R-W.V.), Murkowski (R-Alaska), and Portman (R-Ohio) are also publicly undecided and represent states that expanded Medicaid under the ACA, which the BCRA would repeal.

That said, passage of some type of health legislation within the next several months is still possible, for three reasons: First, while the BCRA looks unlikely to pass the Senate in its current form, it is still possible that Senate Republicans could agree to a different approach. For example, legislation that preserves more of the existing subsidies (to address concerns among centrist Republicans) in return for increased state regulatory flexibility (to address conservative Republicans) might be able to win broader support. However, with limited time to develop a new approach, the probability of such a strategy coming together is fairly low.

Second, a fallback bill that stabilizes the individual insurance market for 2018, among other changes, might pass if a broad bill does not. For example, it is possible that such legislation could be added to the legislation Congress is likely to consider over the next few months to extend various expiring health programs, such as the Children’s Health Insurance Program (CHIP, which expires September 30), or as part of a broader fiscal deal around the deadlines this fall, discussed below.

Third, the political debate over ACA repeal is unlikely to end even if the current legislative effort fails. As discussed below, if the forthcoming budget resolution instructs congressional committees to cut spending and cut taxes, as looks likely, there may be an effort to revisit the cuts to Medicaid and repeal of some of the ACA taxes later this year or in early 2018 as part of the tax reform process. We are skeptical that such an effort would succeed, but it is at least possible.

The Budget Resolution: Looking for Tax Reform Clues

This week’s release of the House Republican budget resolution, expected Wednesday July 19, is likely to provide some clues regarding the shape of tax reform. The budget resolution is a non-binding outline of spending, revenue, and debt levels that guides congressional consideration of fiscal issues over the coming year. The budget resolution is typically of little interest to market participants, but it should be of greater interest this year because it sets the terms of the “reconciliation” process that Congress will use to consider tax reform. Specifically, tax legislation passed via reconciliation cannot increase the deficit by more than the amount the budget resolution calls for.

While no details have been released yet, we expect the House resolution to call for roughly “revenue neutral” reform, meaning no substantial effect on the budget deficit. However, “revenue neutrality” would be judged after accounting for two factors: dynamic scoring, which accounts for economic effects of fiscal legislation, and a “current policy” baseline, which excludes the cost of extending expiring tax provisions. Together these factors could make room for “revenue neutral” legislation that actually reduces revenues by several hundred billion dollars over ten years.

By contrast, we assume a net tax cut of $1 trillion over ten years. The White House has advocated reforms that would reduce revenues much more—the Tax Policy Center recently estimated the one-page proposal the White House released in April would reduce receipts by at least $3.5 trillion over ten years; some Senate Republicans in the Senate appear open to a smaller amount of deficit expansion.

Our expectation is that the eventual reconciliation instructions that Congress approves several weeks from now will be somewhat more generous than what House Republicans are likely to propose this week. Nevertheless, the fact that Republican leaders appear undecided on whether the tax bill should meaningfully reduce tax receipts suggests little chance that a multi-trillion dollar tax cut will be enacted and adds to our belief that the size of the eventual tax cut will be fairly modest, even if tax reform is not actually revenue neutral.

Tax Reform: Still More Questions than Answers

Despite the various legislative delays and setbacks, we continue to expect tax legislation to become law in early 2018. Over the next several weeks, the “big six” negotiators—House Speaker Ryan, Senate Majority Leader McConnell, House Ways and Means Committee Chairman Brady, Senate Finance Committee Chairman Hatch, Treasury Secretary Mnuchin and National Economic Council Director Cohn—hope to reach an agreement on a basic shared framework for tax reform which can be turned into a formal legislative proposal by September. Our expectation is that this process is likely to take somewhat longer, and that the formal release of a detailed tax proposal is more likely to occur in October, after the deadlines noted above have passed.

However, at this point, a number of basic questions remain unanswered. The most basic two questions are whether tax legislation will be revenue-neutral and whether the changes will be permanent. These issues are linked, since under congressional budget rules tax cuts passed through the budget reconciliation process cannot last beyond the budget estimate window, which has traditionally been ten years. House Republican leaders have been the most insistent on revenue-neutrality, while the White House’s position appears to be most open to an expansion of the deficit. As noted above, our expectation is that the tax bill will ultimately result in a modest net tax reduction of around $1 trillion over ten years. If so, this might involve permanent corporate reforms combined with a corporate rate reduction and personal tax cuts that expire after ten years.

