Cruz plan could rally GOP, save health bill

‘Free­dom op­tion’ has mar­ket­place re­form, sub­si­dies

Houston Chronicle Sunday - - FRONT PAGE - By Kevin Diaz

WASHINGTON — Once a fringe player in the U.S. Se­nate, Ted Cruz has taken cen­ter stage as one of the piv­otal fig­ures in the Repub­li­can ef­fort to re­peal the Af­ford­able Care Act, aka Oba­macare. It’s been a long jour­ney. The lat­est ver­sion of the con­tentious Repub­li­can health care bill still faces many lin­ger­ing doubts from the right and the left. But Cruz’s “Free­dom Op­tion” to al­low in­sur­ers to sell cheap, bare-bones poli­cies along­side heav­ily reg­u­lated Oba­macare plans has emerged as a po­ten­tial game-changer.

Hailed on the right as a much sought-af­ter

mar­ket­place re­form, the Cruz amend­ment has run into stiff re­sis­tance from Democrats and some Repub­li­cans who see it as an end-run around pop­u­lar con­sumer safe­guards, in­clud­ing pro­tec­tions for pre-ex­ist­ing med­i­cal con­di­tions.

Cruz calls it a com­pro­mise. But among the skep­tics is Iowa U.S. Sen. Chuck Grass­ley, a se­nior Repub­li­can in the Se­nate, who called it a po­ten­tial “sub­terfuge.”

The Med­i­caid roll­backs in the Repub­li­can bill also re­main a ma­jor stick­ing point, par­tic­u­larly for GOP mod­er­ates from states that ex­panded the poverty pro­gram un­der Oba­macare.

But Cruz has cho­sen to fo­cus — like a “laser,” he says — on the reg­u­la­tory front that most ex­cites con­ser­va­tives: Oba­macare’s in­sur­ance re­quire­ments for com­pre­hen­sive “es­sen­tial ben­e­fits” such as doc­tor vis­its, pre­scrip­tion drug cov­er­age, preg­nancy and child­birth, and men­tal health ser­vices.

Cruz’s pre­scrip­tion: Al­low in­sur­ers that sell plans that com­ply with Oba­macare dic­tates to also sell lower-cost plans that cover less. He calls it “the key to bring­ing Repub­li­cans to­gether and get­ting re­peal passed.”

Crit­ics, in­clud­ing the main lob­by­ing group for the in­sur­ance in­dus­try, say that while Cruz’s plan sounds like a com­pro­mise, it ac­tu­ally would mean the end of the Oba­macare in­sur­ance mar­ket­place — and some sus­pect that’s his real mo­tive.

“We know how this will play out,” Hous­ton Demo­cratic U.S. Rep. Gene Green said in a House floor speech Thurs­day. “Healthy peo­ple would pick the skimpier plan and sicker peo­ple would en­roll in the more ro­bust plan. … Sep­a­rat­ing the sick and healthy will drive up costs and es­sen­tially lead to a death spi­ral.”

A lesser evil

Cruz has ac­knowl­edged this mar­ket seg­men­ta­tion, call­ing it “an un­der­stand­able pol­icy con­cern.” But he ar­gues that in ex­change for healthy peo­ple get­ting lower pre­mium costs on his “free­dom plans,” he’s will­ing to ac­cept di­rect tax­payer health care sub­si­dies for the poor, the old and the sick — in­clud­ing money to help in­sur­ers cover the costs.

Some an­a­lysts see this as a seachange in con­ser­va­tive ide­ol­ogy, con­sid­er­ing that House Repub­li­cans have gone to court to chal­lenge the le­gal­ity of Oba­macare’s sub­si­dies to in­sur­ance com­pa­nies. Ken­tucky U.S. Sen. Rand Paul, a Repub­li­can who op­poses of the GOP health care bill, called them “an en­ti­tle­ment for in­sur­ance com­pa­nies.”

