The Congressional Budget Office postulates that cutting spending by almost $100 million over the next decade would increase the deficit by about $200 million over the next decade. George W. Bush called that kind of arithmetic “fuzzy math.”
The CBO report released this week specifically involves cost-sharing reduction (CSR) payments made by the federal government. The acronym works as a euphemism for “bribe” but few dare utter that ugly word. CSRs, which currently amount to about $7 billion annually, entice private insurers to stay in unprofitable markets covering deductibles, copayments, and other out-of-pocket expenses of lower-income Americans receiving insurance through Obamacare.
The markets remain unprofitable because of restrictions on what companies can charge the old, the sick, and the vicious. CSRs keep the teetering Jenga tower standing. But even with CSRs Aetna, Anthem, and other insurers flee certain Obamacare markets, with fewer competitors ultimately nudging prices upward.
The report claiming that cutting spending means increased spending assumes that citizens not receiving one subsidy make it up by enrolling in Medicaid, finding another program to help fund insurance costs, or benefiting from a tax credit. It bases the analysis on the premises that third parties continue to pay the bulk of the bills and that the defects in the program remain. The CBO admits of the spending cut resulting in a spending boost, “Those effects are uncertain and would depend on how the policy was implemented.” Indeed.
Atop this assumption, the CBO does not explore the possible positive ramifications of relieving third parties (private insurance plans and public welfare programs) of the burden of paying all or nearly all of the tab. In Singapore, where almost everybody pays every time, healthcare eats up less than five percent of GDP versus nearly 20 percent here. Killing the subsidy also highlights the utter unworkability of Obamacare, which inflates prices by mandating several “essential” health benefits most do not want, forbidding fluctuations in the cost of individual plans based on obesity or other salient characteristics, and by placing artificial limits on the gaps in the money charged between age categories. It works as a redistribution program (not true insurance) from the healthy to the unhealthy and from the young to the old.
In other words, Obamacare essentially orders private companies to adopt the policies of public welfare agencies. Unsurprisingly, companies in the business of business go out of the health care business in areas where the restrictions prove particularly onerous. The mere existence of the subsidy exposes the program as one unable to survive without an annual bailout. The exodus of insurers from markets in Iowa, Nevada, Wisconsin, and beyond puts the exclamation point on this.
The report presents some good news for those looking to abolish CSR payments. The CBO sees the number of Americans insured eventually increasing as a result of the policy about-face. Other outcomes that appear painful in the short term yield to long-term benefits. But the positive judgments, like the negative ones, ultimately amount to an educated guess. As the CBO admits but few press accounts do, “Such estimates are inherently imprecise because the ways in which federal agencies, states, insurers, employers, individuals, doctors, hospitals, and other affected parties would respond to the changes made by this policy are all difficult to predict.”
Given that the vast majority of Americans receive insurance through employers, Medicaid, or Medicare, the debate focusing on Obamacare misses the point. Overall, healthcare costs continue to skyrocket. What can we do to control costs for all 320 million of us, not what changes we make to the insurance plans of less than 20 million of us, should be the focus.
Beyond shortcomings in policy, cost-sharing reduction payments do not pass constitutional muster.
“But the reason that the future of the payments is uncertain is that they are the subject of a legal dispute left over from the Obama era,” Peter Suderman writes at Reason. “The CSR subsidies are called for in the statute of Obamacare, but Congress declined to appropriate any money for them. The Obama administration, which had requested an appropriation, decided to pay them anyway.”
We can, and should, debate the policy ramifications of the CBO report. But this remains primarily a constitutional question — and a closed one at that. The executive branch possesses no right to appropriate money on whim. Congress rejected this specific appropriation. President Barack Obama nevertheless spent the money and President Donald Trump continues this usurpation of congressional power. Bizarrely, critics accuse President Trump of skullduggery of sorts for merely threatening to stop spending money that he possesses no legitimate power to spend.
“Paying out Section 1402 reimbursements without an appropriation… violates the Constitution,” Judge Rosemary Collyer ruled last year. “Congress authorized reduced cost sharing but did not appropriate monies for it, in the FY 2014 budget or since. Congress is the only source for such an appropriation, and no public money can be spent without one.”
But, with the ruling stayed pending appeal, the president keeps spending money Congress did not appropriate. This, not the threat to turn off the spigot, marks the real scandal.
Hunt Lawrence is a New York-based investor. Daniel Flynn is the author of five books.