The closer that Republicans get to settling on a Obamacare repeal plan, the uglier the intra-party fighting gets, with the latest round being over the types of tax credits lawmakers offer as an alternative to the Affordable Care Act.

The details are wonky, but reveal the deep differences in philosophies regarding health care reform that are currently roiling the GOP caucus. Just as troubling for Republican leadership in Congress is that a not-insignificant smattering of GOP lawmakers are vowing to vote against an Obamacare repeal bill that also offers the type of tax credits to which they object. The infighting was exacerbated by a leaked GOP plan that included a controversial form of the credits.

Here are 5 points on what the disagreement is over and why it has gotten so heated.

The debate reflects a fundamental disagreement over the goal of the GOP’s Obamacare replacement.

The details of the debate are technical, but underlying it is a fundamental disagreement among Republicans over the goal of their health care overhaul: “The debate over restraining federal spending versus trying to get coverage for people,” as Larry Levitt, the vice president of the Kaiser Family Foundation, told TPM.

The role that tax credits play in this debate is that they basically define how involved government will be in assisting people in seeking coverage. On the skimpiest end is a deduction, which would mean that whatever amount an individual pays on insurance every year will be deducted from the amount of income the government taxes him or her on. Then there are tax credits, which use the tax system to subsidize health insurance. A refundable tax credit means that if a person pays less in taxes than the credit being offered, he or she receives the difference as a payment from the government. A tax credit that was not refundable would mean the credit wouldn’t help those not paying any taxes, or paying less in taxes than the full credit.

This has been a longstanding debate in health care reform. For instance, during the 2016 campaign former Gov. Bobby Jindal (R-LA) slammed Gov. Scott Walker (R-WI) for including a refundable tax credit in his plan, lobbing claims similar to what conservatives are wielding now against that sort of proposal. Trump, for what it’s worth, proposed a deduction during the campaign, but shifted towards favoring a credit in his joint address to Congress Tuesday night (though conservative were quick to point out he didn’t say “refundable”).

Leadership wants a refundable tax credit, in part, because whatever they do will be compared to Obamacare.

Without making their tax credits refundable, Republicans won’t be able to lend much assistance to those who have benefited most from the Affordable Care Act: lower income people. GOP leadership hinted as much in briefing material presented to its conference last month, arguing that “if the credit is to be valuable to the low income— those who are most in need of assistance to purchase health insurance— then refundability is an important feature.”

Republicans from Medicaid expansion states who are particularly squeamish about Obamacare repeal point to the tax credits as way to cushion the blow for people who might no longer be eligible for Medicaid if the expansion is rolled back.

According to Tom Miller — a health care policy analyst at the conservative American Enterprise Institute and a former senior health economist for the Joint Economic Committee in Congress — the challenge facing Republican leadership now is tougher than what it would have been before the Affordable Care Act was implemented, when individuals were on their own when buying insurance. “Now the baseline is a more … progressive, income-related,” Miller told TPM, referring to the tax credits offered under Obamacare. “That makes it harder for the leadership trying to deal with that set of comparisons.”

As it stands in the leaked draft, the Republican credits would shift the tax benefit away from lower income people and towards those higher on the income scale, because the credits don’t adjust for income. That assistance would dry up for those lowest on the income scale completely if they were not refundable, because those who don’t make enough to pay taxes wouldn’t receive the full credit — or any credit at all. The system gets even more regressive if it is limited to a deduction. Those who make the most would get the biggest break, because their tax rates are higher, so the deduction would result in greater savings.

“Most of the people who were uninsured and who have gotten coverage under the Affordable Care Act are low income, and they get little to no help if it’s a tax credit that’s not refundable or a deduction,” Levitt said.



House Speaker Paul Ryan with his ‘Better Way’ outline, which includes many of the health care proposals being considered with Obamacare repeal.



Conservatives bash refundable tax credits for creating a new ‘entitlement’ program.

The biggest qualm conservatives have with a refundable tax credit is that they say it creates another entitlement program, akin to Medicare and Medicaid, which they blame for driving the national debt.

“The feds are going to put in refundable tax credits — a new entitlement system, all of our entitlements are bankrupt,” Rep. David Brat (R-VA), member of the hardline conservative House Freedom Caucus, told reporters last month.

But it also fits into the conservative ethos that this kind of financial assistance provided by the government disincentivizes work.

“Some Republicans view a refundable tax credit as something akin to welfare payments. If you make it refundable it will discourage people from getting a job,” said Joe Antos, who has held positions in the Congressional Budget Office, the Department of Health and Human Services, the Office of Management and Budget, and the President’s Council of Economic Advisers, before becoming a health policy analyst for AEI.

“They would prefer people get their health insurance by becoming productive workers,” Antos told TPM.

Conservatives prefer a deduction system.

The health care plan that has gained the support of many conservatives — introduced by Sen. Rand Paul (R-KY) in the Senate and Rep. Mark Sanford (R-SC) in the House — offers a deduction on health insurance. So if you make $100,000 a year and spend $10,000 on insurance annually, your taxable income would be $90,000 (assuming no other deductions).

This motivation for this deduction is less to make insurance more affordable for individuals, and more to level the playing field in the tax system between individual and employer-based health insurance. Under current law, when an employer provides a health insurance benefit it is not treated as income to the employee. If a health insurance deduction is also an incentive for individuals to buy insurance, so be it.

After Trump name-checked tax credits in his speech Tuesday, conservatives glommed onto the refundability aspect, which went unmentioned in the address.

“There’s a difference between tax credit and refundable credit,” Paul told reporters Wednesday morning. “If they give you back some of your own money, that’s not an entitlement program. If they give you back somebody else’s money, that’s an entitlement program. So I’m not for a program that gives you someone else’s money.”

If they don’t come to a deal, leadership and conservatives will be playing a game of chicken.

The tax credits are just one of many concerns conservatives have raised about the leaked GOP plan. They also object to the way Medicaid expansion is handled — the rumor is that those currently on the expanded rolls will be able to stay within the program — and to a continuous coverage requirement leadership is floating to address the challenge of coverage for pre-existing conditions. Some conservatives claim that requirement amounts to another individual mandate.

The hardliners’ preference is to simply re-run the 2015 Obamacare repeal bill that passed in Congress but was vetoed by President Obama. That bill dismantled most of law with a 2-year delay, and conservatives say that the replacement elements could be voted on separately.

But House leaders seem to be humming along with their own plan, with the hope that the GOP naysayers will be too afraid to be blamed for the failure of an Obamacare repeal if they don’t vote for the final bill.

There have been other issues raised about the tax credits, including whether they should adjust for income or if they should be more generous for older people. But unlike issues of dollar amounts or formulas that can be tweaked towards a compromise, whether consumers get a deduction or a credit — and whether it’s refundable — is a black or white question.