Senator Tom Cotton joined me this morning:
HH: On a snowy day on the East Coast, Senator Tom Cotton is still at work via the phone from Arkansas. He joins me, he is from Arkansas, but he’s in Washington, D.C. Senator Cotton, good morning. How are you?
TC: Morning, Hugh. I’m in Washington snowed in with everyone under an avalanche of two to three inches of snow.
HH: I know. In Ohio, we kind of dance in that, but I am, I understand there are a lot of southern members who are not used to this, and they’re a little soft on this sort of thing. Senator Cotton, I want to talk mostly about the American Health Care Act with you, but first, yesterday, the House passed HR1301, the Defense Department Appropriations for the balance of Fiscal Year ’17, a total of $577.9 billion dollars divided into two funds, the Overseas Contingency Operations Fund of $61.8 billion, and regular DOD appropriations of $516.1 billion. That’s now coming to the Senate. Is it enough for the balance of this year?
TC: I would like to move on that Fiscal ’17 bill, Hugh, quickly. I think we could increase it a little more, in part to smooth out transition to what we’ll need in the coming fiscal year, which as the Armed Services Committee has states, is as much as $640 billion dollars.
HH: So do you expect you’ll plus this up out of the House before sending to the President, or back to the house for concurrence?
TC: I hope so, Hugh, but I’m not sure if we’ll have the votes. You know, the Democrats have drawn a line in the sand for many years, saying that they will not vote for increased Defense spending unless they get increased domestic spending. Some of them have begun to back away from that demand, partly because they no longer have a president to support them, partly because they realize the chaos of the world, and the need to increase our Defense budget. But we’ll have to see.
HH: How quickly do we resolve this, in your opinion, in Armed Services and the other appropriate committees in the Senate?
TC: Well, we have to resolve it by the end of April, Hugh, because that’s when the current spending legislation expires. And the Congress is going to be out of session for the two weeks around Easter. So if we don’t do it by April 8th, then we only have a couple of days when we come back from our Easter work period in our states.
HH: Okay, so now let’s move to the American Health Care Act. This is what you said to George Stephanopoulos on Sunday.
TC: George, the bill probably can be fixed, but it’s going to take a lot of carpentry on that framework.
HH: All right, so let’s, I want to turn to the carpentry on the framework in light of the Congressional Budget Office report yesterday. I’ve read the report, the assessment of it. I’ve read Avik Roy’s takedown of it. what do you think of the report? And what is the carpentry to which you refer?
TC: Well, I think the CBO report provides useful information, but at the same time, the CBO director is not Moses. He’s not walking down from the mountaintop with stone tablets. And we should evaluate that useful information with a critical eye. You know, we should examine the evidence and the conclusions they reach, and see if those are justified. We should also examine their history with health care estimates, which pretty consistently overestimated, for instance, the coverage that Obamacare would provide. They seem to just have some challenges getting right the influence of a healthy individual insurance market. All that said, I think the Congressional Budget Office is directionally correct. They’re right that coverage levels will go down in the coming years under the House bill. They’re also right, I’m afraid, that insurance premiums will continue to go up in the near term, for three to four years, before they start perhaps falling in the long term. However, I suspect that the political consequences of those near term changes means that the long term will never actually arrive. That’s why I believe it’s so important that the House take a pause and try to fix some of these fixable problems in their committees, which is the easiest place in Congress to fix them, whereas the Senate floor is the hardest place to fix them.
HH: Now it seems to me, and let’s work off of this assumption, Senator. It’s not going to get fixed. They’re going to run this through the Budget Committee, they’re going to do a rule, as you know, the Rules Committee is hand-picked by the Speaker, and the Speaker is going to get a rule that limits debates and amendments. Maybe they might tinker on the credits a little bit, the tax credits in the way that Avik Roy has suggested, but you’re going to get basically this bill over to the Senate, or no bill at all. Once it gets there, what changes does Tom Cotton want to propose on the Senate floor, because Leader McConnell wants to bring it directly to the floor, that will make it acceptable to you?
