Seeking Obamacare alternative, Republicans eye tax credits

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Reading Supreme Court's Signals on Health Subsidies

(Reuters) - If the U.S. Supreme Court blows up the tax subsidies at the heart of Obamacare in June, Republicans hope to deliver on their promise to offer an alternative healthcare plan.

But key parts of it may resemble the one President Barack Obama delivered five years ago in the Affordable Care Act, partly reflecting Republican concerns that they could pay a political price if insurance subsidies are yanked from millions of Americans later this year.

Two front-running Republican options at an early stage in Congress include a refundable tax credit that experts say is virtually the same thing as the Obamacare tax subsidy being challenged before the Supreme Court. Republicans deny that their ideas are tantamount to "Obamacare Lite" but acknowledge they will need bipartisan support for their plans to stand any chance of avoiding an Obama veto.

"It's not going to be like Obamacare, in my opinion," said Senate Finance Committee Chairman Orrin Hatch, whose plan includes a refundable tax credit for low-and middle-income Americans.

"It's not a literal subsidy, it's a recognition that they should have this credit."

Republicans have been vowing for years to repeal and replace Obamacare, the president's signature policy achievement that Democrats passed in 2010 over united Republican opposition. Democrats say the act is insuring more Americans and helping to slow the growth in healthcare spending.

Conservatives call Obamacare a government overreach that drives up health costs. They object to its mandates -- that everyone have insurance, that employers offer it, and that insurance plans must cover certain items.

But Republicans have never united around a replacement strategy. There is renewed interest in producing one now, however, to be ready if the Court rules for the plaintiffs in the current Obamacare case and disallows tax subsidies through the federal exchange in a ruling expected in June.

Up to 7.5 million people in at least 34 states that use the federal exchange could then lose their tax subsidies, according to the consulting firm Avalere Health, dealing a possibly fatal blow to the program.

Democrats and the White House have said little about what they might do if the Supreme Court rules against the administration. No replacement could go into effect before 2017 unless Obama signs it into law.


Some experts see bipartisan potential in key elements of what Republicans like Hatch, of Utah, and House Ways and Means Committee Chairman Paul Ryan, of Wisconsin, have discussed to date.

The refundable tax credits in both their plans would be available to those who pay little or no tax, similar to the Obamacare subsidies for low-income Americans.

"There is a lot of common ground here," said Stuart Butler, a senior fellow in economic studies at the Brookings Institution, who called the refundable credits "essentially indistinguishable" from the Obamacare subsidies.

One difference is that Republicans would allow the tax credits to be used to buy insurance in the private market, an approach they say will help drive down insurance costs and give consumers more options. Under Obamacare, the credits can be obtained only through the state or federal online exchanges.

In an e-mailed statement to Reuters, Ryan said tax credits would "empower Americans to make their own healthcare decisions rather than government mandates."

Ryan and Hatch have yet to introduce legislation, but their approaches also diverge from Obamacare in other ways. For example, both lawmakers favor allowing government mandates to be lifted, and letting consumers buy insurance across state lines.

Tax subsidies are popular. A Reuters-Ipsos poll conducted March 6-April 13 said that 79 percent of adults favor providing subsidies on a sliding scale to aid individuals and families who cannot afford health insurance. But Obamacare itself remains divisive. In the poll, 53 percent said they were opposed to it.

More Republican proposals are popping up. If the Court rules against the administration, Wisconsin Senator Ron Johnson wants to make the Obamacare taxpayer subsidies available through August 2017, while repealing the individual and employer mandates.

Louisiana Republican Representative John Fleming favors putting taxpayer money into tax-exempt health savings accounts that individuals can use to pay for healthcare expenses.

"Doing nothing, or not covering more people, was never a goal of Republicans," Fleming said.

(Reporting by Susan Cornwell; editing by Stuart Grudgings)

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