Scrap subsidies, replace the law Sally C. Pipes

President Trump has a new bargaining chip in the drive to repeal and replace Obamacare. He recently expressed willingness to end the law’s “costsharing reduction” subsidies — which reimburse insurers for covering out-of-pocket costs like deductibles and co-pays for low-income exchange enrollees — in order to bring Democrats back to the negotiating table.

That’s exactly what he should do.

Obamacare’s exchanges are on a fiscally unsustainable path. Scrapping the subsidies will only hasten their inevitable demise — and force Republicans and Democrats to work together to replace the law with something actuarially sound now, before the exchanges’ finances worsen further. As an added bonus, ending the subsidies would represent a win for the Constitution.

The Obama administration had been making the cost-sharing payments, which total $7 billion annually, since the exchanges opened for business.

But Congress never appropriated funds for the subsidies. By making the payments anyway, the Obama administration violated the Constitution’s requirement that “no money shall be drawn from the Treasury, but in consequence of appropriations made by law.”

When the GOP-controlled House sued the Obama administration in 2014 over this precise point, Judge Rosemary Collyer of the U.S. District Court for the District of Columbia sided with the House but allowed the subsidy payments to continue pending an appeal to the Supreme Court.

If Trump ends the payments, he’ll be abiding by the Constitution. Insurers may consequently leave the exchanges and thus accelerate the collapse of the individual insurance market. But such an implosion is unavoidable. After all, according to Aetna CEO Mark Bertolini, the market is already in a “death spiral.”

The president took an oath to “preserve, protect and defend the Constitution.” The kerfuffle over the cost-sharing subsidies offers him an opportunity to act on that oath — and rejuvenate Congress’ efforts to repeal and replace Obamacare.

Sally C. Pipes is president, CEO and Thomas W. Smith Fellow in health care policy at the Pacific Research Institute. Her latest book is The Way Out of Obamacare.