President Trump appears to have dropped his demand for immediate funding for the construction of a wall along the Mexican border, and that could be good news for an important Obamacare subsidy.
Earlier this week, the White House had indicated that it would use the threat of eliminating the subsidy as leverage in its battle to fund the 2,000 mile-long wall.
The subsidy -- cost-sharing reductions payments totaling $7 billion this year -- enables insurers to offset their costs for providing reduced co-payments and other out-of-pocket costs to low-income Americans who purchase health insurance through Affordable Care Act exchanges.
Many insurers struggling to make a profit have warned that they likely will drop out of the market next year or substantially boost their premiums unless the government cost-sharing subsidy is continued. Trump has raised the possibility of allowing the cost-sharing subsidy to expire by the end of this year.
Last weekend, Trump and White House Budget Director Mick Mulvaney took the extraordinary step of directly linking the fate of the subsidy payments to the outcome of budget talks aimed at preventing a partial government shutdown by the end of the week. The administration signaled that unless Democrats agreed to support a down payment on the wall, the president would block a new round of health insurance subsidies next year totaling $10 billion.
Trump has formally asked Congress for $1.5 billion this year in new money to start planning for the construction of a wall – a project that some experts say would cost more than $22 billion overall. Trump has also requested an additional $2.6 billion for the fiscal year that begins Oct. 1 to continue the controversial project.
But Senate Minority Leader Chuck Schumer (D-NY) and House Minority Leader Nancy Pelosi (D-CA) refused to go along with Trump’s demands, saying the wall is a waste of time and money. Without Democratic support it will be virtually impossible for GOP-controlled Congress to pass another short-term budget resolution to avert a partial government shutdown beginning early Saturday.
Trump on Monday told a select group of reporters in a private meeting that he was open to delaying funding for wall construction until September, according to media reports. White House Press Secretary Sean Spicer said he was “very confident” that an agreement on the massive spending bill could be reached by Friday, although he would not totally rule out the possibility of a government shutdown.
Without the threat of a Trump veto of the pending $1 trillion spending bill essential to keeping the doors to the government open, the Democrats’ hand has been greatly strengthened. They are now almost certain to extract concessions from Trump and congressional Republican leaders on the health insurance subsidy and other top priorities, such as shoring up pension benefits for coal miners.
In return, the Democrats will likely support some additional funding for border security, provided it is not used to help build the wall.
Stan Collender, a veteran budget analyst and economics blogger, said on Tuesday that he never thought that Trump’s attempt to link funding for the wall to a continuation of the health insurance subsidy for the poor was an effective bargaining strategy, especially since the Democrats held the upper hand.
Unless the Democrats sign off on the spending measure, the Republicans would lack the necessary majorities in the House and Senate to push it through before the deadline. Many GOP conservatives in both chambers will oppose new spending.
“I don’t think it was as much of a bargaining chip as he thought it was,” Collender said in an interview. “He was trying to tie two things together – the wall and the subsidies -- but Democrats were never going to agree to either one of those things.”
“Giving up on one certainly means giving up on the other,” he added.
The cost-sharing subsidy has been under assault from the Republicans for years, despite the Obama administration’s best efforts to preserve it. House Republicans challenged the legality of the subsidy in federal court and won a verdict last year that threatens the future of the subsidy. While the Obama administration filed an appeal, it’s likely that the new Trump administration will allow the ruling to stand.
According to the Kaiser Family Foundation, nearly 60 percent of the 12.2 million people who buy insurance on individual exchanges rely on subsidies to save as much as $3,545 a year on medical and drug deductibles and $5,587 on out-of-pocket maximums. The analysis conlcudes that if the subsidies were eliminated, premiums would rise by an average of 19 percent for the most popular plan.