The White House released its budget proposal this morning. Apart from the fact that the budget abandons any attempt to get to balance within ten years (or ever), a footnote buried deep in the document hides key proposals: Bailing out Obamacare health insurers to the tune of tens of billions of dollars, and taxpayer funding of abortion coverage.
On page 141, footnote 6 of Table S-6, showing the president’s policy proposals, includes the following admission: “The Budget requests mandatory appropriations for the risk corridors program and for cost-sharing reduction payments.”
The White House document claims that these proposals would have “no deficit effect,” but the U.S. Department of Health and Human Services (HHS) budget in brief provides additional detail about the sums at issue, noting that the budget “assumes outlays of $11,513 million (post-sequester) for the risk corridors program.”
There you have it: At least $11.5 billion in corporate welfare payments to insurers for risk corridors, and more for cost-sharing reductions.
About Risk Corridors
While risk corridors have faded in the public debate over the past two years, they remain a potent issue for health insurers. See a full explanation of the issue, but here’s a summary.
The Obamacare risk corridor program intended to provide a financial cushion for the first three years of the law’s exchanges (2014-16). Plans with high profits would pay some of the excess back, to subsidize plans with outsized losses. The text of Obamacare never included an explicit appropriation for risk corridors. The Government Accountability Office admitted as much, calling risk corridors a “user fee” program.
To prevent the Obama administration from using funds from elsewhere to subsidize corporate welfare to insurers, Congress enacted restrictions prohibiting the use of taxpayer funds to bail out risk corridors. Under these restrictions, insurers with losses could only receive as much money from the risk corridor program as insurers with gains paid into the program.
In Obamacare’s first few years, most insurers suffered massive losses, so the money coming in to the risk corridor program by no means equaled the requests for funds from the program. As a result, several insurers sued in the Court of Federal Claims, requesting payment from the Judgment Fund of the Treasury for their unpaid risk corridor obligations. Many of those cases remain on appeal.
While both the White House and HHS budgets include few details about this proposal, it appears that they would pre-emptively surrender the pending legal cases by paying insurers more than $11.5 billion in risk corridor obligations that insurers claim they are owed. The budget further proposes making these payments exempt from the budget sequester.
About Cost-Sharing Reductions
President Trump himself cancelled the cost-sharing reduction payments (CSRs) to insurers in October, correctly noting that the Obama administration made these payments without a legitimate congressional appropriation. Rather than conducting scrutiny of the Obama administration’s unconstitutional actions, or examining why both insurers and state insurance regulators assumed for far too long that these unconstitutional acts would continue, the budget instead proposes a return to the status quo, pretending like the events of last fall never happened.
The White House’s proposal on CSRs looks downright conservative, however, compared to the budget gimmick being contemplated by Speaker of the House Paul Ryan (R-WI). The White House budget indicates that spending on CSRs would have no deficit effect, because the Gramm-Rudman-Hollings statute requires budgetary agencies to assume full funding of entitlements (including CSR payments) when developing their fiscal baselines.
Ryan, however, finds this legal requirement an inconvenient truth. He wants to direct the budget agencies to raise the spending baseline artificially, so Congress can then “lower” the spending baseline right back to where it is now—and spend the phony “savings” from this gimmick on more corporate welfare to insurers.
Forcing Taxpayers to Fund Abortion Coverage
Another point of note: Passing either one of these proposals would by definition result in taxpayer funding of plans that cover abortion. The administration did not include any language prohibiting the use of CSR or risk corridor funds for plans that cover abortion. Therefore the White House presumably endorses federal taxpayer funding of abortion coverage.
This episode represents but the latest attempt to bail out Obamacare without even considering the implications on the life community. Sen. Lamar Alexander (R-TN) did exactly the same thing back in October. Moreover, Democrats will undoubtedly block any attempt to fund Obamacare insurers that includes robust pro-life protections (i.e., the Hyde amendment).
The budget proposal means Trump administration is now actively working to codify not one but two Obamacare bailouts that a Republican Congress denied to the Obama administration—doing liberals’ bidding for them. Moreover, the failure to include any pro-life protections on these bailouts represents at best a massive managerial oversight, and at worst an insult to the pro-life community. For those who thought that last week’s budget deal represented the nadir for conservative principles among this administration, think again.
Mr. Jacobs is founder and CEO of Juniper Research Group, a policy consulting firm. He is on Twitter: @chrisjacobsHC.