ACA update 8/2/17

Wondering what’s next after the Republican effort to repeal the Affordable Care Act (ACA) was dramatically stopped in its tracks last week? This week has brought a new round of legislative threats and another promise from a petulant president to actively sabotage the law at the expense of millions of Americans who rely on it for their care.

Radical bill from "moderate" senators

This week, Senators Lindsey Graham (R-SC), Bill Cassidy (R-LA), and Dean Heller (R-NV) announced that they are working on yet another extreme GOP-only bill with the House Freedom Caucus to gut the ACA. The bill would repeal the ACA’s Medicaid expansion and its financial assistance to help low- and moderate-income households purchase private insurance. In their place, the bill would give states a block grant worth less than what the federal government would contribute under current law. Furthermore, the states that expanded Medicaid would be cut deeply while the 19 states that have refused to expand would be rewarded with a windfall. The grant would be worth less and less each year, before ending abruptly in 2026.

The bill is being falsely cast as a moderate alternative to the repeal-and-replace proposals pushed by GOP leadership because it keeps a portion of the ACA’s revenue. But as Vox correctly notes, “in many ways, it’s the most radical one yet.” In addition to cutting the federal investment by over one-third, the bill would destabilize private insurance markets by requiring insurance companies to accept sick patients even as it eliminates both the carrot of subsidies and stick of an individual mandate to encourage healthy people to sign up.

In a possible sign of wider conservative support, Scott Walker, Wisconsin’s far-right governor, has already endorsed the principles behind the proposal. And Graham and Cassidy have reportedly been pitching their plan to Trump who is eager to sign anything that he can claim tarnishes President Obama’s legacy.

The Senate's undead reconciliation bill

While the politics remain tough for Republicans, it's worth taking this threat seriously, if only because from a procedural perspective, the repeal effort is not dead in the Senate but rather undead—and could potentially stay that way until the end of this Congress on January 3, 2019.

Contrary to what you might have seen floating around Reddit and Twitter, Senate Republican Leader Mitch McConnell (KY) can simply re-start the debate on the underlying reconciliation bill (the House-passed Trumpcare bill, also known AHCA) as soon as he has 50 votes for a deal. That's because what we defeated last week were amendments to the underlying bill, not the bill itself. McConnell pulled the underlying bill  before a vote on final passage, sending it to a kind of procedural limbo on the Senate floor calendar.

If Republicans can get to 50, they will simply pick up where they left off, offering their new plan as another amendment. As Stan Collender notes:

The debate would be of a reconciliation bill and the Senate has already used the full 20 hours allowed for that by the Congressional Budget Act. That means the “debate” would just be a continuation of the vote-a-rama that was underway last week when skinny repeal was considered. As a result, any new repeal and replace plan would only be discussed for 5 minutes.

Because the reconciliation bill has its privilege (can't be filibustered) through the FY17 budget resolution, there is a chance it will die along with the 2017 fiscal year on September 30. But right now that's an untested proposition. It’s also possible that the reconciliation bill will only lose its privilege after both chambers of Congress pass an identical FY18 budget resolution. There are conflicting signals, with some experts suggesting that September is do-or-die for the ACA reconciliation bill and others like Collender countering that the reconciliation bill will only lose its privilege after both chambers of Congress pass an identical FY18 budget resolution.

I updated Paul Ryan's chart from January

At the start of the year, Republicans had hoped to pass a mini FY17 budget resolution authorizing reconciliation for health care, repeal the ACA quickly, and then pass a full-length FY18 budget resolution to set up a second reconciliation process for tax cuts. So far, they’ve only accomplished the first step, and while they still want to use reconciliation for tax cuts, they're having problems getting an FY18 budget resolution passed through the House, let alone through the Senate too. Since the budget resolution passed by the conservative-packed House Budget Committee requires deep cuts to Medicare and anti-poverty programs in order to pay for tax cuts for corporations and the wealthy, we certainly hope they fail. But that failure could keep the possibility of ACA repeal alive for the rest of this Congress.

Meanwhile, the White House is ready to blow up insurance markets...

Threats from Congress aren't the only ones to watch. Republicans in Congress have been quietly sabotaging the ACA for years—then shamelessly pointing to the problems they created as an excused for repeal! But the Trump administration kicked efforts into high gear this year by promising not to enforce the individual mandate, shortening the open enrollment period for people to sign up for insurance, slashing public education funds, and threatening to stop making the cost-sharing reduction (CSR) payments that keep deductibles and copayments low for low-income families on the individual market.

Insurers have been pretty clear that nearly all of their expected premium increases result from this sabotage.

For example, Blue Cross Blue Shield of Tennessee was unequivocal: "[O]ur experience so far in 2017 means we would have only needed a small average rate increase. However, we have to account for two significant uncertainties at the federal level: Whether the federal government will guarantee funding for the cost-sharing reduction (CSR) program, and How the risk pool might change if the individual coverage mandate isn’t enforced."

Over the weekend, Donald Trump upped the uncertainty when he unleashed an angry tweetstorm directed at the Americans whose health insurance he’d hoped to take away and the members of Congress who had defied him.

Falsely calling the CSR payments a “bailout” for insurance companies, Trump threatened to stop making them unless a repeal bill was sent to his desk. Not only are the payments not a "bailout," they're a legally-binding contractual obligation.

Under the ACA, insurance companies are required to keep out-of-pocket costs artificially low for low-income patients and the federal government is required to offset those costs. Blue Cross Blue Shield of Tennessee describes the process pretty well:

[Customers] whose income is between 100 percent and 250 percent of the federal poverty level can qualify for cost-sharing reductions if they purchase a silver plan on the ACA Marketplace. ... The program lowers their out-of-pocket costs, including their deductible and copayments. (This is in addition to the tax credit that helps lower their monthly premiums.)

