Trump does end-run around Congress, scraps Obamacare insurer subsidies via executive order; what’s really happening?

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The News:

An alliance of US states joined ranks on Friday (October 13, 2017) to sue to block President Donald Trump’s move to dump a key component of Obamacare–subsidies to health insurers that help low-income Americans pay out-of-pocket medical expenses.

One day after the administration announced plans to end the payments, Trump said he would dismantle Obamacare “step by step,” even as his latest action raised concerns about chaos in insurance markets, according to a Reuters report. Trump’s action took aim at a critical component of the 2010 law, his Democratic predecessor’s signature domestic policy achievement.

Frustrated by the failure of his fellow Republicans who control Congress to repeal and replace Obamacare, Trump has taken several steps to erode it. The administration will not make the next payment to insurers, scheduled for Wednesday (October 18, 2017), Attorney General Jeff Sessions said. The subsidies cost $7 billion this year and were estimated at $10 billion for 2018, according to congressional analysts.

The Democratic attorneys general of New York and California were joining forces with several other states, including Kentucky, Massachusetts and Connecticut, to file a lawsuit in federal court in California. The states will ask the court to force Trump to make the next payment, Massachusetts Attorney General Maura Healey, a Democrat, told reporters. The new lawsuit would be separate from a case pending before an appeals court in the District of Columbia in which 16 Democratic state attorneys general are defending the legality of the payments.

About 10 million people are enrolled in Obamacare through its marketplace, and most receive subsidies. Trump’s action came just weeks before the Obamacare open enrollment period begins on November 1 for 2018 insurance policies through the law’s marketplace. Democrats accused Trump of sabotaging the law. But Senate Democratic leader Chuck Schumer expressed optimism about chances for a deal with Republicans to continue the subsidy payments.

“We’re going to have a very good opportunity to get this done in a bipartisan way” during negotiations in December on broad federal spending legislation, “if we can’t get it done sooner,” Schumer told reporters.

The White House announced the cut-off just hours after Trump signed an order intended to allow insurers to sell lower-cost, bare-bones policies with limited benefits and consumer protections. Health insurers’ stocks took a hit on Friday, with Centene Corp. (St. Louis) and Molina Healthcare Inc. (Long Beach CA) both sinking about 8% for the week. Hospital shares also plummeted, with Tenet Healthcare Corp. (Dallas) down 16% and Community Health Systems Inc. (Franklin TN) down 19%.

Steve’s Take:

I think it’s safe to say even a moron can tell that President Trump is totally exasperated by Senate Republicans’ inability to pass healthcare reform. Certainly, he wants to obliterate the term “Obamacare” from the American political and societal lexicon.

And I personally believe that even if he cannot technically repeal the Affordable Care Act, if he’s allowed to say that his executive orders and other administration policies amount to a “repeal,” he’ll be satisfied.

Republicans command the Senate, and based on what has happened so far, it appears that no GOP bill will ever attract the support of Rand Paul (KY), Susan Collins (ME), or John McCain (AZ). Therefore, until and unless the constituency of the Senate changes, the only actions Republicans can take are through the executive branch.

Looking back eight years, a lot was said about how the 2,000-plus page Patient Protection and Affordable Care Act set forth, in highly specific language, the way Washington would run the healthcare system going forward. Forbes’ Avik Roy notes that while the HHS Secretary–in those days, Kathleen Sebelius–would have the authority to determine exactly how to carry out Obamacare’s rules, “the Obama administration was (in theory) bound by the statutory law passed by Congress.”

Roy points out, correctly, that the Obama administration was highly selective in enforcing the Affordable Care Act as written. He cites the following as some examples of how Obama simply ignored the ACA and decided to do what he thought was best in carrying out the “spirit” of the law, regardless of the precise letter of the law:


  • After millions of Americans complained that their insurance plans had been canceled–contrary to Obama’s promise that “if you like your plan, you can keep your plan”–Obama declined to enforce aspects of the law that required those plans to shut down–until he was reelected.


  • The Obama administration decided–unilaterally–to waive Obamacare’s individual mandate, by granting a “hardship exemption” to anyone for whom Obamacare’s offerings were “unaffordable.”


Facing a revolt by insurers, who were being forced to cover these individuals at a loss, the Obama administration decided to spend the money anyway, even though they had no legal authority to do so. This policy is now under judicial review.

Returning briefly to Mr. Trump’s executive order, there are a couple of misconceptions about the cost-sharing subsidies. One, decreed by Republicans, is that continuing CSRs amounts to a “bailout” for insurance companies. That’s not the case, Roy argues. Obamacare requires insurers to offer these policies, and mandates that insurers can’t charge higher premiums for them. That’s not their fault.

The other misconception, disseminated by Democrats, is that lower-income people will see higher premiums or out-of-pocket costs due to the Trump decision. That’s not the case either. Anyone who benefited from cost-sharing subsidies will see no change to their net premiums or cost-sharing. However, spending on tax credits will increase to make up for the absence of cost-sharing subsidies.

Yes, it’s all in how you look at it.

Senate Democrats haven’t flinched one iota in voting unanimously against all the Trump-era GOP healthcare reform measures to date. Their party line is that by stopping payments to insurance companies and signing an executive order to that effect, Trump will significantly damage the health insurance market and harm millions of people.

The loss of this subsidy money, expected to be $9 billion next year, will force insurers to raise premiums and stop selling policies in some parts of the country, according to the Democrat-leaning New York Times. Because most people who buy coverage on ACA exchanges also receive subsidies to keep their premiums affordable, this change would actually cost the government money–about $2.3 billion more next year, according to the Kaiser Family Foundation.

State governments, public interest groups and others will seek to prevent some of the damage that may result from the president’s executive order. There is some hope that they will be able to shape the regulations during the public comment period. If the final rules are still harmful, some groups will most likely file lawsuits.

Bottom Line:

There’s little question Mr. Trump is determined to thwart Obamacare, however his executive branch of government might be able to do so. His administration has shortened the ACA open enrollment period during which people can buy coverage for next year. Funding aimed at helping people enroll–like money for advertising and health navigators–has been slashed.

Now is the time for Congress to step in and do what its job is, in the first place. Lawmakers need to finish work on much-ballyhooed bipartisan legislation to strengthen the ACA, including by appropriating money for the cost-sharing payments.

Steve's Take: I'm not holding my breath for a #bipartisan solution for #Obamacare Click To Tweet

Republicans have called Obamacare an unnecessary government intrusion into the American healthcare system. Democrats have said the law needs some fixes but noted that it had brought insurance to 20 million people.

Can our lawmakers put aside their partisan differences, rise to the occasion, and work together to protect the health of all us citizens? I still believe it will happen. But I’m not going to hold my breath.

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