Promoting freedom, innovation, and growth

Connect with IPI

Receive news, research, and updates

August 15, 2017

To Bail or Not to Bail (Obamacare)?

 

Republicans face an ethical—not to mention political—dilemma: Should they bailout Obamacare? 
 
To do so likely means putting band-aid after band-aid on a failing individual health insurance market that cannot survive without a continuous infusion of billions of taxpayer dollars—and may not survive even then.
 
To refuse will likely accelerate the pace in which millions of Americans in Obamacare exchanges lose their health insurance coverage—on top of millions who have already lost their coverage because they couldn’t keep the policy they liked, as President Obama promised.
 
Either way, Democrats and the media—and perhaps many voters—will blame Republicans for the failure of Obamacare, when that failure is almost entirely a result of its original design.
 
President Trump will have to decide soon whether he will continue to authorize the “cost-sharing reduction” (CSR) payments. Obamacare requires the government to make these payments to health insurers, estimated to cost about $7 billion a year, which reduce co-pays and out-of-pocket costs for lower-income participants in Obamacare exchange plans.
 
The problem is that Democrats didn’t appropriate the money for CSR payments, so President Obama unconstitutionally authorized the payments anyway.
 
President Trump has continued to fund the CSR because he reasonably thought that the Obamacare repeal and replace effort would resolve the issue. Now he has to decide if he will continue. And remember: The CSR is only the most pressing of several Obamacare provisions that funnel subsidies to insurers.
 
Complicating the issue is the Congressional Budget Office’s just-released report on CSR payments. It estimates premiums will rise next year by 20 percent to offset the loss of the subsidy, and the deficit would increase by an estimated $194 billion over 10 years because the government would be paying higher premium subsidies. But then the CBO has been no friend of those who want a freer, market-oriented health care system.
 
My gut tells me that Trump should tell Democrats if they want the CSR money, convince members of Congress to pass funding legislation. That’s how our government is supposed to work under the Constitution.
 
But then almost nothing works like it’s supposed to anymore.
 
There will be a lot of pressure on the president from Democrats and even some Republicans to pay up. Republicans may try to extract some concessions from Democrats for doing so, but their track record isn’t very good.
 
How many times have we seen it?  Democrats propose a massive new government program. Republicans resist and resist until they finally cave, create a Democrat-lite version of the legislation, and call it a major Republican victory.
 
Democrats will continue to blame Republicans for anything that goes wrong with Obamacare, putting Republicans in a lose-lose situation.
 
If you’re going to lose anyway, probably best to lose on the side of good policy—and the Constitution—and reject the CSR payments.


 

  • TaxBytes-New

Copyright Institute for Policy Innovation 2017. All Rights Reserved Privacy Policy Contact IPI.

e-resources e-resources