We pay the difference (on behalf of the [customer]) and then get paid back by the government.

But there’s a federal lawsuit which argues the government is unauthorized to provide funds to cover those costs. In 2016, the cost-sharing reduction program saved our [customers] $88.9 million.

Unless the government officially authorizes CSR funds for 2018, we have to assume we will be liable for those costs and build them into our rates for silver plans (the only ones that qualify). Overall, this will add around 14 percent to our average rates for next year.

In fact, as conservative wonk and registered Republican Craig Garthwaite notes, by defaulting on their obligation, Republicans are putting much more at risk than just health care:

Republicans in Congress are causing inestimable damage. Specifically, they are damaging the United States’ reputation for reliability among private companies looking to do business with the government. ...

Republicans appear not to have reckoned with the broader consequences of their uncertainty strategy. For example, Paul Ryan, the House speaker, wants to convert Medicare into a voucher program in which the elderly will shop for private plans. How will that work if insurers, burned by the Obamacare experience, are unwilling partners?

This is perhaps the greatest irony of the Republican actions. Republicans [including Garthwaite] have long believed in the benefits of even greater privatization of government services. But how can any company in any sector trust the United States after seeing health insurers treated so shabbily?

If Trump cuts off those payments, insurance companies could abruptly withdraw from individual markets or they could hike their premiums to make up for their costs. Rates must be set by mid-August, leaving insurers just two weeks to cope with the uncertainty caused by the White House.

If premiums spike, middle class customers ineligible for the ACA’s subsidies will be priced out of the market. Low- and moderate-income customers may be protected because their ACA subsidies will rise in tandem—but only if enough insurers agree to remain in the marketplaces.

Rural areas that already struggle to garner insurer participation—even in programs supported by conservatives, like Medicare Advantage, which pre-dates the ACA by years—will be particularly hard hit. In denser urban areas with healthier markets where insurers are likely to remain, Trump’s move could increase the federal government’s costs in covering those with low- and moderate-incomes who remain by $2.3 billion.

At the same time, insurance companies are likely to sue the government for breach of contract and win, eventually getting paid anyway, but too late to help regular Americans buying insurance.

Adding to the uncertainty, yesterday a federal appeals court ruled in favor of 16 Democratic state attorneys general who want to defend the cost-sharing reduction payments in court even if the Trump administration withdraws its legal defense.

In 2014, House Republicans sued to stop the Obama administration from making CSR payments, arguing that Congress had never appropriated the funds. In a move that surprised most legal experts, who questioned whether the House had standing to sue, the House won the first round. The Obama administration was in the middle of appealing the district court's ruling when the Trump administration assumed control of the government’s position and signaled to the court that it may not defend the payments. As Nicholas Bagley notes:

If the Trump administration wanted to stop making cost-sharing payments, the easiest way to do so would be to dismiss the appeal. The lower court entered an injunction to stop those payments, but put its injunction on hold to allow for an appeal. If Trump were to order the appeal’s dismissal, the injunction would spring into force, and the payments would end. Now the states can keep the appeal alive, even if Trump wants to get rid of it.

But nothing in the court’s ruling requires the Trump administration to keep making the payments, and Trump could still proactively stop them by re-writing the Obama-era regulation that authorized them.

In short, no one knows exactly what will happen in the near-term, only that millions of Americans are likely to be hurt in the process.

Did Trump just try to bribe members of Congress?

The second part of Trump's angry tweetstorm is getting less coverage but to me, it's just as shocking. What he calls "bailouts for members of Congress" is what other employers simply call employer contributions to employee premiums.

The ACA requires members of Congress and staff to get their health insurance through ACA-created marketplaces instead of through the Federal Employee Health Benefit program (FEHPB) which covered them pre-ACA. An Obama-era rule implementing this provision confirmed that members and staff can continue to receive the same employer-provided contribution that they received through the FEHBP—which is the same employer-provided contribution that every federal employee currently receives through the FEHBP, and which is comparable to what millions of people employed in the private sector receive through their employer's health plan.

Under the regulation, each "personal office employee" (so: not committee staff, janitorial staff, or Capitol Police officers, but just the folks working in a member's DC and state offices) can purchase private health insurance through the DC small employer health insurance marketplace (the DC SHOP exchange), with part of their premiums paid by their employer.

I used to always compare each congressional office to its own small business because each senator or representative has near-complete control over hiring, firing, and salary decisions for his or her staff. Staffers don't really "work for Congress," they work for a specific congressperson. Now that I've spent time in the non-profit sector, a closer parallel might be a collection of individual non-profits with a single fiscal sponsor who manages payroll and benefits.

Regardless, it's always seemed entirely appropriate and defensible to me that congressional offices could sign up through the small employer exchange and provide employer contributions. After all, this is pretty much exactly what my current small non-profit employer does through the DC SHOP exchange, and our employer-provided benefits are more generous than what Congress provides to its employees.

(Less defensible is OPM's decision to allow members to keep some personal office staff on the FEHBP instead of making the switch, but I digress.)

While it's true that Trump has the legal ability to scrap that rule and take away sizable chunk of member and staffer compensation, by directly linking it to how they vote, I wonder if he isn't crossing into some questionable legal territory.

Much like how a president can legally fire an FBI director, but firing an FBI director to kill an ongoing probe is obstruction of justice, threatening congressional compensation unless Congress votes the way he wants seems like it must run afoul of federal anti-bribery statutes: he's effectively promising to pay them only if they vote to take health care away from everyone else.

I don't know whether that threat will backfire, much like his attempts to bully Senator Lisa Murkowski (R-AK), but it's something to watch because this is a yuge issue for Congress.