Other aspects of the debate have become somewhat clearer. With little apparent support in the Senate or the White House, the border-adjusted tax (BAT) appears very unlikely to be discussed much further and is unlikely to be included in tax legislation, in our view. An outright repeal of interest deductibility also appears too controversial, though it is possible in our view that an incremental limitation on interest deductibility might be included. Without the revenue from repealing interest deductibility, it will be difficult to finance full expensing of business investment, but we expect that partial expensing (i.e., bonus depreciation) for equipment is likely to be included. The corporate tax rate is the hardest to predict, but our expectation continues to be that a rate in the mid- to high 20s is the most likely outcome, if lawmakers hope to make their corporate reforms revenue neutral (and permanent).

The Debt Limit: Probably a Late September Event

Treasury has asked Congress to lift the debt limit before the August recess, but has also indicated that it could continue to meet its obligations through at least early September if the limit is not raised sooner. We continue to project that the Treasury is likely to have sufficient borrowing capacity until the first days of October (i.e., October 2 or 3), but agree with the Treasury’s assessment that the cash balance could decline to an uncomfortably low level in early September, prior to the influx of corporate tax receipts around the September 15 tax filing deadline.

While there has been some discussion of passing a debt limit increase prior to the August recess, this seems fairly unlikely to us. In theory, congressional Republicans could address the debt limit in one of three ways. First, the debt limit could be coupled with spending cuts and passed via the reconciliation process using only Republican votes. However, this would require the budget resolution (noted above) to be finalized, a process which will probably take several more weeks.

Second, a debt ceiling hike could be added to a popular or must-pass measure; Senate Majority Leader McConnell has raised the possibility of attaching it to an upcoming bill to fund a veterans’ benefit program, for example. While it is possible that the strategy could succeed, most such bills are nevertheless likely to come with their own political complications (the veterans’ measure, for example, has some Democratic support in concept but there are disagreements over certain aspects). Third, a “clean” debt limit increase would probably have adequate support to pass, in light of likely Democratic support, but Republican leaders are unlikely to allow a bill with significant Republican opposition to pass until the deadline is much closer, i.e., September.

The most likely scenario, in our view, continues to be that the debt limit will be raised around the end of September or early October, potentially in a broader fiscal agreement that extends federal spending authority past the end of the fiscal year on September 30, and raises the debt limit.

Republican Healthcare Bill Dead After Two More Senators Defect

Senator Schumer has helpfully chimed in on the "Second Failure of Trumpcare"

Washington, D.C. - U.S. Senator Charles E. Schumer released the following statement regarding the second failure of Trumpcare:

"This second failure of Trumpcare is proof positive that the core of this bill is unworkable."

"Rather than repeating the same failed, partisan process yet again, Republicans should start from scratch and work with Democrats on a bill that lowers premiums, provides long term stability to the markets and improves our health care system."

*  *  *

With two Republican senators - Susan Collins of Maine, a moderate, and Rand Paul of Kentucky, a conservative - having said previously they would not support the Senator version of the GOP healthcare bill and would not be swayed - even on a procedural motion to take up the bill for debate - it meant Republicans in the Senate could afford to lose just one more vote (assuming John McCain does return in the near future). Moments ago they lost two, when first Sen. Mike Lee (Utah) and then Sen. Jerry Moran (Kansas) announced on Monday night they will not support taking up the current bill repealing and replacing ObamaCare, thereby blocking the legislation.

"This closed-door process has yielded the [bill], which fails to repeal the Affordable Care Act or address healthcare’s rising costs. For the same reasons I could not support the previous version of this bill, I cannot support this one," Moran said.

Moments earlier, Mike Lee (R-UT) did the same...

