The Limits of Using Reconciliation to Repeal Obamacare

The Senate rule may be the best hope for the GOP in rolling back the Affordable Care Act, but it still might not be an easy task.

GOP leadership poses for a photo last year after Paul Ryan signed H.R. 3762, a reconciliation repeal bill of Obamacare that was later vetoed by President Obama. (J. Scott Applewhite / AP)

In the early hours of Thursday morning, Senate Republicans began the formal legislative process of repealing—and perhaps replacing—the Affordable Care Act. In a 51 to 48 vote along party lines, save Senator Rand Paul’s defection to the “no” camp, the GOP senators passed a budget resolution to begin the process known as reconciliation. Through that process, lawmakers can vote on critical pieces of the health law without giving Democrats a chance to filibuster. But the reconciliation process is complex, and its limits will shape just how a potential repeal and replacement might look.

Just what is reconciliation, and how does it work? The measure was created by the Congressional Budget Act of 1974, and it essentially expedites Senate consideration of bills pertaining to the budget—sidestepping the legendary power of the Senate filibuster and constraining debate to 20 hours.

A resolution to begin the reconciliation process must first be passed by both chambers—the House will vote on this resolution soon—and then the relevant Senate committee drafts the reconciliation legislation in a process linked to the passage of the budget. There are a number of rules for using reconciliation that are enforced and interpreted by the Senate parliamentarian, but the major rule is that the process can only be used to change laws that are scored by the Congressional Budget Office, i.e., those that cost money or are implemented as taxes.

Reconciliation has already been linked to health reform via its role in the legislative history of the ACA. Though the 2010 law known as Obamacare was not passed via reconciliation, as conservative politicians and writers often claim it was, reconciliation did play a key role in the shape the law takes today. In the early phases of the act’s passage in December 2009, Democrats enjoyed a filibuster-proof 60-vote majority in the Senate, and did not need reconciliation to effectively pass bills. But the House and Senate did pass slightly different versions of a health-reform bill in December of that year, with the House bill spending more, taxing more, and extending more subsidies to increase coverage to more Americans. The House and Senate hoped to bring their bills closer together in a conference, which would have necessitated another Senate vote and another possible filibuster attempt.

Republican Scott Brown’s victory in Massachusetts in the 2010 special election to fill Democrat Ted Kennedy’s Senate seat changed the calculus on that process. Brown’s election upended the Democratic filibuster-proof majority in the Senate, and in response, Democrats resorted to the process of reconciliation to bridge the gaps between the Senate and House bills. The Democrat-led House abandoned its own bill to pass the Senate’s more conservative legislation, and then the Senate avoided a Republican filibuster by using reconciliation to pass the Health Care and Education Reconciliation Act of 2010, which amended the ACA to be more like the House’s original bill. That bill used federal funds to pay for the bulk of the Medicaid expansion, increased tax credits and subsidies for purchasing insurance, closed the Medicare “donut hole,” and increased some taxes to afford the expenditures, among other measures.

Republicans have often presented the use of reconciliation to repeal key parts of the ACA as a bit of poetic justice for that 2010 maneuver, and they have performed a practice run before. In 2015, the Republican-led Senate voted 52 to 47 to pass H.R. 3762, a reconciliation bill that would have stripped federal subsidies for purchasing insurance through the exchanges, ended federal funding for the Medicaid expansion, and nullified a number of taxes sustaining the law, including the individual mandate. That bill has largely been seen as a blueprint for Republicans’ repeal efforts this time around, and its potential effects on the economy have already been modeled and predicted.

But according to a senior Senate health aide, an H.R. 3762-like bill passing through the reconciliation process is less likely than it seems, mostly because Republicans don’t expect President-elect Trump to veto their legislation. In other words, Trump has promised to roll back the ACA and might actually sign a law to that effect, so congressional repeal plans have more weight. The 2015 vote was symbolic, and Republican members of Congress had the luxury of pushing through legislation on ideological grounds, rather than actually considering the real effects of repeal or what might need to come next. When asked about H.R. 3762’s repeal of the Medicaid expansion—which his home state of Nevada had accepted—Republican Senator Dean Heller responded, in a well-publicized quote, “Well, it’s going to be vetoed.” But in this run, the policies are live-fire, and stripping coverage away from millions of people has real political—not to mention societal—ramifications. The provisions in H.R. 3762 may have too many unpalatable effects to use it as a model. The staffer, who works for a Democratic senator, suggested that many Senate Republicans are already tentative about these very real-world effects on health care and the economy.

Reconciliation could be used to do a number of things if an H.R. 3762-like bill is too risky. The GOP could use it to alter the individual mandate; reduce, rather than strip away, subsidies; or phase out Medicaid expansion funds to ease the pain. They could change federal commitments to paying insurance plans for taking on the additional risk of exchange enrollees (though Congress would do so at its own peril).

Yet even if Republicans pass a less scorched-earth reconciliation, each of these actions could invalidate federal contracts with insurers and allow them to exit the exchanges early. Mandate or not, such rules could kill the private–public cooperation of the exchanges and start millions of Americans on the road to uninsured status.

One thing reconciliation probably cannot do on its own is remove the provisions of the ACA that prevent insurance plans from denying coverage for pre-existing conditions. Any modifications to that requirement would have to come from the “replace” part of “repeal and replace,” and be initiated in the normal filibuster-bound rules. That limitation of reconciliation might be its biggest weakness for Republicans, because the requirement to provide coverage for pre-existing conditions essentially requires an individual mandate to work. Without a way to compel healthy people into purchasing insurance, markets are at risk of “death spirals.” That’s where only sick, and thus expensive, patients sign up for insurance; insurers can’t deny them coverage; and they, in turn, can’t create profit for insurers. Again, insurance companies might balk at that prospect and leave the markets altogether before they start taking more losses.

Republicans have created a quandary. If they follow through with a reconciliation-based repeal before a replacement comes along, there are serious potential effects for health markets, jobs, and health care that might not be fixable with a follow-up plan. But they need to get the job done this year if they want to push through a major tax-reform reconciliation plan sometime in early 2018, as only one reconciliation bill can be passed per year. The increasing disunion among Republicans on what shape a replacement bill might take could drag the process, and each day that passes is one in which people gain more coverage and supporters of Obamacare can mobilize more opposition. The pressure is on.