Trump ended key Obamacare payments. But bringing them back could do more harm than good.

Something very strange is happening in health policy right now. In October, when President Donald Trump announced he would end Obamacare’s cost-sharing reduction payments to health insurers, it was billed (including by yours truly) as sabotage and potentially disastrous for the law’s markets.

But now, with Republicans putting forward a plan to restore those payments and inject billions of dollars in new money into the marketplace, Democrats and progressive analysts are wary. They now say that restoring the CSR payments would be harmful.

(CSRs, you’ll remember, are payments to health insurers made by the federal government to compensate them for offering mandatory discounts on out-of-pocket spending to their lower-income customers.)

Democrats have other reasons for opposing the Republican bill — namely, anti-abortion riders and the codifying of Trump’s proposal to expand short-term non-ACA insurance plans — and they question whether GOP leaders are actually interested in a stabilization measure. But it seems like, even on the merits, the alleged big Democratic win in this deal — CSRs, reversing Trump’s decision — isn’t actually a win at all. Which probably explains why Democrats are holding firm with no sign of budging to back the GOP’s stabilization plan.

So what happened? States and insurance companies adjusted to Trump’s CSR move. Insurers, in conjunction with state officials, compensated for the loss of the CSRs by hiking premiums for certain plans that are used to calculate Obamacare’s premium subsidies. Insurers were made whole and customers actually ended up with a bigger federal subsidy than they would have otherwise received. That allowed them to buy either a better plan for the same price or the same plan for a lower price — even for free.

So, in this odd way, Trump’s attack on Obamacare actually turned into a better deal for the 10 million or so Americans who receive those subsidies. People with higher incomes didn’t receive the same help, but they were already getting priced out of the ACA marketplace. This CSR business just accelerated a trend that was underway.

States are formally adjusting to this new reality. Vermont, one of the few states that didn’t allow insurers to load up their post-CSR rate hikes on certain plans, is now advancing legislation that would officially permit the practice.

In the new world, the CBO actually projected that restoring CSR payments would lead to a net loss in coverage. If insurers received the payments, they would presumably reduce rates on the plans used to calculate the size of the ACA’s subsidies, which would reduce the size of the subsidy. People who receive those subsidies would suddenly need to pay more to keep the same plan they bought in 2018.

This all led me to wonder: If you can make an argument that the ACA is actually a better deal without CSRs, then what motivation would Democrats ever have for restoring them? Or is it better to simply move on and embrace this CSR-free world.

The answers I got were:

David Anderson at Duke University pointed me to proposals by Sens. Patty Murray (D-WA) and Elizabeth Warren (D-MA) that would take the first tack. Murray wanted to increase the size of the subsidies and expand eligibility for them above 400 percent of the federal poverty level. Warren, according to the Huffington Post, is putting forward a similar plan.

The message is that, to restore CSRs, there needs to be a corresponding increase in federal assistance to make sure people are held harmless. Without such an increase, the status quo is actually preferable to bringing back the CSR payments.

”There needs to be a recognition that right now on a pragmatic basis ... funding CSR is a massive cut to the ACA if there is no other corresponding policy initiatives,” Anderson told me.

Of course, that could be far-fetched for Republicans. They already view restoring the CSRs and adding reinsurance as a compromise from their position: These are new federal dollars to shore up the ACA’s markets at a time when the official GOP position is that Obamacare should be repealed. Adding even more funding feels like a nonstarter.

What other incentive would Democrats have for funding CSRs, given the on-the-ground reality? I heard one from Larry Levitt at the Kaiser Family Foundation: The Trump administration could still try to block states and health plans from their CSR workaround (where they jack up the rates for only certain plans, thereby increasing the size of the premium subsidies).

If that were to happen, the good deals that followed from Trump’s CSR decision would evaporate.

”This only works out good for people if insurers load the full cost of CSRs onto silver marketplace premiums,” Levitt said. “There’s always a risk that, at some point, the federal government could prohibit that.”

But absent any more such overt sabotage, it doesn’t seem like the Republican stabilization plan actually has much to offer Democrats. Which is why the bill is stuck, with the spending bill that was supposed to carry it over the finish line needing to pass in a matter of days.

It’s a bizarre twist, but that is the world we live in now.

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