Dear House Dems: The CSR shoe is on the other foot now. Negotiate accordingly.

I visited DC last month for the Families USA healthcare conference. While I was there, I managed to arrange to meet with staffers for four U.S. Senators and two House members (in fact, the House members themselves stopped by to talk for awhile as well. None of the Senators did, but they were a bit busy dealing with Donald Trump's idiotic temper tantrum government shutdown at the time).

In my meetings, we discussed a variety of healthcare policy-related issues, but the two most important ones I focused on were:

  1. It's important to make sure that a robust ACA 2.0 improvement bill doesn't get lost in the hype and debate over Medicare for All, Medicare for America or whatever other universal coverage du jour ACA replacement bill eventually comes down the pike, and...
  2. When negotiating that ACA 2.0 bill, whatever they do, do NOT agree to appropriate CSR funding without ALSO ensuring that the ACA subsidy formula is beefed up and expanded.

David Anderson explains why over at Balloon Juice:

...as I have argued many times, the termination of cost sharing reduction subsidies is not sabotage. It instead has actually strengthened the market. The cohort of people earning between two and four times the federal poverty level are seeing much lower net of subsidy pricing.

I need to add an important clarification to how Anderson words this: The CSR reimbursement cut-off by Trump was intended to be sabotage. It really was...he flat-out said that's what he had in mind, since he was trying to "kill Obamacare". He honestly thought that cutting off CSR payments would cause the ACA exchanges to "explode" and thus the ACA would collapse.

He didn't understand how CSR payments actually work...and this, combined with the clever Silver Loading/Silver Switcharoo workaround which the carriers, exchanges and state regulators came up with, resulted in the sabotage mostly backfiring:

As I noted in October 2017, the world has changed:

Inaction means, over the long run, more people will get low(er) out of pocket expenses/lower deductible insurance for lower premiums through structured, subsidized exchanges. I think that after a year or two, the expected social contract of what “acceptable” publicly subsidized insurance will move to Gold instead of Silver plans. Lower cost Gold plans and very affordable Bronze plans will increase long run uptake of PPACA insurance among people who earn between 200 percent and 400 percent FPL. This is a group with more political power than Medicaid recipients and Medicaid recipients were able to successfully mobilize to defend their interest this year. Appropriating CSR and thus maintaining the status quo is closer to conservative policy and ideological preferences than resetting the effective benchmark to Gold.

Ironically, we’re now far closer to the Obama 2007 healthcare plan today than we were on January 19, 2017.

This last part is actually more of a reference to the historical tidbit that then-Senator Barack Obama opposed having an individual mandate ("shared responsibility") coverage requirement during the 2008 primary campaign, and only came around to supporting Hillary Clinton's position requiring one later on.

There can be good reasons for liberals and Democrats to agree to appropriate CSR. Rep. Pallone’s 2018 HR 5155 appropriated CSR but used the fund flow to expand CSR eligibility and levels as well as expand premium tax credit subsidy eligibility to more people. But the fundamental nature of the ACA has changed due to the termination of CSR and the politics have changed since October 2017 when there was a legitimate fear that not paying CSRs would cause the market to collapse.

But that trade-off has to be made with a recognition of reality. Terminating CSR has created a different market that is more favorable, in isolation, to Democratic policy preferences than Republican policy preferences. The New Dem coalition needs to realize that it was not effective sabotage but a backdoor incidental strengthening.

In a nutshell, here's what Anderson is talking about:

  • Had CSR reimbursement payments continued to be paid over the next decade, the CBO projected that it would have cost the federal government $118 billion between 2018 - 2026, or around $13 billion per year on average.
  • Cutting off CSR reimbursement payments saves the federal government that $118 billion over 9 years. HOWEVER...
  • The practice of "Silver Loading" by the carriers make up for that $118 billion is causing federal APTC subsidy costs to increase by a far more than $118 billion...in fact, the CBO projects that it's gonna increase APTC by around $309 billion for those earning between 250 - 400% FPL (that is, people who are eligible for APTC but not for CSR...the 200-250% crowd does qualify for CSR as well but it's pretty weak, so many of them likely go for Gold or Bronze plans regardless).
  • There's some additional revenue increases & decreases projected by the CBO as well which I don't entirely understand, but they mostly cancel each other out, so in the end, the bottom line is that the CBO projected that cutting off CSR payments is actually going to COST the federal government a net $194 billion over the next nine years. That's roughly $21.5 billion per year.

In other words, Donald Trump, in attempting to destroy the ACA, has actually ended up unintentionally causing the ACA's subsidies for lower-income Americans to increase by over $20 billion per year...without the Dems having to pass a law or anything.

Massive irony aside, what this means is that, as Anderson notes (and as I've noted many times before as well), the tables have been turned on the CSR issue: Officially appropriating CSR funding is now a Republican priority, not a Democratic one.

In fact, the only down side here from a Democratic/progressive POV is that many middle class ACA enrollees are being hit hard by this situation, since they don't qualify for any ACA subsidies at all. This means that in states which aren't doing the full Silver Switch route, those earning over 400% FPL are stuck being hit with the full CSR load if they stick with Silver. They can usually move to Gold or Bronze plans to avoid the hit, but that's hardly ideal for them.

Even so, a lot more people are being helped by Silver Loading than hurt by it...which means Democrats should ONLY agree to appropriate CSR payments if they get something big in return.

And what should they demand in return? Again, two things:

  • 1. EXPAND APTC ELIGIBILTY & UPGRADE THE APTC FORMULA
  • 2. EXPAND CSR ELIGIBILITY & UPGRADE THE CSR FORMULA

Here's the current APTC table compared to the ACA 2.0 upgrade table proposed by the House Dems in their "ACA 2.0" bill, aka H.R. 5155:

...and here's the current CSR table compared ot the ACA 2.0 upgrade proposed in H.R. 5155:

How much would each of these cost? Well, the estimates vary depending on a lot of factors, but my guess is it'd bring in several million additional middle-class exchange enrollees (those earning over 400% FPL...mostly between 400-700%, I'd imagine), while coming in below $20 billion per year...which means you'd substantially lower net healthcare costs for millions of people without (further) increasing the deficit at all.

Even if it ended up costing, say, $25 billion/year, this would still be an incredibly good bang for the buck, since that'd amount to a net spending increase of $5 billion/year to ensure several million more people get covered with comprehensive healthcare policies.

Another way of approaching this would be to use that $20 billion/year to reinstate the federal reinsurance program which lasted from 2014 - 2016. However, this would only address the "over 400% FPL" side of the issue, so using all of the money for reinsurance would actually amount to hurting the 250-400% FPL crowd. If reinsurance was part of the equation, it's still important to raise/beef up the APTC & CSR tables as well.

UPDATE: I can't believe I forgot to mention this, seeing how I wrote up not just one, but two major posts about it just a couple of weeks ago, but it's important to note that depending on how the federal appeals process plays out in the CSR lawsuits, it's conceivable that the House Dems may even have up to $32 billion per year to negotiate over, not "just" $20 billion.