Mulvaney: We still might dump Obamacare subsidies

The White House isn’t backing down from threats to cut off key Obamacare subsidies, which could potentially send health insurance markets into chaos.

Despite the legislative impasse over repealing Obamacare and a Tuesday court ruling that could limit the administration’s ability to nix the subsidy, President Donald Trump’s budget chief on Wednesday suggested Trump favors ending payments that help insurers cover low-income Obamacare customers.


"We said from the very beginning that we would look at that on a month by month basis," said Office of Management and Budget director Mick Mulvaney on CNN. "That has not changed."

But more Republican lawmakers, fresh off the collapse of the Senate’s Obamacare repeal effort last week, are now looking to repair the 2010 health care law. Sen. Lamar Alexander (R-Tenn.), who chairs the key Senate Health, Education, Labor and Pension Committee, has been among many lawmakers who have called on the White House to continue making the payments, which are worth $7 billion this year. On Tuesday, Alexander announced he will hold bipartisan hearings on stabilizing the Obamacare markets, which in some states have seen dwindling insurance options and skyrocketing premiums.

A bipartisan group of centrist House members have also worked this week on an Obamacare stabilization proposal. Their plan calls for funding the cost-sharing subsidies, loosening Obamacare’s requirement for employers to provide insurance, and eliminating the medical device tax.

“We are sick and tired of the gridlock," said Rep. Tom Reed (R-N.Y.), one of the leaders of the effort, on a call with reporters Tuesday. "We are sick and tired of the partisan politics.”

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Those efforts are a rebuke to Trump, who has repeatedly called for letting Obamacare implode to pressure lawmakers to pass a replacement plan. Trump has also derided the cost sharing subsidies as a “bailout” for insurers.

"These cost sharing reduction payments are payments to the insurance companies in order to get them to support Obamacare in the first place," Mulvaney said. "The president's attitude is fairly simple. If people are suffering, and they are, and they will continue to suffer because we have not repealed or replaced Obamacare, why shouldn't insurance companies similarly suffer?"

But a decision to scrap the subsidy – which White House aides said could come this week – could hurt millions receiving coverage through Obamacare’s marketplaces. More insurers could exit the marketplaces or dramatically raise premiums to cover the payments.

However, a federal appellate court ruling on Tuesday evening could complicate Trump’s efforts to unilaterally cut off the Obamacare payments. The court ruled that more than a dozen Democratic state attorneys general could intervene in a lawsuit brought by House Republicans contesting the legality of the subsidies.

House Republicans filed a lawsuit in 2014 arguing that there was no legal funding for the payments, and they prevailed at the lower court level last year. The Obama administration appealed that decision, and Trump has requested delays as it plots a legal strategy.

“What Donald Trump does is anyone’s guess,” said California Attorney General Xavier Becerra, who helped lead the effort to intervene in the legal dispute, during a Wednesday press conference. “If he decides to go AWOL on the litigation we get to stand up.”

Tuesday night’s ruling ensures that the states can still continue to fight for the payments in court, even if the Trump administration ultimately refuses to defend them. Trump could still decide pull the subsidy as that legal fight plays out – but he could no longer use the courts as cover for that decision.

“It changes the political optics a bit,” said Nicholas Bagley, a professor at the University of Michigan Law School who has written extensively about the Affordable Care Act. “It makes him take full responsibility for it.”

The ruling also makes it more likely that the state attorneys general and others will file a separate lawsuit seeking to force the federal government to keep making the payments. However, Bagley points out that even if the courts ordered payments to continue, it would likely only be a stopgap measure that would fail to reassure skittish insurers.

“At this point the insurers just can’t trust the Trump administration,” Bagley said. “The important fight right now is whether Congress will fund the cost sharing subsidies in 2018 and beyond.”

Insurers soon face big decisions about Obamacare participation for 2018. They need to finalize rate filings in most states in less than three weeks before making final decisions about whether to sell coverage by mid-September.

Insurers are already jacking up premiums at least in part because of uncertainty about the payments. In California, premiums are rising by an average of 12.5 percent next year, state officials announced on Tuesday, but they warned that the rates could essentially double if the cost-sharing subsidies are yanked.

In addition, industry giant Anthem Blue Cross announced that it’s dramatically shrinking its exchange footprint, citing uncertainty about the subsidy payments as one factor in its decision.

Nationwide there are currently 19 counties serving 12,000 Obamacare customers at risk of having zero insurance options for 2018, according to the Kaiser Family Foundation.

