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If Obamacare Is Repealed, Trio of Dems Want to Replace It on State Level

Proposal would use local taxes, instead of federal fees, to fund Medicaid and market plans

State Sen. Raymond Lesniak
State Sen. Raymond Lesniak

Several New Jersey Democrats hope to rally bipartisan support for their plan to collect from the state the same fees that currently sustain Obamacare on a federal level — if massive cuts result from the program being repealed. Revenue from these new state taxes would be used to support New Jersey’s healthcare efforts.

Legislation by Senators Raymond Lesniak (D-Union) and Joe Vitale (D-Middlesex) and Assemblyman Jamel C. Holley (D-Union) would call on the Garden State to create the same taxes on high earners, drugmakers, and health insurance companies that are now used by the federal government to fund the Medicaid expansion and subsidies for private insurance available through the Affordable Care Act, or Obamacare.

The lawmakers hope to collect at least the $3 billion needed to protect New Jersey’s 550,000 Medicaid beneficiaries who gained coverage after the landmark federal law took effect in 2014. (Another nearly 300,000 low-income workers also got assistance through the ACA to purchase commercial plans on the health insurance marketplace, but the Democrats’ bill doesn’t outline a mechanism to continue these subsidies, estimated to cost another $1 billion.)

Repeal and replace

President Donald Trump and the GOP have sought to eliminate these federal taxes as part of their plan to repeal and replace Obamacare, although the effort is now on hold in the U.S. Senate after additional Republicans defected late Monday. The latest Senate version of the bill would have cost New Jersey more than $60 billion over two decades, ended coverage for one in 10 adults under 65, and eliminated tens of thousands of jobs, according to one analysis.

But in a statement on Tuesday, Lesniak and Holley said “the threat of losing health insurance and Medicaid coverage has not been erased by the repeated failures of President Trump and Washington Republicans to generate enough support to enact a ‘TrumpCare’ plan to replace the Affordable Care Act.”

U.S. Senate leaders were twice forced to delay a possible vote on the measure when it became clear they didn’t have support in their own party; a similar version of the legislation barely passed the U.S. House of Representatives in May, after an initial attempt failed in late March.

Lesniak and Holley appealed to leaders in the New Jersey Senate and Assembly to post the bill for a hearing and asked all their colleagues on both sides of the aisle to co-sponsor the measure, which they introduced in late June — just days before state budget negotiations broke down and triggered a three-day state government closure.

“Repealing the Affordable Care Act without an adequate replacement would devastate New Jersey,” according to Lesniak, a longtime advocate for vulnerable residents. “The time is now to protect the most vulnerable New Jersey residents from whatever comes from a president and Republican Congress determined to undercut their healthcare coverage.”

“Enough is enough,” added Vitale, the longtime chairman of the Senate health committee and the legislative architect of many expansions of the state’s FamilyCare, or Medicaid, program.

No immediate impact?

It was not clear that their request had any immediate impact; Sen. President Steve Sweeney (D-Gloucester) and Assembly Speaker Vincent Prieto (D-Hudson) did not publicly respond to the call. While the Legislature is not currently in full session, leadership has scheduled several hearings this summer, including a joint committee review of Gov. Chris Christie’s plan to shift addiction and mental health services from one department to another.

This isn’t the first time Democrats in Trenton have sought to create a tax system in New Jersey that is more progressive than the national standard. In early June, the Assembly passed a measure that would establish a new state tax designed to close the gap between the (higher) federal tax rate charged for traditional income and the (lower) tax rate applied to certain hedge fund earnings. Some estimates suggested addressing this loophole could bring in an extra $100 million annually.

Lesniak, who sought the Democratic Party’s blessing as a candidate for governor last spring, outlined a similar plan to fund healthcare during his campaign. In that scenario, he called for revenue from higher taxes on wealthy residents, eliminating tax cuts, and plugging Internal Revenue Service loopholes to provide what he suggested would be nearly universal health coverage in New Jersey.

(All four major candidates were open to expanding care; Phil Murphy, the Democratic candidate, has prioritized protecting the ACA coverage now in place.)

Under the new legislation, (S-3376), the Treasury Department would be required to establish the “Affordable Health Care Fund” and deposit into it the revenue collected by five new taxes it would impose, replacing those eliminated by efforts to repeal the ACA — or replace it with something that doesn’t include these fees.

Translated into law

The ACA includes a 3.8 percent tax on net investment income and a 0.9 percent payroll tax for couples who earn more than $250,000, or individuals who gross $200,000 or greater; these would be translated into state law under the bill. The measure also calls for New Jersey to collect a health insurance provider fee, a tax on manufacturing or importing prescription drugs, and a levy on the use of indoor tanning equipment, all revenue sources now used nationwide under Obamacare.

If the federal law remains intact, no new state taxes would be imposed; but if the ACA is eliminated, these new state taxes would take effect the day they were no longer collected on the federal level. Whatever the final outcome, Lesniak and Holley said, “Hundreds of thousands of our constituents are living in fear day to day as President Trump and Congress continue to threaten their ability to live in peace knowing they have nothing to fear.”

This revenue, deposited in the healthcare fund, would be dedicated to maintaining the Medicaid expansion as outlined in the ACA. In New Jersey, this covers residents who earn up to 138 percent of the federal poverty level — less than $28,000 a year for a family of three. In all, Medicaid covers some 1.7 million people in the Garden State.

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