When is a bailout not a bailout? That’s the big question facing Congress now.
In an earlier post I described the peculiar language that Congress uses to describe things so they are considered political correct, or incorrect, as it suits their agenda. (see The Misleading Language of Healthcare Reform) The latest word in this peculiar language is bailout.
Now that Democrats have successfully prevented Republicans from making the changes in ObamaCare they promised, it’s time to deal with an unpleasant issue. Cost-Sharing Reductions subsidies (CSRs) are payments by the government to the insurers to subsidize deductibles and co-pays for lower-income individuals – those below 250 percent of the Federal Poverty Level – who purchase coverage on ObamaCare’s exchanges.
Although these payments must be appropriated by Congress, the Obama administration made the payments without approval anyway. The result is a lawsuit called House of Representatives v. Price (the current HHS Secretary). This lawsuit was originally filed in 2015 against the Obama administration and a federal judge ruled in favor of the House. The judge initially slammed the Obama administration with an injunction to prevent further payments. However, the injunction was later stayed at Congress’ request, putting the legality and existence of CSRs in limbo.
President Trump had opposed what he calls “bailouts of insurance companies.” Insurers and Democrats are pressuring the White House to approve the payments to lower the cost of health insurance for low-income Americans.
Are these actually bailouts or not? Who is being bailed out?
Republicans call these bailouts of the insurance companies. Democrats call these necessary subsidies for low-income Americans. Insurers call these cost-sharing reductions.
Avik Roy, writing in Forbes, calls these payments “a bailout of ObamaCare’s sloppy authors.” He blames the authors for creating a healthcare system that is so overloaded with government regulations that it drives up the cost of insurance and makes these payments necessary.
The Congressional Budget Office (CBO) as usual has weighed into the fray with their opinion which Democrats routinely pounce on to justify their position. The CBO predicts 20% premium increases in 2018 if the Trump administration fails to make the CSR payments. They also say the higher subsidies mean that the increased spending on tax cuts will add $194 billion to the deficit through 2026, according to The Wall Street Journal. Ending the subsidies would add $6 billion to the deficit next year.
However, there is some good news. The CBO says that failure to make the payments would produce no significant change in the number of insured individuals, at least not any time soon. Analyst Charles Blahous says the report shows that killing the subsidies could lower costs for some consumers, especially the near-elderly, whose premiums would rise very little while they would be able to afford gold plans that are worth more.
Roy says the prudent thing to do is to pass a short-term, one-year funding package for ObamaCare’s CSRs, in exchange for real reforms of the individual insurance market.
The suggested real reforms include the following:
- Repeal of the Individual Mandate – to give people freedom not to purchase insurance. A six-month waiting period to re-enroll would help lower premiums by incentivizing people to remain enrolled.
- Eliminating the “age bands” – that force insurers to overcharge younger enrollees. The young would pay less, enroll more, and therefore drive down premiums for everyone.
Conservatives would rather not put any more taxpayer funds into the healthcare system but a short-term funding package with these reforms could lead to long-term lower premiums.