Trump takes over Obamacare political risks with end of subsidies

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(Bloomberg) --After months of pinning the blame for Obamacare’s shortcomings on Democrats and watching his own party fail to act, President Donald Trump just took ownership of a struggle that’s consumed Republicans for seven years.

Trump’s decision late Thursday to end government subsidies to insurers to help lower-income Americans afford to use their coverage under the Affordable Care Act was the most drastic step he’s taken to undermine his predecessor’s signature achievement.

It also lobbed a live bomb into the laps of Republicans lawmakers 13 months before congressional elections after he publicly berated the party’s Senate leadership for being unable to keep a longstanding promise to repeal the law.

“We’re taking a little different route than we had hoped,” Trump said Friday at an event with a conservative group in Washington. “Because Congress, they’re forgetting what their pledges were.”

The move is politically risky. Trump’s action may force movement on a bipartisan effort in the Senate to craft legislation to shore up the Obamacare insurance exchanges and fix some of the law’s shortcomings. But if that fails and thousands of voters see a spike in premiums in the next year, their wrath may be taken out on the president and on Republicans intent on holding control of Congress after the 2018 elections.

Heading for standoff

Adding to the political peril, it increases the odds of a government shutdown when agency spending authority expires on Dec. 8, as well. Democrats are all but certain to demand the health care payments in exchange for their support in any final spending agreement, and the administration is signaling it won’t go for an Obamacare fix without getting something in return.

While Trump has called the Affordable Care Act a “nightmare,” polls show the public disagrees. Two-thirds of Americans say they want the president to work with Congress to improve the Affordable Care Act, according to a poll from the Kaiser Family Foundation conducted before Trump’s action was announced.

The most prominent proposal to fix the law was being crafted by Republican Senator Lamar Alexander of Tennessee and Democratic Senator Patty Murray of Washington.

The pair has been working on a measure that would combine continued cost-sharing subsidies with added flexibility for states to determine the offerings in the individual insurance market. They were making progress in recent weeks, although Alexander said last week that it was vital that they not only agree on their own proposal but also assure party leaders that there was consensus among other lawmakers.

Even if Senate Majority Leader Mitch McConnell were to allow a vote on the Senate floor, conservative opponents would likely filibuster the measure and slow debate.

Opposing subsidies

There also is broad opposition to allowing the subsidy payments in the Republican-controlled House. Under former Republican Speaker John Boehner, the House in 2014 successfully challenged in federal court the Obama administration’s decision to make them without an appropriation from Congress. That decision is being appealed.

Trump said later Friday there is room for a negotiation with Democrats in Congress.

“If Democrats were smart, they’d negotiate something where people could get the kind of health care they deserve,” he told reporters Friday. “What would be nice is if the Democratic leaders should come over to the White House.”

“If they came over, maybe we could make a deal,” he added.

Earlier, Trump’s budget director Mick Mulvaney said in an interview Friday with Politico said that Trump won’t support the Alexander-Murray proposal as it stands or without getting a significant concession on funding for other priorities.

“If the straight-up question is: Is the president interested in continuing what he sees as corporate welfare and bailouts for the insurance companies? No,” Mulvaney told Politico.

The individuals who will be hardest hit by the president’s decision to cut off the cost-sharing subsidies aren’t the low-income people who receive the help. Insurers are required to continue offering them lower deductibles and copays, even if the government funding ends.

Higher premiums

Instead, it’ll be middle-income people who buy their own health insurance without subsidies who will bear the burden. That group numbers roughly 8 million, compared to about 10 million who do get subsidies. They’ll face higher insurance prices for 2018, because insurers will recoup their subsidy shortfall by raising premiums.

“Ironically, it is these unsubsidized folks who have complained the loudest about Obamacare’s big premiums and deductibles,” Robert Laszewski, who runs Health Policy and Strategy Associates, said by email. “They will now have even more to complain about.”

Already, insurers in many states are planning to charge higher premiums next year in anticipation that the cost-sharing payments would end. The administration has been threatening to cut them off for months. In some -- but not all -- cases, state regulators structured those cost increases to fall mainly on individuals who get subsidies, helping protect everyone else.

For hospital chains and health insurers, Trump’s move sowed uncertainty, driving down shares as the market opened to the news. Centene Corp., one of the few remaining health insurers that has pressed forward into the Affordable Care Act marketplace, fell as much as 11 percent and HCA Healthcare Inc., the largest publicly-traded U.S. hospital operator, slid as much as 4.1 percent.

Where Democrats saw deliberate sabotage, Republicans saw vindication.

“Obamacare has proven itself to be a fatally flawed law, and the House will continue to work with Trump administration to provide the American people a better system,” House Speaker Paul Ryan said in a statement.

Senate Minority Leader Chuck Schumer told reporters on a conference call that withdrawing the subsidies is “one of the worst things the president could do to sabotage our health care system.”

Ending them, the New York Democrat said, would cause premiums to jump by 20 percent to 25 percent and likely will result in more Americans living in counties that have no insurers offering policies in the individual market.

Separately, the Democratic attorneys general in California, Massachusetts and Connecticut have announced legal challenges to Trump’s action.

Bloomberg News