For Congress, the Best Deal on Obamacare May Be No Deal At All

Allowing the health law's insurer subsidies to go unpaid may be the superior outcome for everyone.


Credit Tom Williams/CQ Roll Call/Newscom

What would a compromise deal on health care actually look like? Following President Trump's decision to cut off funding for insurers under Obamacare, lawmakers are struggling to work out a legislative response. The best outcome for everyone may turn out to be doing nothing.

Earlier this month, Trump made the belated decision to stop making a series of subsidy payments to health insurers under Obamacare. The payments, which reimburse insurers for providing mandatory additional benefits to low-income enrollees, were never explicitly appropriated by Congress. As a result, a federal court ruled last year the payments illegal. The Obama administration kept making them anyway, and so, until recently, did the Trump White House.

The court ruled that those payments were illegal because, without an explicit appropriation, making them violated the constitutional separation of powers, which gives Congress the power of the purse. But the payments are called for in the statute of the law, and could be made legally—if Congress gives its consent.

Two legislative proposals would do just that. The first, a bipartisan bill from Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.), trades two years of funding for the subsidies, which are known as cost-sharing reduction (CSR) payments, for the possibility of some additional flexibility for states implementing Obamacare.

The bill is being pitched as a stability measure, intended to help keep premiums down in Obamacare's exchanges. Supporters also point to Congressional Budget Office (CBO) reports estimating that, in the long run, paying the subsidies would actually save taxpayers money, because Obamacare's subsidies rise in conjunction with insurance premiums. Keeping premiums down now by subsidizing insurers would reduce the amount of premium subsidies paid over the next decade by almost $200 billion, according to CBO.

The problem with this proposal is that it offers clear benefits to Obamacare's supporters but little obvious upside for critics. The division of benefits is reflected in the support for the proposal: According to Senate Minority Leader Chuck Schumer (D-N.Y.), it has the support of 60 Senators—48 Democrats and just 12 Republicans. Schumer has pushed to bring the proposal to a floor vote, but Majority Leader Mitch McConnell (R-Ky.) has not committed to doing so.

In response, a pair of Republicans, Senate Finance chair Orrin Hatch and House Ways and Means Chair Kevin Brady, released a competing proposal yesterday. It too would fund CSRs, but it would also suspend Obamacare's individual mandate for five years. Unlike Murray-Alexander, it is not an attempt to find common ground with Democrats. It is an attempt to find common ground amongst Republicans, trading the CSR funding that some want to see in exchange for the temporary elimination of the mandate—which would probably become semi-permanent, if it became law.

The Hatch-Brady proposal would also require 60 votes in the Senate to pass, relying mostly on Republicans.* Republicans have repeatedly demonstrated this year that there are not 50 GOP votes for any health care measure, making this a tough lift. So Murray-Alexander, or some lightly modified version of it, is likely to be the only option. McConnell has said he will bring it to a floor vote if President Trump says he will sign it into law, but Trump, as is his wont, has provided extremely mixed signals on what he actually wants from the legislation, suggesting variously that he both supports and opposes it. Trump's actual position on this, as on so many policy questions, remains a mystery, probably even to Trump himself.

The Alexander-Murray bill, as a result, is unlikely to come to the floor by itself. But it may end up attached to some part of the flurry of major legislation Congress is expected to work on in December, thanks to the short-term budget agreement Trump made with Democratic leadership in September.

Even if the Senate were to pass a bill, however, it would likely face some resistance in the House from conservatives. House Speaker Paul Ryan has already said he opposes it. The entire exercise, then, raises—or at least repeats—the question of what a health care compromise would look like.

For the moment, the best answer may simply be the status quo, in which Obamacare continues but without the CSR payments being made. The appeal to both critics of the health law and those who care about constitutional limits is obvious enough: The CSR payments were being made illegally, and have now been cut off, bringing the law into constitutional compliance.

The appeal to Obamacare supporters is that, over time, eliminating the payments is likely to result in greater health coverage under the law. The CBO estimates that, if the CSR payments are not made, about 1 million more people will have coverage after 2020 than otherwise would have.

The reason is because even though premiums will rise, insurers in most states will pack the bulk of the increase onto typical plans—the "silver" tier of coverage under Obamacare. Enrollees will be insulated from these increases, however, because under the law, subsidies rise with the cost of premiums. Although the cut off may result in some initial market turbulence, CBO predicts that over time the subsidies will rise so much that the plans will become more attractive, resulting in more people being covered. (In the process, the deficit will increase too.)

This is not a deal that either side will especially love: On the one hand, it accepts that Obamacare will remain largely in place going forward. (The Trump administration is already detailing its plans for this year's open enrollment period.) On the other hand, it is likely to cause some disruption in the short term, and provides an important signal that neither Congress nor the White House are interested in propping up the law. It does not imply a permanent equilibrium.

Yet it offers limited but clear benefits to both parties going forward in a way that other proposals do not, and is probably the best grounds for a compromise that currently exists. The best health care deal, in other words, may be no deal at all.

*Correction: This post initially stated that Hatch-Brady would need 50 votes to pass. Presuming no changes to the filibuster, it would need 60.