Obamacare subsidies up $10 billion
Republicans scramble to rewrite health care law that’s ‘not sustainable’
Taxpayers will dole out nearly $10 billion more next year to help people buy Obamacare health care plans through the insurance exchanges, according to a study released Thursday that highlighted the spiraling costs of President Obama’s signature achievement.
The federal government will spend $42.6 billion to subsidize customers’ Obamacare plans, up from $32.8 billion this year, the Center for Health and Economy said, amid widespread questions over the law’s ability to survive.
Premiums for Obamacare’s benchmark plans are expected to spike an average of 22 percent next year, but under the complex law’s operations, taxpayers finance most of the costs. As a result, the average monthly government bill for each Obamacare customer will rise from $291 this year to $367 next year, the analysis found.
“That’s not sustainable,” said Rep. Kevin Brady, Texas Republican and chairman of the House Ways and Means Committee, which will have a major hand in trying to rewrite the health care law when Congress convenes next month.
Lawmakers also fear there is costly fraud in the program. The Government Accountability Office on Thursday said federal and state-run exchanges approved coverage for nine out of 12 fictitious enrollees who signed up outside of the normal enrollment period because of major live events, such as losing coverage or getting married.
The administration says it is trying to crack down on people who game the system by using “special enrollment periods” to sign up only after they
Starting in the middle of this year, Obamacare required documentation of certain qualifying life changes, although a dozen state-run exchanges don’t have to enforce the rules. GAO’s fake enrollees were approved for coverage without providing documents, offering false information or applying through life events that don’t require proof.
“This report confirms what we’ve known all along: Bad actors are taking advantage of loose enforcement mechanisms to access highly subsidized health care plans,” said Mr. Brady; Rep. Fred Upton, Michigan Republican and chairman of the House Energy and Commerce Committee; and Sen. Orrin G. Hatch, Utah Republican and chairman of the Senate Finance Committee.
The Obama administration insists its law is working as intended, despite logistical, political and financial headwinds. A record number of Americans have health care coverage, and the law’s tax increases will help decrease federal deficits, according to the Centers for Medicare and Medicaid Services.
“The Affordable Care Act is covering 20 million Americans, and 2017 marketplace premiums remain on par with the Congressional Budget Office’s November 2009 projections,” CMS spokesman Aaron Albright said.
Republicans haven’t fully sketched out how they would improve on Mr. Obama’s model, though they dropped hints in an election-year blueprint called a “Better Way.” It ties tax credits to age so they are fixed, grow over time and provide older, sicker customers with more support.
Allowing federal costs to increase alongside premiums, the plan says, “sends the wrong signals to insurers.”
“Age-based [assistance] would allocate subsidies in a more efficient manner — older people cost more to insure — but the real money saver for the federal government is that the Republican subsidies would not necessarily increase as quickly as premiums increased,” said Robert Laszewski, a health care policy consultant in Alexandria, Virginia.
Others say the Republican plan would avoid a nettlesome process that tax filers face under Obamacare: reconciling how much subsidy they receive with their income for the year. Filers who underestimate their pay must pay the excess subsidy back to the IRS.
“A consumer can confirm his age, but he might not know what he’s going to make in the coming year,” said John Desser, a former George W. Bush administration health care official and vice president for government affairs at eHealth, a website that connects users with private insurance.
Whether the subsidies are generous enough, however, is still uncertain.
“If the subsidy is a flat amount — only adjusted by age — it is possible that the subsidy would only cover the cost of a catastrophic insurance plan having a large deductible,” Mr. Laszewski said. “That wouldn’t necessarily be bad for middle-income workers who could afford the deductible but could be a real problem for poor people who would have trouble with a deductible of $1,000 or more.”
For now, the administration is urging millions of Americans to brush aside Republican talk of “repeal and replace” and sign up before key deadlines so it is more difficult for Donald Trump to unravel Obamacare’s gains when he becomes president.
Obamacare customers had until midnight Thursday to enroll in coverage that takes effect Jan. 1. The administration said enrollments through Dec. 10 exceeded last year’s by 250,000, though its performance through this week’s cutoff will shed light on whether the administration can draw new customers and meet its target of 13.8 million people by Jan. 31 — compared with 12.7 million who initially signed up for this year.
Republicans argue that even people who bought coverage under Mr. Obama’s law face high out-of-pocket costs or narrow doctor networks.
“In truth, coverage isn’t health care,” Mr. Brady told reporters Thursday during a break in Republican brainstorming sessions at the Library of Congress.
Republicans haven’t described how long of a transition period they will need to reach consensus on a replacement and win over enough Senate Democrats to surmount a filibuster of the plan, prompting the health care sector to warn of a crisis if insurers flee the individual market and patients lose coverage.
Mr. Brady said the idea that 20 million Americans will lose their health care coverage under Republican leadership is the “new big lie.”
“There’s a lot of scare tactics out there on this,” he said. “My point is this: We can assure the American public that the plan they’re in right now, the Obamacare plans, will not end on Jan. 20, that we’re going to be prepared and ready with new options tailored for them.”