But de­spite the right’s aver­sion to gov­ern­ment aid, some con­ser­va­tives have bought into the idea of di­rect tax­payer sub­si­dies as a lesser evil than Oba­macare’s sys­tem of cross-sub­si­diza­tion between young and old within the in­sur­ance mar­kets.

Ap­pear­ing on ABC’s “This Week,” Cruz called the cur­rent sys­tem “wildly un­fair.”

Cruz, work­ing along­side Utah Repub­li­can Mike Lee, has helped sell his plan by of­fer­ing con­ser­va­tives an­other bone: The ex­pan­sion of tax-ex­empt health sav­ings ac­counts to cover in­sur­ance pre­mi­ums as well as out-of-pocket costs.

Health sav­ings ac­counts, known as HSAs, have long been the pre­ferred GOP route to tax re­form and lower health care costs. Cruz has won plau­dits from con­ser­va­tive back­ers for adding them to the equa­tion in the cur­rent health care bill.

Democrats have been less san­guine, not­ing that tax-pre­ferred sav­ings do lit­tle for fam­i­lies that strug­gle to get by and pay lit­tle or no fed­eral taxes. But between mid­dle- and up­per-class tax in­cen­tives for pre­mi­ums, and di­rect sub­si­dies to cover those on the bot­tom rungs of the eco­nomic lad­der, Cruz calls it a “win-win for ev­ery­body.”

For Cruz, this po­si­tion­ing rep­re­sents some un­char­ac­ter­is­tic com­pro­mises.

Ja­son Pyle, vice pres­i­dent for leg­isla­tive af­fairs at Free­domWorks, a con­ser­va­tive ad­vo­cacy group, called Cruz’s move “a step in the right di­rec­tion.”

But to in­flu­en­tial con­ser­va­tive Brent Bozell, chair­man of ForAmer­ica, Se­nate Repub­li­cans’ em­brace of tax­payer­funded sub­si­dies for in­sur­ance com­pa­nies rep­re­sents a sell­out of their prom­ise to re­peal Oba­macare.

“They ef­fec­tively have em­braced Oba­macare,” he said.

Mak­ing com­pro­mises

Nev­er­the­less, by bring­ing along many of his fel­low con­ser­va­tives, Cruz’s pro­posal could give Se­nate lead­ers some breath­ing room on the right.

Along with the sharp re­duc­tions in planned Med­i­caid spend­ing, some an­a­lysts say Cruz’s mea­sure could save the health care bill, even if GOP lead­ers have been forced to re­tain many of Oba­macare’s higher taxes on the wealthy.

“Yes, the com­pro­mise is spend­ing lots more than be­fore to pur­chase com­pro­mises, but that is how Oba­macare was passed in the first place,” said Peter Fer­rara, a se­nior pol­icy an­a­lyst at The Heart­land In­sti­tute, a freemar­ket think tank.

Shoring up the con­ser­va­tive base, how­ever, could ex­pose mod­er­ate Repub­li­cans, par­tic­u­larly swing votes like Sens. Lisa Murkowski of Alaska, Dean Heller of Ne­vada, Su­san Collins of Maine, Rob Port­man of Ohio and Shel­ley Moore Capito of West Vir­ginia.

Capito’s of­fice re­leased a statement Fri­day say­ing she still has “se­ri­ous con­cerns” about the Med­i­caid pro­vi­sions. The Con­gres­sional Bud­get Of­fice is an­a­lyz­ing the changes in the lat­est GOP bill, in­clud­ing the Cruz amend­ment.

The CBO’s es­ti­mate of the GOP’s last Se­nate health care bill pro­jected that it could re­sult in 22 mil­lion more Amer­i­cans drop­ping off the in­sur­ance rolls, most of them peo­ple who are cur­rently on Med­i­caid.

The Repub­li­can bill also took a hit last week when two pow­er­ful in­ter­est groups, AARP and Amer­ica’s Health In­sur­ance Plans, tore into Cruz’s pro­vi­sion to of­fer al­ter­na­tive plans that don’t have to cover pre-ex­ist­ing con­di­tions.