My colleague @JerryMoran and I will not support the MTP to this version of BCRA #HealthcareBill

— Mike Lee (@SenMikeLee) July 18, 2017

... and issued the following statement Monday regarding the Better Care Reconciliation Act:

“After conferring with trusted experts regarding the latest version of the Consumer Freedom Amendment, I have decided I cannot support the current version of the Better Care Reconciliation Act,” Sen. Lee said. “In addition to not repealing all of the Obamacare taxes, it doesn’t go far enough in lowering premiums for middle class families; nor does it create enough free space from the most costly Obamacare regulations.”

On Twitter, both Moran and Less said that "my colleague @JerryMoran/@SenMike Lee and I will not support the MTP to this version of BCRA."

My colleague @SenMikeLee and I will not support the MTP to this version of BCRA. #HealthcareBill

— Jerry Moran (@JerryMoran) July 18, 2017

The two defections mean that Sen. Majority Leader Mitch McConnell won"t have enough support to bring the bill to the floor, and that Obamacare "repeal and replace" is now - if only for the time being - officially dead. The good news: John McCain can come back to work now. 

Senate Republicans Reveal New "Obamacare-Lite" Healthcare Bill

In what could very well end up being just another exercise in futility, Senate Majority Leader Mitch McConnell has just released a new version of a healthcare plan which, among other things, incorporates demands from Senator Ted Cruz (R-TX) and Senator Mike Lee (R-UT) to allow insurers to sell low-cost, skimpier plans all in an effort to draw conservative support for the new bill.

Called the "Consumer Freedom Amendment," we highlighted the main points of the Cruz/Lee proposal last month:

The "Consumer Freedom Amendment" would leave existing ObamaCare plans on the individual market, while also allowing insurers to sell plans that don"t comply with requirements of the Affordable Care Act.

"What that does — it leaves existing plans on the market but it gives new options so that people can purchase far more affordable health insurance. It will enable a lot more people to be able to afford buying health insurance," Cruz told The Hill on Thursday afternoon.

Cruz"s amendment would allow insurers to continue offering plans that follow ObamaCare"s "Title One" requirements, including essential health benefits, which mandates 10 services insurers must cover with no cost-sharing.

But insurers could also sell skimpier, cheaper plans that don"t cover those 10 services or meet other ObamaCare requirements.

"If a health insurer offers a plan consistent with the Title One mandates, insurers can also sell in that same state any other plans that consumers desire," Cruz said.

Of course, with precious little votes to spare, McConnell"s new bill has plenty of handouts for moderate Republicans as well. The rewritten package would add $70 billion to the $112 billion McConnell originally sought that states could use to help insurers curb the growth of premiums and consumers" other out-of-pocket costs.  It also has $45 billion for states to combat the misuse of drugs like opioids. That"s a big boost from the $2 billion in the initial bill and an addition demanded by Republicans from states in the Midwest and Northeast that have been ravaged by the drugs.

As The Hill points out, the revised bill largely keeps the Medicaid sections the same, meaning that deeper cuts to the program will still begin in 2025, and the funds for ObamaCare’s expansion of Medicaid will still end in 2024.  The changes to Medicaid emerged as a top concern of moderates such as Senators Rob Portman (R-Ohio), Shelley Moore Capito (R-W.Va.) and Lisa Murkowski (R-Alaska).

The revised bill also restores some of the original Obamacare taxes on investment income and the payroll tax in an effort to help fund Medicare. Axios had more highlights:

An additional $70 billion to help states stabilize their markets and offset the costs of covering expensive patients — on top of more than $100 billion that was already there.

$45 billion to fight the opioid epidemic.

A provision allowing people to use tax-preferred health savings accounts to pay their premiums

Changes to the ACA that would let more consumers use tax subsidies to buy plans that only offer catastrophic coverage.

The bill would no longer repeal two of the ACA"s tax increases on wealthy families, and it won"t include a new tax break for health-care executives.

In other words, more provisions that simply make the bill look and feel an awful lot like Obamacare...a fact that Senator Rand Paul pointed out in an op-ed just yesterday in which he blasted McConnell"s new bill as more or less a capitulation by Republicans to simply "keep Obamacare."

I miss the old days, when Republicans stood for repealing Obamacare. Republicans across the country and every member of my caucus campaigned on repeal – often declaring they would tear out Obamacare “root and branch!”

What happened?