TC: Hugh, on the process, I don’t think that’s exactly right on the Budget Committee and the Rules Committee. The Rules Committee can make substantial changes to any kind of committee draft. They do that frequently on all kinds of legislation. I suspect that the House leadership will have to do so, because I suspect they don’t have anything close to a majority of their members who are willing to vote for this bill now. I know many of them, and they come from all stripes. They’re not just hardline conservatives. Many of them are centrists, or many of them are just being practical-minded about this bill the way I am. Just from a practical standpoint, I don’t think this bill is going to reduce premiums for working Americans. I think it’s going to cost coverage for many Americans as the CBO said yesterday. So that’s why I think the Rules Committee might be the place where some of these changes happen. What kind of changes do we need? Let’s break the bill down into its two big components, Hugh, Medicaid and the individual insurance market. As you have said, as many people observe, and I agree, this bill has far reaching changes to Medicaid, a badly flawed program which has had a dysfunctional design from its earliest days. Rather than making it an open-ended joint federal-state program, we would return authority and flexibility to the states to design programs that suit them. That’s what my own governor has wanted for a long time. However, the Medicaid provisions are only about a 70-80% right. We can tinker with them and get them even more right. So for instance, give the governors more flexibility, but also hold them more accountable if they break through the caps on Medicaid spending. Also look at the rates…
HH: Well, what does that look like? Pause for that for a moment, Senator. What does that look like, make them more accountable if they break through the caps on Medicaid spending?
TC: So currently, there’s a small penalty for states if they go over their per capita limits. I don’t think that penalty will deter some governors, particularly in Democratic states that have a history of notoriously spending huge amounts of money on Medicaid. So we should not, we should not give governors and legislatures in particular in Democratic states an incentive to go over the very per capita limits that are such an important part of this Medicaid reform.
HH: What if they use their own state money to do that?
TC: If they use their own state money, Hugh, that would be one thing.
TC: But most of them don’t have that money, and therefore, it’s important that we not allow them to basically raid the federal piggy bank.
HH: I agree with that.
TC: …I think at the expense…
HH: But I do believe that if they want to take part of California’s budget and they want to use California money to supplement the federal baseline that comes in, that’s more, that’s a state choice. They don’t necessarily have the money in California, but that’s a state choice.
TC: So that’s, Hugh, of course, but as the bill is currently written, it would make it too easy for them to overspend not California tax dollars on California, but Arkansas tax dollars on California.
HH: How does that actually work, Senator? I didn’t understand that part. I’m not, I’m never embarrassed to say I don’t understand something about health insurance.
TC: The bill imposes a penalty if the state exceeds its per capita limits. But in my opinion, the penalty is too low. In some cases, the penalty is not much more than the current federal state match. So in a way, it’s creating a perverse incentive that the current federal state system has created.
HH: So the devolution is flawed…
TC: In part.
HH: And you want the devolution to be more complete and permanent?
TC: More robust, as what happened in business, as happens in the Army, as should happen with this legislation in our states. With flexibility and authority must come accountability. And we must hold states accountable to designing their programs in a way that is not going to break the federal treasury.
HH: On the Medicaid piece, before we move to the individual market, do you believe that the Republicans have communicated adequately that Medicaid insurance is often no insurance at all? And I talk about my Orange County experience, 18 years on a commission devoted to providing health care to kids. We had to build our own dental plan. We had to put $35 million dollars of our own commission money into creating six chairs and hiring six dentists, because no dentist in Orange County, or almost no dentists, take Medical dentistry. It’s just, it’s not really insurance. It’s paper.