“Al­low­ing health in­sur­ance prod­ucts gov­erned by dif­fer­ent rules and stan­dards would fur­ther desta­bi­lize the in­di­vid­ual mar­ket and in­crease costs for those with pre-ex­ist­ing con­di­tions,” the in­sur­ance lobby said in a pol­icy pa­per.

Cruz ar­gues that his plan would pre­serve guar­an­tees for pre-ex­ist­ing con­di­tions in the Oba­macare ex­changes. But in­dus­try ex­perts, echo­ing Green and Grass­ley, said such cov­er­age would be cost-pro­hib­i­tive in par­al­lel mar­kets di­vid­ing young and old.

“Such pro­tec­tions … only work if there is broad par­tic­i­pa­tion to as­sure sta­ble mar­kets and af­ford­able pre­mi­ums,” AHIP’s an­a­lysts wrote.

Open to change

Cruz’s back­ers counter that al­low­ing com­pa­nies to sell plans off the fed­er­ally reg­u­lated Oba­macare ex­changes could make pri­vate in­sur­ance af­ford­able to peo­ple who now rely on the Med­i­caid ex­pan­sion. Lib­er­als are skep­ti­cal. Hold­ing a nar­row 52-seat ma­jor­ity, Se­nate Repub­li­cans have lit­tle room to spare to pass their bill. In a re­flec­tion of the con­ser­va­tive-mod­er­ate di­vide, Paul and Collins al­ready have sig­naled their op­po­si­tion, though for dif­fer­ent rea­sons.

Count­ing on Vice Pres­i­dent Mike Pence as the tie-breaker in a po­ten­tial 50-50 vote, Se­nate Ma­jor­ity Leader Mitch McCon­nell is on the precipice. He now has to count on the co­op­er­a­tion of both wary mod­er­ates and Cruz, the tea party up­start who once ac­cused him of ly­ing on the Se­nate floor.

Play­ing an un­ac­cus­tomed insider role, Cruz has spent the past five months qui­etly work­ing with other Repub­li­can sen­a­tors of vary­ing stripes to forge an agree­ment that can get at least 50 votes.

Some an­a­lysts say that to the ex­tent that he can help de­liver con­ser­va­tives, he can in­oc­u­late him­self and the party’s right flank should the health care bill fall to the op­po­si­tion of mod­er­ates. And if it passes, it likely will be re­garded as a vic­tory for Repub­li­cans and Pres­i­dent Don­ald Trump, even if it falls far short of the goal of re­peal­ing ev­ery last ves­tige of Oba­macare.

Still strug­gling for votes to move the bill for­ward this week, GOP lead­ers have promised that they’re still open to change.

“We’re go­ing to have an open amend­ment process,” said Texas U.S. Sen. John Cornyn, McCon­nell’s chief vote counter. “So long as sen­a­tors have the en­ergy to stay on their feet and of­fer amend­ments.”

At the cen­ter of it all will be Cruz, whose amend­ment has be­come a ral­ly­ing point for con­ser­va­tives who want to dis­man­tle for­mer Pres­i­dent Barack Obama’s le­gacy health care law.

“If ever there was a lit­mus test about whether a politi­cian sup­ports Oba­macare, the Cruz amend­ment is it,” said Michael Can­non of the lib­er­tar­ian Cato In­sti­tute, writ­ing in The Hill. “Any politi­cian who voted against Oba­macare … or cam­paigned on re­peal­ing it … but op­poses the Cruz amend­ment is flip-flop­ping.”

Chip So­mod­ev­illa / Getty Images

De­mon­stra­tors from Texas op­pos­ing the GOP health plan chant “Kill the bill, kill the bill” on Mon­day out­side Cruz’s of­fice in the Rus­sell Se­nate Of­fice Build­ing on Capi­tol Hill.

Alex Wong / Getty Images

U.S. Sen. Ted Cruz is asked his opinion of a new Repub­li­can health care bill re­leased on Thurs­day. He is of­fer­ing his own “Free­dom Op­tion” to win over con­ser­va­tive mem­bers to the bill.

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