The Senate Obamacare bill does not repeal Obamacare. I want to repeat that so everyone realizes why I’ll vote “no” as it stands now:

The Senate Obamacare bill does not repeal Obamacare. Not even close.

Seems that McConnell is trying to "have his cake and eat it too" with efforts to appeal to both conservative and moderate elements of the Republican party. 

Will he be successful?  John Cornyn seems to think so:

US SENATOR CORNYN, NO. 2 REPUBLICAN, SAYS WILL HAVE ENOUGH SUPPORT TO PASS HEALTHCARE BILL BY THE TIME IT IS PUT TO A VOTE

Of course, it seems like we"ve heard that somewhere before...

Senate Majority Whip John Cornyn tells @marykbruce: "I expect to have the votes to get this done and yes we will vote this week."

— Mariam Khan (@MKhan47) June 27, 2017

The full text of the new bill can be read here:

Here Is The Full Text Of The Republican Healthcare Bill

Update 2:  Here is a live feed of Senators offering up their initial reactions:

Lindsey Graham is encouraged...

GRAHAM SAYS LIKELIHOOD OF GETTING 50 VOTES FOR HEALTHCARE BILL "IS GREATER TODAY THAN I THOUGHT YESTERDAY"

...while Chuck Schumer is not...

*SCHUMER: SENATE NEEDS MORE TIME THAN 10 HOURS TO DEBATE BILL

All very shocking.

Update 1:  Senate Republicans have just released their official 142-page healthcare bill.

Here are some initial takeaways:

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  Ends ACA mandates for individuals AND employers 

  
  


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  Funds the ACA"s cost-sharing subsidies through 2019 but then only provides tax credits for people with incomes up to 350% of the federal povery level

  
  


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  Tax cuts largely similar to those in the House bill. That includes repealing a 3.8% tax on investment income retroactively to January 2017 and delaying the repeal of a 0.9% payroll tax until 2023

  
  


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  Contributes $62 billion to a "State Innovation Fund"

  
  


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  Seeks funding for insurers through 2021

  
  


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  Allows "children" to stay on parental plans until the age of 26

  
  


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  Bill suspends "Cadillac Tax" on employer health plans through 2025

  
  

Medicaid:  The plan would roll back the Affordable Care Act’s Medicaid expansion more gradually than the House version would, but would ultimately make deeper cuts to the program. While states" funding from Washington would be capped for the first time in the history of the Medicaid program, states would be given a choice of the formula used -- "block grants" or "per capita caps" -- to curb it under the bill.

Planned Parenthood: The bill would strip federal funding from Planned Parenthood Federation of America for one year. It also prohibits tax credits from being used to purchase plans that offer abortion coverage.

Senate Republicans provided additional summary details here:

Short-Term Stabilization Fund: To help balance premium costs and promote more choice in insurance markets throughout the country, this stabilization fund would help address coverage and access disruption – providing $15 billion per year in 2018 and 2019; $10 billion per year in 2020 and 2021.

Cost-Sharing Reductions: Continues federal assistance – through 2019 – to help lower health care costs for low-income Americans in the individual market.

Long-Term State Innovation Fund: Dedicates $62 billion, over 8 years, to encourage states to assist high-cost and low-income individuals to purchase health insurance by making it more affordable.

Tax Credits: Targeted tax credits will help defray the cost of purchasing insurance; these advanceable and refundable credits - adjusted for income, age and geography - will help ensure those who truly need financial assistance can afford a health plan.

Health Savings Accounts: Expanded tax-free Health Savings Accounts to give Americans greater flexibility and control over medical costs; increased contribution limits to help pay for out-of-pocket health costs and to help pay for over-the-counter medications.

Repeals Obamacare Taxes: Repeal costly Obamacare taxes that contribute to premium increases and hurt life-saving health care innovation, like the taxes on health insurance, prescription drugs, medical devices, and “high-cost” employer sponsored plans.

Empowers states through state innovation waivers (Obamacare 1332 Waiver): Provide states additional flexibility to use waivers that exist in current law to decide the rules of insurance and ultimately better allow customers to buy the health insurance they want.  Allow the Department of Health and Human Services (HHS) to fast-track applications from states experiencing an Obamacare emergency.

