Cost-sharing-reduction subsidies can be acceptable if the individual mandate is loosened.
On October 17, Senators Lamar Alexander (R., Tenn.) and Patty Murray (D., Wash.) reached an agreement to provide cost-sharing-reduction (CSR) subsidies to insurers on the exchanges established by the Affordable Care Act. (“Cost sharing” refers to copayments, deductibles, and the like; these subsidies reduced the amount of such charges that low-income individuals would be responsible for.) While they are not necessary for the exchanges to function effectively as high-risk pools, they are needed to maintain an entitlement that guarantees low out-of-pocket costs for low-income individuals. By itself, this is not an unreasonable use of taxpayer funds, but it makes little sense for the federal government to force people to enroll in subsidized plans when they would prefer to enroll in unsubsidized plans. The House GOP should therefore appropriate funds for CSRs only if this agreement includes authority for states to waive the individual mandate for individuals enrolled in the unsubsidized plans authorized by last week’s executive order.
When the Trump administration announced that it would stop paying subsidies for insurance companies to reduce cost-sharing for low-income individuals enrolled in the exchanges established by the ACA, it argued that Congress had never appropriated funds for this purpose. Maintaining that “the Government cannot lawfully make the cost-sharing reduction payments” in the absence of such appropriation, it called on Congress to step into the breach. The Democratic congressional leaders, Senator Chuck Schumer (New York) and Representative Nancy Pelosi (Calif.) issued a joint statement calling the move “a spiteful act of vast, pointless sabotage.”
Although the New York Times headline screamed, “Trump to Scrap Critical Health Care Subsidies,” the cost-sharing-reduction payments in question represent only 20 percent of federal subsidies for the exchange. The premium subsidies, which heavily subsidize plans covering 70 percent of medical costs for households earning less than 400 percent of the poverty level ($48,240 for individuals; $98,400 for a family of four), do not require annual congressional appropriations and will remain in place.
Read the entire piece at National Review Online
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Chris Pope is a senior fellow at the Manhattan Institute. Follow him on Twitter here.
This piece originally appeared in National Review Online