The Trump administration announced late Thursday that it would stop paying subsidies to insurers that help cover the cost for about 6 million low-income customers on the Obamacare exchanges. The Department of Health and Human Services said that the cost sharing reduction (CSR) payments "will be discontinued immediately."
Although eliminating the payments will save several billion dollars in the short run – the payments cost roughly $7 billion in 2017 and were set to rise to $10 billion in 2018 – the federal government will end up spending more on Obamacare subsidies due to the higher cost of health insurance. A CBO analysis from August found that terminating the payments “would increase the federal deficit, on net, by $194 billion from 2017 through 2026.”
Here's what the controversial decision means:
Trump is clearly looking to destroy Obamacare: Combined with Trump’s executive order Thursday undercutting Affordable Care Act markets, this move represents taking a sledgehammer or a chainsaw to Obama’s signature law. “President Trump left little doubt yesterday that he intends to do as much damage as he can to the Affordable Care Act's insurance markets,” Axios’s Sam Baker writes. “And he can do a lot.”
Many Americans, and insurers, will be hurt: Insurers have locked in their rates for 2018, but some may try to secure increases or decide to pull out of some markets. “This action will make it harder for patients to access the care they need. Costs will go up and choices will be restricted,” the Blue Cross Blue Shield Association and the health insurance trade association said in a joint statement. If premiums do jump as expected, low-income enrollees who get federal subsidies to cover the cost of their plans won’t feel the pinch, but millions of Americans who earn too much to qualify for the subsidies will face sharply higher costs.
It’s hard to find any winners here: “Trump's new policy will increase premiums by 20%, cost the government $194 billion, increase the deficit, destabilize insurance markets, and increase the number of uninsured Americans,” Vox’s Ezra Klein tweeted. “There is nothing it makes better; it's pure policy nihilism.”
Though some call it a win for the Constitution: The administration justified its move by citing a Justice Department decision that the payments were illegal without Congressional appropriation, a question at the heart of a lawsuit by House Republicans. "Today’s decision … preserves a monumental affirmation of Congress’s authority and the separation of powers," the House Speaker Paul Ryan said in a statement late Thursday.
Not every Republican is pleased: “Cutting health care subsidies will mean more uninsured in my district. @potus promised more access, affordable coverage. This does opposite.” – Rep. Ileana Ros-Lehtinen (R-FL) tweeted. And Nevada Gov. Brian Sandoval said, “It’s going to hurt people. It’s going to hurt kids. It’s going to hurt families. It’s going to hurt individuals. It’s going to hurt people with mental health issues. It’s going to hurt veterans. It’s going to hurt everybody.”
And Democrats want to make sure Trump owns health care now – and “will pay the price for it”: "Sadly, instead of working to lower health costs for Americans, it seems President Trump will single-handedly hike Americans' health premiums. It is a spiteful act of vast, pointless sabotage leveled at working families and the middle class in every corner of America,” House Minority Leader Nancy Pelosi (D-CA) and Senate Minority Leader Chuck Schumer (D-NY) said in a joint statement. “Now, millions of hard-working American families will suffer just because President Trump wants them to."
Lawsuits are already in the works: “A coalition of U.S. states lined up on Friday to sue” to prevent the subsidy cuts, Reuters reports. Democratic attorneys general in New York and California are joining with other states, including Kentucky, Massachusetts and Connecticut, to file suit in federal court in California. Insurers, who are required by Obamacare to reduce out-of-pocket costs for low-income enrollees, could also sue to get the compensation the law promises in return.
The pressure will be on Congress to step in: “President Trump is once again the bull in the china shop, telling Congress, ‘I broke it, you buy it,’” ABC News says. Congress can have the subsidies resume by appropriating money for them, and Sens. Lamar Alexander (R-TN) and Patty Murray (D-WA) are negotiating an Obamacare fix that would include that, but they reportedly still have a long way to go to reach an agreement.
And Trump may still be open to a deal: “I will say the Democrats should come to me, I would even go to them,” Trump said Friday. “I’m only interested in one thing: getting great health care for this country.” But Mick Mulvaney, director of the White House Office of Management and Budget, said Friday that Trump would oppose a compromise along the lines of the one being negotiated. The question then is what else Trump might want in return.