President Trump wants a deal that will fund Obamacare’s insurer subsidies in exchange for some reforms to Obamacare. Democrats want this deal, too. One such deal fell apart last week when Trump swung from supporting it to opposing it in about 18 hours.
Congressional Republicans should return to the table with a simple demand that if Democrats get subsidies for insurance companies, states get the freedom to set up a free market in health insurance.
Democrats get corporate subsidies, and Republicans get competition and federalism.
The policy at hand involves Obamacare’s cost-sharing reduction, or CSR scheme. A characteristically jury-rigged gambit, Obamacare’s CSR provision requires insurers to reduce the copays and deductibles for poorer customers. To compensate insurers for these discounts, Obamacare authorized subsidies to the insurers, the so-called CSR payments.
But although Obamacare authorized the payments, Congress decided not to provide any money for it in the form of an appropriation. Money doesn’t go out the door unless Congress appropriates money for that purpose. The Republican Congress refused to do so for CSR payments. Former President Barack Obama, with characteristic lawlessness, tried to spend the money anyway. And Republicans sued.
Earlier this month, Trump announced that the president couldn’t subsidize insurers without a congressional appropriation, cut the payments, and asked Congress to work out a deal.
The first effort, between Sens. Lamar Alexander, R-Tenn., and Patty Murray, D-Wash., was deeply flawed, and the president was right, if somewhat tardy, in rejecting it. Now, we’re at square one. Democrats desperately want subsidies for Aetna, Blue Cross, and the rest of the industry. If Republicans allow this, they must get something for it.
Republicans should demand room for markets. The Alexander-Murray deal purported to give states flexibility, but didn’t allow states to waive regulations that make cheaper insurance illegal. A good deal would let states set up their own lightly regulated systems. Separating the safety net from the private market would be better than Obamacare’s jungle of regulations, subsidies, mandates, and taxes that try to turn the private market into a quasi-safety net.
With state flexibility, we will get experiments in healthcare markets, and can turn away from the path to socialist medicine that we are on now.
If Democrats believe their regulate-mandate-subsidize system works best, they shouldn’t fear competition. If it’s better, it will win.
This is only a first step. Republicans should offer a standard, one year, appropriation of the insurer subsidies in exchange for state flexibility. That year gives Republicans a chance to shape a bigger reform package, which will be the price for further funding of the CSR scheme. A year from now, running up to the election, let Democrats demand their subsidies for Aetna while Republicans try to legalize affordable insurance plans.