TC: Yeah, Hugh, I think too few Americans understand that. For many, Medicaid is essentially no insurance at all, simply because doctors and other providers won’t see Medicaid recipients, because the payment rates are too low. Now for Medicaid’s traditional population, of course, the severely disabled, the blind, the indigent elderly, it is very important. But for a lot of people who have Medicaid because of their income levels, especially through the Medicaid expansion, having Medicaid is the functional equivalent in many places of having no insurance, because doctors simply will not take, you know, new Medicaid recipients. That’s one reason why it’s so important that we have a healthy market-based insurance system, because I want to get people off of Medicaid. I mean, Medicaid ultimately is a welfare system. And I want people to get off of all kinds of welfare, get into the job market, get into the market-based insurance system. For the people who need it most, like I said, the severely disabled and the blind and the indigent elderly, it’s very important. But for most Medicaid recipients, they would be better off, and taxpayers would be better off, if we can help them get into the job or individual insurance market.
HH: The CBO report also says that those staying on Medicaid, if you remove the mandate, 5 million Medicaid recipients will leave Medicaid of their own volition. I understand that. They wish to try and go and not be tagged as a Medicaid patient so they can get in to see someone. They know that the insurance doesn’t work, but that it strikes many people as counterintuitive. It’s not. It’s that badly broken. Do you think you have Senate support to make the Medicaid changes you’re talking about?
TC: I think we can find that support, Hugh. You know, again, this is a gradual transition from just the blanket expansion of Medicaid under Obamacare, which has dumped a lot of people in the old broken Medicaid system. And this is the kind of Medicaid reforms that Republicans have sought for decades, that even Bill Clinton proposed in the 1990s. So I think we can find the votes in both the House and the Senate for these relatively modest changes to the really important Medicaid reforms in this bill. The bigger challenges, Hugh, in the bill, are in the individual market provisions. And I just simply think, just from a non-ideological, very practical standpoint, those are not likely to work in bringing down insurance premiums, and that’s the core problem for most people who have market-based insurance, whether it’s in the individual market, or whether it’s through their employer.
HH: So what can be done? I’ve talked to the Speaker, I’ve got to the Leader. I’ve talked to Cathy McMorris Rodgers is on today, Mick Mulvaney, Tom Price. They all say it’s a three-step dance because of the Senate reconciliation rule. So you know those rules. Working within the rules, how can the Senate improve its bill, or how can the House send to the Senate a bill that fits within the guardrails of reconciliation and allows for 51 votes that improves the individual market?
TC: Hugh, there is no three-phase process. There is no three-step plan. That is just political talk. It’s just politicians engaging in spin. This is why. Step one is a bill that can pass with 51 votes in the Senate. That’s what we’re working on right now. Step two, as yet unwritten regulations by Tom Price, which is going to be subject to court challenge, and therefore, perhaps the whims of the most liberal judge in America. But step three, some mythical legislation in the future that is going to garner Democratic support and help us get over 60 votes in the Senate. If we had those Democratic votes, we wouldn’t need three steps. We would just be doing that right now on this legislation altogether. That’s why it’s so important that we get this legislation right, because there is no step three. And step two is not completely under our control.
HH: I would say step two is underestimated because of the CRA and the ability to do false flag regulations, something I introduced to the Speaker last week, and he hadn’t thought about it, which is you know, the CRA empowers you to reverse regulations and prohibit future regulation by 51 votes. If Tom Price puts out a false flag regulation transparently, disingenuous, meaning we’re going to cover 35 benefits, and the Senate and the House reject it by 51, you’ve effectively barred the expansion of Medicaid in the future, I mean, of Obamacare in the future into those essential benefits programs. But let’s talk about what can be done now in Tom Cotton’s view, either in House Rules or on the Senate floor to improve this, not depending upon a three-step process, but to the point that you would support it?
