(Bloomberg View) — Monday put two of my favorite topics in the headlines: Donald Trump, and cost-sharing reduction payments. Plenty of folks have spilled plenty of ink on that first problem. Let's spare a moment for the second. Cost-sharing reduction payments, a subsidy built into the Affordable Care Act public exchange plan program, are not just a policy problem, but a potent symbol of the larger political disease ailing our nation.
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They were designed to address a real challenge: similar policies may have very different effects at different income levels. Say you make $75,000 a year, and your health insurance policy has a $5,000 deductible. If you get something serious, something expensive — well, ouch, that's going to hurt your budget, but you'll scrape together the $5,000 and get the care that you need. If you have the same policy but earn only $25,000 a year … ummm, you don't really need that liver transplant, do you?
So the Affordable Care Act — Obamacare — required insurers to make special accommodations for people whose incomes were below 250% of the poverty line. The companies have to provide these individuals with silver plans (the second-lowest benefit tier) with lower deductibles and co-payments. This is, of course, quite expensive for insurers to do. So the Affordable Care Act also granted subsidies to go to the insurers to cover the cost. Well, to be precise, lawmakers who dreamed up Obamacare promised the payments to insurers, but did not appropriate any money to actually pay them.
Yes. Congress can mandate subsidies without also mandating a funding source. Medicaid is another example. This is crazy, but there it is.
For once the Constitution is admirably clear on how the executive branch should handle this quandary: "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time." The law appropriated no money for these cost-sharing reduction payments. But the Obama administration went ahead and paid them anyway.
The House of Representatives then sued the Obama administration to halt those payments. That's how Trump and the cost-sharing reduction ended up in headlines together: The Trump administration was on deadline to decide what to do about the case, which is currently wending its way through the courts. (Spoiler alert: They punted.)