Share this article

print logo

Trump uses Obamacare subsidies as chip for $1.4 billion for border wall

WASHINGTON – More than 19,000 Buffalo-area residents on the state's Essential Plan health care option could be in danger of losing their insurance because the Trump administration is threatening to withdraw a huge part of the program's funding.

Meantime, another 10,637 metro Buffalo residents who buy their health care on the state's insurance exchange could see dramatically higher costs next year.

And it's all because the Trump administration is using the Obamacare subsidies, called "cost-sharing reductions," as a bargaining chip to try to get Congress to begin funding the wall he wants at the Mexican border.

If the administration goes through with its threat to withhold those federal subsidies, "it would be unlikely that there would be something called the Essential Plan anymore," said Roberta Rifkin, senior vice president for government programs and governmental affairs at Independent Health.

In addition, insurers say Trump's move could dramatically boost the price of other "qualified health plans" on the state's health marketplace. Higher prices could force thousands of New Yorkers to decide to drop their health coverage and go uninsured, insurers said.

"It's likely to be unaffordable, except to those people who really need it," Rifkin said of the health care sold on the state's insurance exchange.

Those dire warnings come as Trump and Congress embark on a difficult week of negotiations on a spending bill aimed at funding the government through Sept. 30 and averting a federal government shutdown at midnight Friday.

Congressional leaders from both parties have been negotiating to try to reach a deal.

But they have been slowed by conflicting signals from the Trump administration about the future of the "cost-sharing reductions" that the federal government provides to subsidize many insurance plans sold on the Obamacare health marketplaces called exchanges.

First, in an April 12 interview with the Wall Street Journal, Trump threatened to withhold the cost-sharing reductions to force Democrats back to the table to negotiate a deal to replace Obamacare.

“Obamacare is dead next month if it doesn’t get that money,” Trump said in that interview. “I haven’t made my viewpoint clear yet. I don’t want people to get hurt ... What I think should happen and will happen is the Democrats will start calling me and negotiating.”

Then Mick Mulvaney, the director of Trump's Office of Management and Budget, proposed using the cost-sharing reductions (CSR) as leverage to force Congress to set aside money in the upcoming spending bill for Trump's proposed wall at the U.S.-Mexico border.

"We'd offer them $1 of CSR payments for $1 of wall payments. Right now, that's the offer that we've given to our Democratic colleagues," Mulvaney told Bloomberg Live on Friday.

Democrats rejected that offer out of hand.

“The White House gambit to hold hostage health care for millions of Americans, in order to force American taxpayers to foot the bill for a wall that the President said would be paid for by Mexico, is a complete non-starter," said Matt House, communications director for Senate Minority Leader Charles E. Schumer, D-N.Y.

Trapped between Trump and Congress are health administrators such as Donna Frescatore, executive director of New York State of Health, the state's Obamacare exchange.

Her first concern is the Essential Plan, a state-run insurance plan for low- and middle-income people who earn too much to get Medicaid, the state-federal health plan for the poor. The Essential Plan offers comprehensive benefits for no more than $20 a month, all because it is heavily subsidized.

---

Subsidies under threat

The subsidies that are now under threat provide nearly a quarter of the Essential Plan's funding, or about $900 million annually.

"I'm not going to speculate on what would happen with the Essential Plan in the event that the cost-sharing reductions are eliminated," Frescatore said. "But that said, there is the potential for it to have a significant impact on the 655,000 New Yorkers that rely on it."

Other health care experts speculate that a $900 million annual hit would end the Essential Plan as it exists today.

Either the state would have to find that $900 million in its budget, pass that $900 million on to policyholders in the form of huge premium increases, design some sort of combination of the two, or abandon the Essential Plan and leave its policyholders to consider buying other insurance.

The problem is that other insurance is likely to be much more expensive if Trump's moves end the subsidies that support it.

Proof can be found in recent research by the Kaiser Family Foundation, which studied how the cost-sharing reductions on the federal Obamacare exchange saved people money. For people with incomes between 150 percent and 200 percent of the federal poverty rate who bought "silver" plans on the exchange, those federal subsidies cut annual out-of-pocket limits by $4,653.

Those people would have to pay that money themselves if the federal cost-sharing reductions were eliminated, and that's just the start of the cost impact of such a move.

---

Ripple effect

Frescatore and other health insurance experts said they expect the elimination of those subsidies would ripple through the entire market for individual health plans. The loss of subsidies would prompt many lower- and middle-income people who buy insurance on the exchanges to drop their coverage. Those who keep their insurance would likely be older and sicker – and insurers would have to raise rates in order to cover them.

Rates on individual plans could increase between 12 and 20 percent above and beyond their usual annual increase, said Donald R. Ingalls, vice president for state and federal relations at Blue Cross Blue Shield of Western New York.

At that price level, insurers might not find enough customers to make it worthwhile to even offer health plans on the Obamacare exchanges such as New York State of Health.

"Insurers would have to evaluate if they could even participate in the individual market anymore," Ingalls said.

In other words, the stakes in this week's Washington budget battle are extraordinarily high for any American who buys their health insurance on one of the Obamacare exchanges.

Democrats and the Republican president's team disagree on whether it's fair that those stakes are so high.

---

$1.4 billion for a wall

Trump is seeking $1.4 billion in this week's spending bill to start work on his border wall, which is expected to cost as much as $21.6 billion in total. Democrats such as Schumer are aghast that the president may use the health care of millions of Americans to try to coerce Congress to get what he wants.

"The U.S. government is supposed to take care of its citizens and, according to the president, Mexico is supposed to pay for the wall," said House, Schumer's spokesman. "If the administration would drop their 11th hour demand for a wall that Democrats – and a good number of Republicans – oppose, Congressional leaders could quickly reach a deal” on spending.

Mulvaney, Trump's budget director, conceded that despite Trump's earlier comments about using the health care subsidies as leverage to force Democrats to agree to Obamacare reforms, the administration's focus now was to use those health subsidies to get what the president wants most: a wall at the Mexican border.

"This president should be allowed to have his highest priorities funded even though the Democrats rightly have a seat at the table because of the Senate rules," Mulvaney told Bloomberg Live. "But you cannot expect a president who just won election to give up very easily on his highest priority."

Story topics:

There are no comments - be the first to comment