President Trump sent conflicting signals this week on the status of health reform, particularly regarding what the administration is planning on doing with the ACA’s Cost Sharing Reduction (CSR) program. On Monday, the Department of Health and Human Services (HHS) wrote in a statement, “The precedent is that while the lawsuit is being litigated, the cost-sharing subsidies will be funded. It would be fair for you to report that there has been no policy change in the current administration.” This suggested that HHS was sending a strong signal to insurers and others that they would continue funding the CSR program, which would bring needed stability to the marketplaces. But a day later, reportedly at the personal request of President Trump to HHS Secretary Tom Price, HHS strongly condemned the New York Times’ report of their statement and said that they hadn’t yet made a decision on the CSR program.
One possibility for the conflicting messages from President Trump is that he intends to use the CSR program as leverage with Democrats to pass a larger health reform package to the ACA. As Republicans continue to work out their differences, which prevented a vote from being held last month on the American Health Care Act (AHCA), President Trump has hinted that he may work with Democrats on a bipartisan deal if Republicans can’t come to an agreement. The president referenced the CSR program as part of a deal and directly called on Democrats this week saying, “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.”
However, congressional Democrats have not indicted that they will negotiate over the CSR payments, saying in a statement, “Failing to make these payments would be a direct effort by the administration to further undermine the health care system in this country, putting care for millions of Americans at risk.” Senator Ron Wyden (D-OR) ardently responded to Trump’s proposition by saying “We will not negotiate with hostage takers,” suggesting that Trump’s demand effectively holds consumers who receive the CSRs as hostages to the president’s negotiations.
Democrats also issued a counter-threat that they would hold up the 2017 appropriations bills if the CSRs are not funded, unless they are included as permanent mandatory spending. While the budget reconciliation process only requires a simple majority of 51 votes in the Senate, the separate appropriations bills require 60 votes to overcome a filibuster. Therefore, Democrats could force Republicans to include their request for permanent CSR funding to be attached to one of the appropriations bills, in order for other Republican priorities to also be passed. The Trump Administration could be encouraged to fund them now because that wouldn’t have an additional cost attached to them as the Congressional Budget Office baselines already account for them, but if they were to stop payment and later resume the program, additional offsets would be required in the appropriations process.
The CSRs help offset out-of-pocket expenses for silver-tiered plans purchased through the marketplaces, for households with incomes up to 250% of the federal poverty level. The subsidies are paid indirectly, as insurers reduce their costs for eligible consumers and in return receive monthly payments from the federal government to make up the difference. The administration has been appealing a ruling last May by U.S. District Court Judge Rosemary M. Collyer in favor of Congress that the program was not properly funded. In February, the Trump Administration requested an additional three months to consider the lawsuit, House v. Price, challenging the CSR payments. The court filing postponed legal proceedings until May 22, after which the administration and House Republicans will report every 90 days whether to continue or further delay the case.
The CSR payments are allowed to continue as long as the administration continues its challenge of the ruling. But should the Trump Administration decide to drop its challenge, then the payments made by the government to insurers would cease, while insurers would still be required to provide the subsidy amounts owed to individuals—an amount of roughly $7 billion annually across all insurers. This could result in many insurers opting to immediately withdraw from the marketplaces and leaving millions without coverage. Last year, insurers added language to their contracts permitting them to leave the market should the government funding cease.
A group of health insurance officials are due to meet with Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma next Tuesday to discuss the subsidies. The group includes executives from America’s Health Insurance Plans, the Blue Cross Blue Shield Association and several large regional health plans, including Molina Healthcare, Geisinger Health Plan, Oscar Insurance Company, Kaiser Permanente and Health Care Service Corp.
Ahead of the meeting, several major industry groups sent a letter to President Trump urging the administration to continue funding the CSR program on the basis of market stability. The letter notes that “The most critical action to help stabilize the individual market for 2017 and 2018 is to remove uncertainty about continued funding for cost sharing reductions (CSRs).” It further notes the consequences of not funding the program: limited consumer choices, higher premiums for consumers both on and off the exchanges, more uncompensated care, and increased taxes for middle-class Americans. The letter was sent by America’s Health Insurance Plans, the U.S. Chamber of Commerce, American Benefits Council, American Hospital Association, American Medical Association, Blue Cross Blue Shield Association, American Academy of Family Physicians, and the Federation of American Hospitals. In addition to President Trump, it also went to HHS Secretary Tom Price, Treasury Secretary Steven Mnuchin, Office of Management and Budget Director Mick Mulvaney and CMS Administrator Seema Verma.
A group of 10 top healthcare officials from both ends of the ideological spectrum released a similar statement on Thursday. Led by former Senate Majority Leaders Bill Frist, M.D. (R-TN) and Tom Daschle (D-SD), the group called for a temporary extension of the CSR payments through 2018, noting that the elimination of the funds “would destabilize this already fragile market.” The group also cited that continuation of the funds is necessary due to the absence of a larger consensus for health reform and the bipartisan commitment to ensuring stable and affordable coverage in the individual market. In addition to Frist and Daschle, other signatories included former CMS Acting Administrator Andy Slavitt, former Health Care Financing Administrator Gail Wilensky, former CMS director Cindy Mann, and top health policy leaders including Avik Roy, Chris Jennings, Alice Rivlin, James Capretta, Sheila Burke, and Baker Donaldson.
Meanwhile, as Congress continues its two-week recess, House Republicans are working on a compromise plan to pass the AHCA when they return. Representative Dave Brat (R-VA), a member of the House Freedom Caucus, said this week that he, other congressional leaders, and the White House are closing in on finalizing a compromise that could satisfy all factions of the Republican Party. The deal would likely include a provision allowing states to opt-out of the ACA’s community rating and minimum benefits requirements. Prior to breaking for their recess, Vice President Mike Pence, House Speaker Paul Ryan (R-WI) and Freedom Caucus Chairman Mark Meadows (R-NC) attempted to have the House Rules Committee add this as an amendment to the AHCA, but were unsuccessful after the proposal was later pared down and members of both the Freedom Caucus and the moderate Tuesday Group opposed it, for not going far enough and for going too far, respectively. Brat, who opposed the AHCA, said that this would help get all Republicans to yes.
President Trump suggested in an interview on Fox Business this week that he wants to pass healthcare reform when Congress gets back, even if it means postponing his next legislative priority, tax reform. Trump said, “We are going to have a phenomenal tax reform but I have to do healthcare first. I want to do it first to really get it right.” Part of the reason for tackling healthcare before taxes is that the AHCA included nearly $1 trillion in tax changes from the ACA that were intended to serve as the basis for tax reform and would have provided offsets for the lost revenue expected under Trump’s tax reform. Yet in the same interview, Trump also suggested that he could push tax reform first, “Now, if it doesn't happen fast enough, I'll start the taxes…But the tax reform and the tax cuts are better if I can do health care first.” In both legislative vehicles, NAHU remains very concerned about efforts by many leading congressional Republicans to include a cap on the employer exclusion, which many see as a possible leading pay-for to offset the loss in revenue for reducing the corporate tax rate.