One way of looking at Donald Trump’s plan for the Affordable Care Act, which has leaked out and was expected to be announced this week, is that it’s a surrender. (The fact that “strong congressional backlash” has delayed the announcement fits this analysis.) While stopping short of making Democratic enhanced subsidies for millions of insurance exchange customers permanent, it does extend them for two years, similar to a bipartisan outline introduced last week. And while there are changes to the subsidies, some are relatively more benign than expected.
One of the main goals of the enhanced subsidies, established in 2021, was to universalize affordable insurance and avoid the “cliff” effect of cutting off aid at a particular income level. The Trump proposal restores that cliff but sets it much higher. Prior to 2021, the cliff was set at 400 percent of the federal poverty level. The Trump plan raises that to 700 percent. This means that single individuals making under around $109,000 a year would qualify for subsidies, as well as a family of four making under $225,000 a year. Most people above that income level are getting their insurance from their employer, and while there will be select cases of people paying far more, they will be less numerous.
More from David Dayen | Ryan Cooper
With Trump’s endorsement, Republicans who have been resistant to maintaining anything related to the Affordable Care Act may feel pressured to do so. And Democrats may be in a position to declare victory in their long fight, punctuated by a 43-day government shutdown, to extend virtually all of the subsidies and prevent disastrous insurance premium spikes.
But there’s more to this story.
The Trump plan also includes nominal minimum payments for everyone—that is, abolishing any zero-premium plans—as a supposed anti-fraud measure. Now, there has been an epidemic of companies cheating the ACA system by signing people up for exchange coverage, or switching their existing coverage, particularly in the insurance fraud hotbed of Florida. Since most people wouldn’t notice or care if they got signed up for a free plan, the insurance broker or agent can fraudulently collect the government subsidy. The Republican idea is that adding a nominal payment would cut down on scamming.
But the root of this problem is malicious companies, not the typical Republican welfare queen stereotype. Previous research has shown that even a tiny cost-sharing requirement, as low as $1 to $5, leads to much reduced insurance enrollment and worse health outcomes among low-income populations. By rights, the government ought to crack down on scammers rather than making the poor pay more—and indeed, under the Biden administration the Centers for Medicare & Medicaid Services had done just that, with plan changes associated with a broker or agent going down by a reported 70 percent as of October last year. Alas, Republicans seem likely to demand their pound of flesh.
The Trump team has a bigger goal, though, of opening up the market to Health Savings Accounts and junk insurance run by middlemen. They’ve hit upon a way to provide cash incentives to make insurance potentially unusable when you actually need it. That will be lucrative to the private contractors with the power and influence to capture the market.
As part of the package, the president’s plan will reportedly include an option he’s been talking about on social media, whereby individuals can receive their subsidy directly rather than giving it to an insurance company. This is fairly insane, because one person will not have the purchasing power of a large pool of insured policyholders to get favorable prices from hospitals and other providers, even if that money is tax-advantaged in some way.
The way Trump gets around that is by using the cash promise as an incentive for people to downgrade their insurance. Under his plan, if someone on the insurance exchanges shifts from a “gold” to a “silver” or “bronze” plan, they will get the difference in subsidy placed into a tax-exempt Health Savings Account, from which they can purchase health care. This may sound attractive—you get your money to do with it as you please!—but it’s just a recipe for worse coverage and more uncertainty.
The lower tiers of ACA plans come with increased out-of-pocket expenses and higher deductibles, which the HSA account is unlikely to offset. The administration apparently wants Congress to appropriate additional “cost sharing reductions” to lower out-of-pocket costs, but that feels like the one thing House Republicans would insist on keeping out of the plan. So people will be enticed into making their insurance crappier in exchange for “cash” tied up in a savings account with limited utility. (UPDATE: Friend of the Prospect Andrew Sprung checks in to note that even the cost sharing reductions idea is a poison pill, designed to eliminate something called “silver loading” that states have used to make ACA plans cheaper and boost enrollment.)
It will also affect everyone who stays in their gold and silver plans. The individuals who want to keep their good coverage are likely sicker patients who know that they need to use insurance over the course of a year. If everyone leaving the better plans is relatively healthier, it makes the “risk pool” of those who remain sicker on average. That will almost certainly raise the costs of that insurance over time.
The HSA money, meanwhile, could end up flowing to a new set of schemes that either promise to close gaps in the bad ACA plans or offer emergency room coverage or some other patch. These could easily herald a return to the bad old days before Obamacare, when insurance was of dubious value when called upon. Trump has been changing federal rules to promote short-term “junk insurance” plans with limited benefits that trick customers into thinking that they are more comprehensive. Because the plans would exist outside of the ACA framework, for example, they may not cover so-called “pre-existing conditions,” and may exempt basic things like mental health and maternity care.
All told, there’s a good chance that Democrats will accept this offer, or something like it, as the best they’re likely to get for the time being. If they are ever in power again, they can fix the ACA permanently, and avoid the danger of subsidies expiring (as the Prospect advocated back in 2021). But it’s quite revealing as to the total bankruptcy of the Republican Party when it comes to health care policy. The GOP will flinch from more than doubling health insurance premiums—at least if middle-class people and up are the most affected—but only if they can also make the insurance worse, and make poor people pay more.
Republicans aren’t even discussing the trillion dollars in looming Medicaid cuts that are going to wreak havoc on the health care system across the country, with an estimated 7.5 million people being kicked off Medicaid by 2034. (Democrats soft-pedaled restoring that funding as one of their shutdown demands, to be fair, but it’ll be high on the list of reversals if Democrats regain power.) Rural hospitals in hyper-MAGA regions in particular are going to get gored by these cuts, but characteristically the only Republican idea to deal with that is a pitiful $50 billion pot of money—and, it turns out, that is mostly a sham too.
As Layla A. Jones reports at Talking Points Memo, Trump’s CMS is setting aside just 15 percent of the money for hospital payments, with the rest going out based on a formula that includes a bonus for following right-wing ideology on certain matters, like schools implementing Trump’s Presidential Fitness Test. Mass rural uninsurance in turn means many people will flee to urban ERs to get care, and when they can’t pay, even higher costs for everyone else will result.
Donald Trump, facing collapsing polling and a potential riot-inducing scenario on health insurance, might have backed off temporarily on the long-standing Republican tendency to ruin the health care system so rich people can have more tax cuts. But he’s still ruining the health care system, make no mistake, just a bit more stealthily. This has always been the GOP approach to health care, and it’s not going anywhere.