President Trump has announced a radical move on Obamacare that has the healthcare policy world in a tizzy: He has, at long last, decided to follow the constitution and end illegal payments being made to insurers.
At issue are the cost sharing reduction payments, which are supplemental subsidies through Obamacare aimed at reducing premiums for lower-income enrollees. Though the payments were authorized by the text of Obamacare, Congress never appropriated the money to cover them, but former President Barack Obama made the payments anyway. Upon taking office, Trump continued making the payments as Republicans tried to come up with a plan to repeal and replace Obamacare. Now that those efforts are dead, Trump has taken action that he should have taken months ago by ending the payments.
There are a lot of arguments you'll be hearing about the legality of the payments, but it's worth keeping in mind that while the issue is still in legal limbo, the one court that ruled on the issue determined that they were illegal. "Congress authorized reduced cost sharing but did not appropriate monies for it, in the FY 2014 budget or since," wrote Judge Rosemary Collyer of the United States District Court for the District of Columbia, in a May 2016 decision. "Congress is the only source for such an appropriation, and no public money can be spent without one."
Though liberals behave as if the money was always supposed to be handed out by the executive branch without any appropriations from Congress, in the decision, Collyer noted that even the Obama administration itself originally sought appropriations for the payments. In 2013, when the Obama administration submitted its budget request for the next fiscal year to Congress, the Department of Health and Human Services referred to "'Cost-Sharing Reductions' as one of 'five annually appropriated accounts.'" Yet when Congress didn't appropriate the money in spending bills signed by Obama, Obama decided to go ahead with them anyway.
There are arguments that can be made questioning the sincerity of Trump's fealty to the Constitution and the rule of law, particularly in a week in which he floated revoking NBC's license over a news report he said was fake. But he is on firm footing in this case.
As for the policy aspects of the decision, ending the illegal payments will no doubt put further pressure on insurers, who were depending on the payments to help mitigate premium increases and make up for the money they're losing on Obamacare's exchanges. But it's important to draw a distinction between the argument that ending CSRs will contribute to further premium increases and insurer exits, and the idea that ending them would be the ultimate cause of such problems.
A year ago, Obama was committed to making the payments and taking any other actions necessary to prop up his signature healthcare law. Yet insurers were accumulating losses, exiting markets, and hiking premiums. In fact, one of the reasons that Trump is president is that a lot of these headlines were coming out in the weeks leading up to last year's election. By making billions in illegal payments, Obama may have helped contain the damage, but it did not change the underlying problem with Obamacare: not enough young and healthy people were signing up for expensive comprehensive insurance to offset the cost of covering older and sicker enrollees.
It's also true that ending the subsidies could end up increasing deficits, because the other subsidies that Obamacare gives out to help individuals purchase insurance automatically go up in response to increases in premiums. However, that is more of an argument to fully repeal a program that makes the federal government constantly chase higher premiums with more subsidies than it is an argument against ending the CSR payments.