The Senate is set to vote on dueling healthcare proposals, neither of which is expected to get 50 votes, let alone the 60 necessary to defeat a filibuster and advance legislation to the House of Representatives. While the anticipated failure of the bills may seem an exercise in futility, it is actually a necessary first step to establishing baseline negotiating positions to keep the government from shutting down, yet again, at the end of January.
Washington is barely a month past surviving the longest shutdown in federal government history, and the unfortunate reality is that Congress is barreling toward the next funding deadline set for Jan. 31. The underlying issue that caused the last shutdown, the expiring COVID-19-era Affordable Care Act subsidies, has not been resolved and after favorable results for Democrats in this November’s elections, there is no reason to believe the party will not shut down the government again unless it gets what it wants. It should not get that, however.
The legislation Democrats are putting forward would extend the COVID-19 bonus subsidies for three years, with no strings attached, no reforms, at a cost of about $30 billion a year. Since higher taxes or spending cuts do not offset it, this would directly add to the deficit.
The Republican alternative, sponsored by Sens. Mike Crapo (R-ID) and Bill Cassidy (R-LA), would let the subsidies expire and direct payments of up to $1,500 per year into qualified health savings account plans paired with existing ACA exchange insurance plans. It would partially pay for this new spending by cutting Medicaid payments to states that offer healthcare to illegal immigrants. The Congressional Budget Office has not yet provided a cost estimate for the bill.
Democrats will probably vote in lockstep for their bonus subsidy expansion while Republicans are likely to face defections from as many as half a dozen senators. Either way, both proposals will fall far short of the 60 votes needed for passage. But they will be the beginning, not the end, of a necessary debate over how to deal with the expiring subsidies. Let’s hope that the debate will be informed by a recent Government Accountability Office report on how the COVID-19 subsidies have caused fraud to run rampant in the ACA exchanges.
The ACA exchanges have always been an invitation to fraud, with the GAO finding as early as 2016 that its investigators were able to create fictitious accounts, causing thousands of taxpayer dollars to be sent directly to insurance companies for health insurance that was never provided. Fraud enabled by the ACA exchanges is not committed by insurance companies but instead by health insurance brokers who receive a commission, paid by the health insurance companies, for each ACA subsidy recipient signed up.
Most ACA subsidy recipients pay a monthly premium on top of their subsidies, but many do not. Those ACA subsidy recipients who do not have to pay monthly premiums are where the opportunity for fraud is strongest. Brokers can sign people up using stolen Social Security numbers, receive a commission from the insurance company, and the insurance company receives a check from the government. As a result, no one gets a bill from the health insurance company for a monthly subsidy, because the subsidy is zero. Before COVID-19, about 15% of ACA exchange plans paid no subsidy. However, since the COVID-19 bonus subsidies took effect, the number of no-premium subsidy recipients has skyrocketed to more than 40% of the exchange market. This has created a huge opportunity for fraud.
A GAO review published last week found that of the 24 fraudulent ACA exchange subsidy applications submitted by investigators, 23 were approved, at a cost to taxpayers of more than $10,000 a month. One estimate found that such fraudulent accounts are costing taxpayers about $27 billion a year.
The Democrats’ straight extension of the COVID-19 bonus subsidies would make fraud worse. It would keep subsidizing the idle lifestyles of many wealthy early retirees who, thanks to the removal of income caps for exchange subsidies, receive generous and wholly unnecessary taxpayer financing.
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Sens. Susan Collins (R-ME) and Bernie Moreno (R-OH) have introduced legislation that would address both these problems. Their Consumer Affordability and Responsibility Enhancement Act would extend the COVID-19 bonus subsidies for two years, add a $25 minimum monthly premium charge, and end the bonus subsidies for all households with an income exceeding $200,000.
It is not a long-term solution but a Band-Aid meant to buy time. Neither Senate Republicans nor Democrats can pass their own ideal healthcare plan, so a compromise is going to have to be made to avoid another shutdown that harms everyone and damages the economy. If Republicans want to pass larger, longer-term reform, they need to win more Senate seats by converting more Democrats to their cause.