TC: Hugh, the most important thing driving the increases in premiums, not just in the individual markets, but in the job-based markets, are all the insurance regulations of Obamacare. I think we should take a bolder stance about the number of those regulations that can be included inside this process, because those regulations clearly have a huge budgetary impact. They are driving up the price of premiums by billions and billions of dollars in the aggregate, which means taxpayers are paying billions and billions of dollars in the aggregate on the individual market and through the Obamacare subsidies. So rather than pick and choose, and say we think this regulation fits within the Senate rules, or we think that one does not, we should take a bolder view. We should make that case, and we should proceed on that manner. I simply don’t understand why the House bill has tried to repeal, it tries to repeal some of the regulations of Obamacare, it modifies some of the other regulations, although it doesn’t repeal them, and then it leaves others in place on the grounds that they can’t be touched through this process. I don’t see why that is a consistent view. I think we need to just focus on the entire regulatory scheme that has driven up premiums for so many Americans, and therefore has cost billions and billions of dollars to the taxpayers, which is perfectly suitable for the reconciliation process. Now there are other changes in the way that I would design the tax credit, and how the tax credit is paid and so forth, that I think would also help address some of the issues raised by the CBO estimate in terms of lost coverage or impact at various income and age levels. But I think the core problem is that we’re not addressing what’s really driving premiums increases in our health care system.
HH: Let’s come back to the tax credit in a second and focus on the regulations that you would like the House to repeal in the bill, and then try and get past the parliamentarian. I believe the core of that is the essential benefits regulatory scheme. Am I right in assessing that?
TC: That’s one of the main ones, but there’s other provisions as well, Hugh.
HH: Have you put forward anywhere a list of those that you would like to be detailed and repudiated by law in the House bill?
TC: Sure. I mean, they’re all well known, Hugh. So for instance, here’s something that mystifies me. Take the so-called community rating. That’s the ratios for which you can charge insurance based on age. So under Obamacare, it was 3-1. You can charge older citizens three times what you charge younger citizens, since age is a very good proxy for health, and the consumption of health care. Rather than just lift that and provide a more generous credit for older citizens, because they’ll need a little bit more money to account for higher premiums based on their age. The health bill tries to modify it from 3-1 to 5-1. I am mystified why we can modify it under the Senate rules, but we can’t change it altogether. So these regulations are fairly well known, and there’s some pretty good research to go to show that they’re driving, you know, over 80% of all the premium increases under Obamacare, which again, increases taxpayer liabilities by billions and billions of dollars.
HH: So if they did in fact remove community rating, or created a larger spectrum, 6-1, 7-1, 8-1, they’d be marginally improving the bill. If they modify the essential benefits, which I actually understand to be one of the drivers of cost dramatically…
TC: No, that is one of the key, that is one of the key regulations that drives the cost. You’re right.
HH: And they postponed that to phase two, and I understand why they did that, but they don’t have interstate competition. Do you agree with the Speaker that that can’t be fit between the guardrails of reconciliation?
TC: I think we ought to at least try. I don’t understand why we wouldn’t try these things, if they’re going to be stricken under the arcane Senate rules. They can be stricken in the Senate. And the elimination of the insurance industry’s antitrust exemption, so they can have state by state markets rather than a nationwide market is, we should all remember, the one thing on which Donald Trump campaigned. It is the one core health care policy idea that he campaigned on repeatedly. We ought to try to do our best to help him deliver on that promise in this legislation, because there is not going to be phase three legislation. It’s phase one and done.
HH: Senator Cotton, have you talked with President Trump about your objections?
TC: I haven’t spoken specifically about the objections at the level of details that we have, Hugh, but he understands my desire to get this right rather than get it fast, and that ultimately, you know, not only do the American people have to live with these results in the long run, but he and everyone in Congress has to live with them as well. And we’ve seen what can happen when health care goes wrong, both with the American people and for folks’ political prospects.
HH: How deeply invested in passage of this bill do you believe President Trump is? Will he remain committed to working the legislative process? I call it going full LBJ. Is he going to go full LBJ on this?
TC: I think President Trump is committed to solving the problem, not just passing a bill. Too often in a legislature, people get tunnel vision, and they focus on passing a bill and not solving a problem. But I believe President Trump wants to solve the problem just as he said when he campaigned. He wants to ensure that premiums are stabilized and ultimately going down, and that people have access to affordable, quality, personalized care. If this bill can be improved to do so, I think he very much would like to do so.