Preserve access to care for Americans with pre-existing conditions, and allow children to stay on their parents’ health insurance through age 26. (There are no changes to current law as it applies to Veterans, Medicare, or Social Security benefits.)

Strengthen Medicaid for those who need it most by giving states more flexibility while ensuring that those who rely on this program won’t have the rug pulled out from under them.

Targets Medicaid to Those Most in Need: In 2021, begins gradual reductions in the amount of federal Obamacare funds provided to expand Medicaid, restoring levels of federal support to preexisting law by 2024 while providing fairness for non-expansion states.

New Protection for the Most Vulnerable:  Guarantees children with medically complex disabilities will continue to be covered.

Provides additional state flexibility to address the substance abuse and mental health crisis.

Flexibilities for Governors:  Allows states to choose between block grant and per-capita support for their Medicaid population beginning in 2020, with a flexibility in the calculation of the base year.  Allows states to impose a work requirement on non-pregnant, non-disabled, non-elderly individuals receiving Medicaid.

New Protections for Taxpayers: Curbs Medicaid funding gimmicks that drive up federal costs.

#Obamacare has been a disaster from day one. It"s time that Americans received #BetterCare. https://t.co/M1mEJGTZW6

— Leader McConnell (@SenateMajLdr) June 22, 2017

And here is the official text of the 142-page healthcare bill:

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Here is our update from earlier:

After weeks of drafting in private, much to the dismay of Chuck Schumer, details of the Senate"s healthcare bill are set to be revealed today.  While we"re still awaiting the official text of the bill, the New York Times, courtesy of leaks from some D.C. lobbyists, has previewed some of the details which apparently include large cuts to Medicaid, an end to the "mandate" that requires everyone to have health care and a repeal of "virtually all the tax increases imposed by the Affordable Care Act."

Senate Republicans, who have promised a repeal of the Affordable Care Act for seven years, took a major step on Thursday to achieve that goal as they unveiled a bill to end the health law’s mandate that nearly everyone have health care, remake and cut the Medicaid program and create a new system of federal tax credits to help people buy health insurance.

The Senate bill — once promised as a top-to-bottom revamp of the health bill passed by the House last month — instead maintains its structure, with modest adjustments. The Senate version is, in some respects, more moderate than the House bill, offering more financial assistance to some lower-income people to help them defray the rapidly rising cost of private health insurance.

But the Senate measure, like the House bill, would phase out the extra money that the federal government has provided to states as an incentive to expand eligibility for Medicaid. And like the House measure, it would put the entire Medicaid program on a budget, ending the open-ended entitlement that now exists.

It would also repeal virtually all the tax increases imposed by the Affordable Care Act to pay for itself, in effect handing a broad tax cut to the affluent, paid for by billions of dollars sliced from Medicaid, a health care program that serves one in five Americans, not only the poor but two-thirds of those in nursing homes. The bill, drafted in secret, is likely to come to the Senate floor next week, and could come to a vote after 20 hours of debate.

Bloomberg has provided additional details:

The plan, to be released Thursday after a private Senate GOP meeting, includes $15 billion a year in market-stabilizing funds over the next two years and $10 billion a year in 2020 and 2021, the person said.

It also would provide $62 billion allocated over eight years to a state innovation fund, which can be used for coverage for high-risk patients, reinsurance and other items. The draft bill would phase out Obamacare’s expansion of Medicaid over three years, starting in 2021.

The assessment being made by senators will be shaped in part by an analysis of the bill to be released by the Congressional Budget Office, the official scorekeeper on Capitol Hill.

Of course, time is of the essence as the deadline for insurers to finalize their coverage and pricing plans for 2018 is just around the corner on August 16th.

What"s next for the ACA marketplaces? Two more important dates, which @bjdickmayhew described to me perfectly. https://t.co/csGWOAopXJ pic.twitter.com/nlyey0lRvb

— Bob Herman (@bobjherman) June 22, 2017

Meanwhile, with the bill now up for debate and all 48 Democrats expected to vote "no", the race is on to figure out which Republicans will join them.  Of course, Mitch McConnell can only afford to lose 2 Republican votes which would result in a tie and leave Mike Pence the deciding tie-breaker vote.