The Coming ObamaCare Bailout

‘Cost-sharing’ subsidies are illegal without an appropriation by Congress.


U.S. Senate Minority Leader Sen. Chuck Schumer speaks to the media at the Capitol, August 1.
U.S. Senate Minority Leader Sen. Chuck Schumer speaks to the media at the Capitol, August 1. PHOTO: ALEX WONG/GETTY IMAGES

The Senate GOP’s health failure is a political debacle that will compound for years, and the first predictable fallout is already here: Republicans in Congress are under pressure to bail out the Obama Care exchanges, even as Donald Trump threatens to let them collapse. The GOP needs to get at least some reform in return if it’s going to save Democrats and insurers from their own failed policies.


At immediate issue are government payments that insurers receive to offset the costs of mandated benefits and other rules for Affordable Care Act customers. Unlike ObamaCare’s tax credits that go directly to consumers, these “cost-sharing” subsidies for insurers aren’t a permanent appropriation. That means Congress can decide not to appropriate funds, and it hasn’t done so since 2014.

President Obama spent the money anyway, which inspired a lawsuit by the House of Representatives against the White House for usurping its power of the purse. Federal Judge Rosemary Collyer last year issued a potentially landmark ruling that Mr. Obama had exceeded his constitutional power. Paying “reimbursements without an appropriation thus violates the Constitution,” Judge Collyer wrote.


The Obama Administration appealed to the D.C. Circuit Court of Appeals. But the Trump Administration and House Republicans asked that the case be stayed amid Congress’s health-care negotiations. Health and Human Services Secretary Tom Price has continued the subsidies in the meantime, and another payment is due this month.

Mr. Trump tweeted over the weekend that he’ll stop these payments if Congress gives up on health reform, and he’s right for the wrong reason. HHS shouldn’t spend the money because Judge Collyer is right that it’s illegal to do so. Republicans sued to stop Mr. Obama from violating the law and it’s no better if the spender is a Republican President.

While Judge Collyer might be overturned by the liberal D.C. Circuit, the Supreme Court is likely to uphold her careful reading of the law and Article I of the Constitution. The Affordable Care Act authorized the insurer subsidies but subject to an annual appropriation. Congress has enacted many entitlement programs with automatic spending provisions, but it didn’t here because it wanted leverage over insurers on an annual basis. If a President can spend the money anyway, then he is co-opting Congress’s most important power.

Democrats and even many Republicans want Mr. Trump to continue the subsidies in any case so they don’t have to take responsibility for the failing exchanges. Insurers also want the cash, and is there a worse lobby in Washington? Insurers worked to defeat the GOP’s health reform and now they want the same Senators to bail them out. Sometimes we fantasize about endorsing single-payer simply to put the insurers out of business.

Yet the decline of the exchanges is real, and premiums will rise faster with even fewer insurance choices if the cost-sharing subsidies end. Senate Minority Leader Chuck Schumer is demanding that Republicans help him bail out the insurers, and the GOP’s Lamar Alexander is ready and willing. Democrats are only too happy to see the GOP prop up ObamaCare, but the debate will divide Republicans, none of whom voted for the law that produced the current mess.

Mr. Schumer is mumbling sweet nothings about “bipartisanship,” but his definition of that word is GOP surrender: Bail out insurers, impose price controls on Big Pharma, and that’s about it. The Republicans who killed the GOP reform— Susan Collins, John McCain and Lisa Murkowski —will want their own political bailout on similar terms.

But if Mr. Trump and the GOP are going to accept the political pain of rescuing insurers, they ought to get at least some reform in return. Republicans want to pass tax reform, and one demand could be a reduction of the corporate tax rate to 20%. Keep in mind that Chief Justice John Roberts upheld the constitutionality of ObamaCare as a “tax.”

If that’s too much for Democrats, then the GOP ought to at least demand the elimination of the employer and individual mandates, both of which are deeply unpopular, and the 2.3% medical-device tax that is merely passed along to consumers and that even Elizabeth Warren has decried.


Mr. Schumer may figure he can bludgeon the GOP into surrender because his press-corps buddies will blame the GOP for rising premiums. Mr. Trump’s stupid tweets haven’t helped by suggesting that he wants the exchanges to fail. But if Democrats reject any policy compromise, then Republicans will at least have a case to make to voters that Democrats are the reason the exchanges are collapsing.

Republicans put themselves in this political box by failing to reform ObamaCare on their terms. They shouldn’t compound the rout by flipping their convictions on the power of the purse or surrendering wholesale to Democrats and insurers. They need to demand that “bipartisan” means both sides get something.

Appeared in the August 3, 2017, print edition.

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