Congressional Republicans were caught off guard by the Trump administration’s decision Thursday to pull $7 billion in Obamacare funding next week, and there is no path forward on whether or how to replace the critical subsidy funds.
A bipartisan attempt by Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) to stabilize Obamacare, which would fund the subsidies for up to two years, has already encountered skepticism from GOP conservatives and growing opposition from the White House.
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“Under no circumstance should Congress attempt to expand Obamacare by cutting a check for President Obama’s bailout of insurance companies,” Rep. Mark Walker (R-N.C.), chairman of the conservative Republican Study Committee, tweeted late Thursday.
In the short term, a bill to restore the funding faces huge political hurdles on Capitol Hill, where the White House’s decision has reignited the partisan warfare over the GOP’s failed Obamacare repeal efforts. Democrats are already eyeing a year-end spending bill or a supplemental disaster bill as possible places to tuck in the Obamacare funding.
But without the money for the cost-sharing subsidies, which reduce the out-of-pocket health care costs for low-income people, the Obamacare markets are likely to grow more unstable over the next year, with big questions about viability in 2019.
The sudden decision to end the payments — which is likely to be thrown into the courts — presents a risky political calculation for both parties before the 2018 mid-term elections.
If Republicans negotiate with Democrats, it means taking partial ownership of a health law that is toxic to their base. If they walk away, it may not be so easy for Republicans to keep blaming Democrats for higher premiums with the GOP in control of Washington. Similarly, Democrats have to decide whether it’s better to make changes to Obamacare, or to blame rising premiums on a Republican party hell-bent on taking insurance away from people as they head into the fall campaign.
Several polls have shown that while the Trump base still clamors for Obamacare repeal, much of the country wants both parties to stabilize the health law. A poll by the Kaiser Family Foundation released Friday found that 7 in 10 Americans want the Trump administration to make the health law work, not make it fail.
While they don’t have a final agreement yet, Alexander and Murray have a general framework they hope will result in a deal: Republicans would support up to two years of cost-sharing payments in exchange for giving the states flexibility to get around Obamacare’s requirements. But the negotiations had stalled over how to define that flexibility in a way that both parties could accept. Alexander and Murray plan to keep working when the Senate returns from a recess next week.
They have support from many governors, including some Republicans who would prefer to see a stable insurance market rather than an imploding one.
“I continue to be optimistic about our negotiations and believe we can reach a deal quickly — and I urge Republican leaders in Congress to do the right thing for families this time by supporting our work,” Murray said Friday.
Before the funding was pulled, Senate Republicans were increasingly pessimistic that Murray and Alexander could reach a deal that a broad number of Republican senators could support. And they were even more skeptical that any plan they pass could get through the more conservative House, where the GOP lawmakers are still smarting from seeing their Obamacare repeal bill die in the upper chamber.
Privately, many Republicans hoped the White House would continue making the payments so that the GOP didn’t have to deal with the problem. In fact, within a day of the announcement, few Republicans had made public statements to weigh in one way or another on the White House’s decision.
President Donald Trump has often mused about throwing the Obamacare markets into chaos to force Democrats to the negotiating table. He spent months toying with pulling the subsidy funding before making the call Thursday night — just hours after signing an separate executive order paving the way for health plans that are exempt from Obamacare rules. Policy experts warn those “skinny plans” appealing to younger and healthier people could do widespread damage to the individual market on its own.
“Massive subsidy payments to their pet insurance companies has stopped,” Trump tweeted afterward. “Dems should call me to fix!”
Senate Minority Leader Chuck Schumer quickly ruled out any thought that Democrats might be pressured to give ground on health care, repeatedly telling reporters that it’s up to Republicans to find a way to fund the subsidies or risk owning whatever chaos hits the markets.
“Republicans in the House and Senate now own the health care system in this country from top to bottom,” he said. “Threats and bullying is not going to work. In this, politically, [Trump]’s in worse shape than we are.”
With polls showing that Americans largely hold Republicans responsible for the fate of the health care system, there’s little incentive to give in to any demands that would make major structural changes to Obamacare.
“Our Republican colleagues understand that they have an obligation to solve this problem,” Schumer said.
Republicans also have to decide whether they want to step between the increasingly hostile relationship between the White House and insurance companies. The combination of the White House decision to cut the cost-sharing payments as well as the new executive order to allow insurance companies to sell less regulated plans has the potential to further destabilize shaky markets.
“They’re sending a signal as strong as they can to the insurance industry: I double dog dare you to participate” in the Obamacare markets, said Rodney Whitlock, a vice president at ML Strategies and a former GOP aide on Capitol Hill.
It was House Republicans who first objected in 2014 to the Obama administration using its executive authority to fund the subsidies — a legal challenge that they ultimately won in a district court. But when Trump won the presidency, it put the GOP in a difficult spot between pushing to end the subsidies at the risk of owning any resulting damage, or quietly reversing their stance in court.
Conservative Republicans on Friday said the decision to stop the payments is an opportunity to renew the repeal debate — calling on the GOP not to accept anything less than a total replacement of Obamacare.
“We need the focus to be on repealing and replacing Obamacare,” a spokesman for Walker said. “What we don’t want is for the Senate to pass a bill that simply props up the failing system.”