HH: Now Speaker Ryan said last night, in fact, I want to play for you the clip so you can respond to it. He was on with Bret Baier about the consequences of not moving forward. It’s cut number 7:
PR: No, it actually makes it extremely complicated. It puts us about a trillion dollars further down the path or away from doing tax reform. So it’s a very important point. We can’t get to the next budget, either, which is where tax reform is done. So it really would gum up the works, and it would make tax reform that much harder to achieve, because we would have all these Obamacare taxes to deal with as well.
HH: What do you make of that response, Senator Cotton?
TC: Not a single American is going to get better or more affordable health care based on when the Congress passes a particular bill. Not a single American is ever going to cast their vote based on when that happens. It’s important that we get this right, not that we get it fast.
HH: Now can you, do you have conversations with your friend, Paul Ryan, about what Rules can do? I think Americans, especially those who understand the once in a lifetime chance to move Medicaid to the states, to me, that’s the biggest deal here, is to reverse a federalization of everything for the first time ever, pushing it back to the states in a significant way, far more significant than welfare reform. Do you guys talk about this, on how to bridge the gap and bring in your, let’s call them the wets, Susan Collins, Lisa Murkowski, Cory Gardner, Rob Portman all signed that Medicaid letter. How do you get this done?
TC: We do consult pretty regularly, Hugh, not just Senators among themselves, but Senators and Congressmen. The Rules Committee can basically replace an entire draft bill with its own version, but that carries some practical challenges. I mean, the problem in Congress when the leadership simply introduces a bill and doesn’t, you know, take a deliberative approach and allow the committees to really weigh it and have hearings and develop a fact-based body of knowledge, is that they miscalculate the views of their own members. If the Rules Committee tries to make some of the fixes we’ve been discussing, Hugh, I think that could improve the bill. But it also runs the risk of miscounting where some of the votes are. That’s why I think a more deliberative process here would have been, would have better served all of us, and better served the American people in the long run. But again, I don’t think Americans care whether this bill passes by Easter or Memorial Day. They will care in the long run whether their premiums are stabilizing, or whether they’re getting decent health care.
HH: But I believe a Lord of the Flies effect takes over if you retreat. I believe that if you veer form the path, it’s done. If you go into the ditch or try and back up in mud, you get deeper into the mud. They’ve got move forward, in Hugh Hewitt’s view. I think you’re disagreeing with me. Am I correct?
TC: I do disagree with that, Hugh. I think that people in Congress often get tunnel vision, and they focus on, you know, the next 24 or 48 hours and what’s going to happen with this legislation, and passing a bill and not solving a problem. This happened once when I was in the House, Hugh. The leadership brought a flawed farm bill to the floor. It failed. We regrouped, you know, later on, passed a better farm bill and food stamp bill, two different bills. The Senate ultimately didn’t take that approach, but by regrouping in the House and having a better approach, we got a better compromise bill in the end.
HH: Can you split Medicaid away from the individual market? Or does reconciliation not allow that?
TC: Hugh, under the rules of reconciliation, I believe the budget only produces one piece of legislation, which would be why they’re combined right now.
HH: So it has to be done this way. So given where we are, what are the odds of getting a bill that you will vote for by the end of Memorial Day, Tom Cotton?
TC: Oh, by the end of Memorial Day, I think it would be very easy. You know, that would give us many more weeks to work together on this, to get a solution that works for Americans, and also could garner majority support. I simply think that the way this process has unfolded, of dropping a bill that no one had ever seen on a Monday night and voting on it Wednesday morning without CBO estimates or any hearings was apt to produced what has happened, which is a flawed bill that’s not going to solve a lot of the problems that we promised to solve in our campaigns.
HH: And on the tax credit, we have 30 seconds left, do you agree with Avik Roy it needs to be indexed at a steeper amount?
TC: I worry that as Avik says, that there’s going to be a big cliff of people as they transition off of Medicaid into market-based insurance. So that’s something that we need to examine more carefully, and with a little more time, we can.
HH: Senator Tom Cotton, I appreciate the extended conversation about this, and your assessments of what’s going to happen. We’ll talk with Cathy McMorris Rodgers next.
End of interview.