The Reconciliation Option

Published October 18, 2011

National Review Online

At last Tuesday’s debate among the Republican presidential candidates, former Massachusetts governor Mitt Romney and former U.S. senator Rick Santorum both mentioned that repeal of Obamacare could be accomplished through the special budgetary procedure known as “reconciliation” (see this video clip of the debate exchange, courtesy of Avik Roy’s enlightening post on the subject). This bit of Washington inside baseball was unusual in a presidential-debate setting; most of those in the audience watching at home probably have no earthly idea what the budget-reconciliation process is, nor should they. But in the long fight over Obamacare, what Romney and Santorum said about the use of reconciliation is a crucially important point that has the potential to dramatically affect the future of American health care.

First, what is “reconciliation”? Reconciliation is a special legislative process established by Congress to provide for expedited consideration of important budgetary legislation. The “expedited” designation is particularly important in the Senate. Most legislation of any consequence requires 60 votes in the Senate to pass, as that is the normal number needed to shut off debate (called “cloture”) when a determined minority is willing to stage an indefinite filibuster. But reconciliation bills can be debated only for a certain number of hours before the measure goes to a final vote. In other words, a reconciliation bill cannot be filibustered—and therefore can pass in the Senate with a simple majority, normally 51 votes, when all time for debate has expired.

Fast-forward now to 2013. If, in the 2012 election, Republicans are able to maintain control of the House, pick up the majority in the Senate (a real possibility) but not a 60-vote supermajority, and win the White House (looking more possible by the day), the GOP would be in position to set in motion a reconciliation bill to repeal and replace Obamacare—and they wouldn’t need any Democratic cooperation to make it happen. The fact that leading Republican presidential candidates have now said that reconciliation is an option is a big deal, as it makes it very clear to all concerned that there is a clear path to victory for Obamacare opponents.

Seeing the threat that the reconciliation option could pose, Obamacare’s apologists have responded by suggesting it would be the height of cynical partisanship for Republicans to undo Obamacare in this fashion, since reconciliation supposedly played only a minor role in the enactment of Obamacare. Obamacare’s defenders also claim that, in any event, the GOP may not be able to pull it off because some aspects of Obamacare are non-budgetary and therefore aren’t eligible for repeal in a reconciliation measure, which is supposed to deal exclusively with budgetary matters. Sen. Kent Conrad, the Democratic chairman of the Senate Budget Committee, took the argument further and said that using reconciliation for repeal would be inappropriate because reconciliation is supposed to be used for deficit-cutting efforts—and Obamacare’s full repeal would increase the deficit, according to the Congressional Budget Office (CBO).

As usual, there’s a lot of smoke and misdirection in these arguments, and not much clarity.

For starters, it seems that some might need a refresher course on the history of Obamacare’s enactment. Reconciliation didn’t play a small role in Obamacare’s passage, as has been suggested. Without reconciliation, Obamacare would not have become law at all. It’s true that the main Obamacare structure was passed by the Senate in December 2009 under normal rules for legislative consideration. That’s because Democrats at that time had 60 votes (including two independent senators who caucus with them). They didn’t need to resort to reconciliation to pass the bill as long as all 60 of their senators stuck together and supported passage, which they did.

But then Scott Brown won the Massachusetts Senate race in January 2010; the Democrats lost their 60-vote supermajority and could no longer close off debate on legislation without the help of at least one Republican senator.

At that point, the president and his allies had two choices. They could compromise with Republicans and bring back a bill to the Senate that could garner a large bipartisan majority. Or they could ignore the election results in Massachusetts and pull an unprecedented legislative maneuver, essentially switching from regular order to reconciliation at the eleventh hour, thereby bypassing any need for Republican support. As they had done at every other step in the process, the Democrats chose the partisan route. They created a separate bill, with scores and scores of legislative changes that essentially became the vehicle for a House-Senate conference on the legislation. That bill was designated a reconciliation bill. Then they passed the original Senate bill through the House on the explicit promise that it would be immediately amended by this highly unusual reconciliation bill, which then passed both the House and Senate a few days later, on an entirely party-line vote.

So what goes around, comes around. Obamacare is in law—with all of its trillion-dollar spending and taxes now part of CBO’s “baseline” budget projections. Reconciliation was created for the express purpose of giving Congress an expedited process for making changes to just this kind of spending and tax policy. Obamacare is thus a very ripe target for budget cutting, and that means reconciliation.

It’s true that Obamacare includes some provisions that, on their own, might be considered non-budgetary, but not nearly as many as some may think. The entire machinery of the coverage provisions—the individual mandate, the Medicaid expansion, the employer requirements—is entirely fueled by federal money (in the form of both subsidies and penalties). Moreover, the state exchanges and the regulatory apparatus they are intended to impose are also financed by federal taxpayers. Repeal of all of these provisions, which are the guts of Obamacare, is plainly a budgetary matter, and therefore appropriate in reconciliation. For the rest, creative legislative drafting can solve many problems. Senator Conrad’s contention that Obamacare shouldn’t be repealed in reconciliation because Obamacare reduces, not increases, the budget deficit doesn’t stand up to scrutiny. For starters, the supposed deficit reduction originally found by CBO is vanishing rapidly. In the original cost estimate, CBO said the health-related provisions of Obamacare would reduce the deficit by $124 billion over ten years. Of that, $70 billion was supposed to come from an initial “surplus” of premiums paid into a voluntary long-term care insurance program, called “CLASS” (Community Living Assistance Services and Supports). Opponents said all along that this was a budget gimmick of the worst kind—which the Obama administration now implicitly admits, because they themselves have pulled the plug on the program. There will be no CLASS surplus, or a CLASS program at all. So there goes more than half of the supposed ten-year deficit reduction from Obamacare.

Meanwhile, Treasury’s inspector general tells us the tax collection from the so-called “tanning tax” is also coming in way under projections. Throw in the fact that the high-risk pools are massively underfunded, the Medicare cuts are unrealistic, and the employer dumping will far exceed what CBO projected, and you have a budget buster of enormous proportions.

But even if CBO continues to play along with the Obamacare-as-deficit-cutter fairy tale, that still doesn’t preclude Congress from repealing it in reconciliation. All the House and Senate would have to do is couple repeal with some strategic cuts in spending (including, perhaps, retention of some cuts that were enacted in Obamacare itself). The total package would then be estimated to cut the deficit and therefore fall well within the normal boundaries of a reconciliation bill.

Obamacare was jammed through Congress against the wishes of a majority of the electorate. Voters took it out on those controlling Congress in the 2010 midterm election, which was a Republican rout of historic magnitude. The opposition to Obamacare remains just as strong today as it was last year, which means the 2012 election could produce a similar result. Except that, unlike 2010, in the aftermath of the coming election there could very well be a straightforward and unimpeded path for delivering on repeal and replace, as the voters are demanding.

James C. Capretta is a fellow at the Ethics and Public Policy Center. He was an associate director at the Office of Management and Budget from 2001 to 2004.

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