The key reason Trump keeps funding ObamaCare “ransom”

Ed Morrissey Posted at 2:01 pm on August 17, 2017

Last month, Donald Trump threatened to force ObamaCare into collapse when Senate Republicans proved unable to advance any plan for its repeal and replacement. Since most of the Affordable Care Act spending and administration comes from statute, options for interfering with its operations are more limited than many may assume. However, funding of the cost-sharing reduction payments to insurers for Silver plans can be halted, as the funds have never been appropriated for that program. Trump has specifically threatened to halt that funding, but … once again, those insurers will get their subsidies, at least for another month:

The Trump administration said on Wednesday the federal government would make a set of payments to insurers for August, despite threats from the president that the funding would be halted following the failure of Senate Republicans to repeal most of the Affordable Care Act.

Governors and Democratic lawmakers have been urging President Donald Trump to continue the payments, known as cost-sharing reduction payments, because insurers have said they may pull out of the ACA’s insurance markets or raise premiums in 2018 without the funding.

The nonpartisan Congressional Budget Office said in a report Tuesday that premiums for popular, midprice plans on the ACA exchanges would rise 20% next year without the payments.

Conservative Review’s David Horowitz lamented, “So Trump pays the ransom,” which is a fair assessment but not a complete one. The CSR program does provide some political support for ObamaCare thanks to its artificial suppression of out-of-pocket costs to qualifying Silver plan enrollees, so ending the payments might theoretically undermine support for the plan. However, as I explain in my column at The Fiscal Times, cutting off those payments will cost far more than it saves, and might well be described as cutting off one’s nose to spite one’s face:

Trump could moot this dispute at any time by refusing to make the CSR payments to the insurers. However, the CBO report predicts a number of unintended consequences if he does. It could save $118 billion in CSR payments over the next decade, but insurers – still stuck with the statutory requirement to lower out-of-pocket costs in Silver plans – would have to raise their premiums by as much as 25 percent, the CBO predicts. Enrollees only pay a set fee for insurance at all levels based on their income, benchmarked on the Silver plan, so taxpayers would end up footing the bill not just for the increased subsidies on these specific Silver plans but all plans. That would increase subsidies by $365 billion in the same time period, resulting in a net increase of deficit spending of nearly $200 billion.

Oddly enough, while taxpayers would lose the most in this exchange, lower-income Americans would gain the most benefit. E21’s Charles Blahous walks through the CBO’s examples that show dramatic reductions in premium payouts for older consumers opting to buy Gold level plans, in some cases paying nothing at all. “It is interesting, precisely because it is so counterintuitive,” Blahous concludes, “that CBO has projected that terminating CSR subsidies would actually lead to the federal government spending more money, providing low-income people with more affordable insurance coverage options, and even increasing insurance enrollment.”

Rather than hasten Obamacare’s collapse, the CBO also notes, the changes that come from eliminating funding for CSRs might actually make the system more stable. “[T]he nongroup insurance market would also continue to be stable in most areas of the country,” CBO concludes, in part because state insurance commissioners would have significant incentive to approve premium increases. “Many insurance commissioners would favor that increase,” the report notes, “because it would result in larger increases in premium tax credits for people in their states and, thus, lower net premiums paid by enrollees than alternatives that insurers might propose.”

There are two main arguments for ending the CSR payments. The first, the issue of constitutional authority and executive abuse of federal funds, is an argument that stands on its own regardless of whether one wants ObamaCare to collapse. Unless Congress appropriates funding for the CSR program, the president should not be allowed to spend funds directed elsewhere for it, especially given Congress’ explicit refusal to fund the program. On that basis, certainly, the funding should end — and if Congress doesn’t like the consequences of what follows from that, they can appropriate the funds legitimately in the next budget cycle.

The utilitarian argument — that it will help accelerate the crash of ObamaCare — simply doesn’t hold water. Insurers will jack up the premiums, and taxpayers will foot the bill through the mandated statutory spending that neither the president nor Congress can stop without repealing the ACA.

There are no shortcuts for ObamaCare repeal, especially not this one. Trump and Republicans on Capitol Hill should focus those efforts on effective legislation. However, the constitutional issue of executive encroachment on Congress’ power of the purse is important enough to justify Trump taking action, and forcing Congress to decide how to proceed on the CSR program in the meantime.





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