Senators Scramble to Save Subsidy Smartly Stopped by Trump

Donald Trump pulled the cost-sharing reductions (CSRs) propping up the individual healthcare market last week.

Senators Lamar Alexander (R-Tenn.) and Patty Murray (D-WA) hastily offered a temporary fix to those ailing individual markets in an effort to salvage them. But it remains unclear why the president would want to sign a bill to restore what he just revoked.

“This takes care of the next two years,” Alexander told the New York Times. “After that, we can have a full-fledged debate on where we go long-term on health care.”

Throw me the idol. I’ll throw you the whip.

Donald Trump needed allies in Congress to replace Obamacare. Now congressmen and senators need Donald Trump to preserve Obamacare.

The president finds himself in a more comfortable, and powerful, position this fall than he did in the summer.

His executive order essentially allowing the health care equivalent of “collision” insurance and empowering small businesses to band together to get big business prices on plans, along with his decision to abolish the CSRs, eroded Obamacare more in a single day than Republicans in Congress did over the last seven-plus years.

The elimination of CSRs, in particular, means, at the very least, that Obamacare requires mending and amending to survive. And, for Democrats to get Republicans to agree to that (yes, Trump’s power play reversed roles, Democrats now need Republicans to change Obamacare), they need to do something heretofore foreign to their Trump-era selves: compromise.

Not doing so means the end of the previous president’s signature legislation, at least as it pertains to the individual markets.

Obamacare, acting in the individual markets as a socialism benefiting the old, the sick, and those with bad habits, relies on the young and the healthy to subsidize everyone else. To get these populations to enroll, the federal government essentially bribes them through a subsidy that goes to insurance companies to make plans somewhat affordable to healthy people.

Despite the subsidies, the markets remain unprofitable to many insurers, and unattractive to consumers, because of restrictions on what companies can charge higher-risk (older, sicker, addicted, etc.) customers and because the law saddles plans with a host of “essential” benefits that many find neither essential nor beneficial. To keep the sinking individual markets afloat, the executive branch, contrary to the Constitution, allocates about $7 billion annually.

Still, Aetna, Anthem, and other insurers flee certain Obamacare markets. The hyperbole, “I wouldn’t do X even if you paid me a million dollars,” becomes real here. Companies in the business of making money refuse free money because the strings attached prove too constricting.

Fewer competitors ultimately pushes prices higher. Fewer young and healthy enrollees, a certainty without the subsidy, skyrockets prices for older and unhealthier individuals. This inevitably results in the “death spiral” so often discussed.

Senator Alexander, who voted for the Graham-Cassidy replace bill, nevertheless aims to preserve Obamacare by restoring the subsidy the previous president allocated and this president abolished — and a federal judge, in between those two Oval Office actions, deemed unconstitutional.

“In my view, this agreement avoids chaos,” he explained in the Times, “and I don’t know a Democrat or a Republican who benefits from chaos.”

For many Americans not named Lamar Alexander, the chaos occurred when the executive branch usurped the power of the legislature by authorizing subsidies nowhere referenced in the Patient Protection and Affordable Care Act. Courts do not declare war and legislatures do not grant pardons. They do not in the United States, at least. When they do, everything breaks down. When the president appropriates funds, everything breaks down.

Trump righted a wrong in more ways than one in abolishing the subsidy. It violated the laws of economics. More importantly, it violated the laws of the land.

Hunt Lawrence is a New York-based investor. Daniel Flynn is the author of five books.

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