The implosion option.
Even before the U.S. Senate's effort to repeal and replace the Affordable Care Act foundered last month, President Trump toyed publicly with a different strategy: "Let Obamacare implode, then deal." The idea is that implosion would bring chaos, forcing Democrats to negotiate on a substitute for the ACA. The trouble with that approach is that the ACA won't implode on its own - an act of demolition would be required, and so far the Trump administration has refrained from pushing the plunger.
One way to push the ACA toward the brink would be for the federal government to stop sending checks to insurance companies that allow them to reduce deductibles and co-payments for low-income people who buy their policies. The White House has threatened to end these so-called cost-sharing reductions, but on Wednesday announced that the payments would continue for the month of August. A month-to-month reprieve does not give insurance companies the predictability they need, but it avoids an implosion.
One reason for Wednesday's announcement was the release of a Congressional Budget Office report the day before. The CBO calculated that ending the cost-sharing reductions would push insurance premiums upward by 20 percent, and increase the federal deficit by $194 billion over a 10-year period.
Cutting subsidies would increase the deficit because of the hydraulics of the ACA. Insurance companies would raise their premiums in response to the loss of cost-sharing reductions. Higher premiums would allow people who buy health insurance to qualify for larger federal tax credits available under the ACA. In some cases, the larger tax credits would allow people to buy more comprehensive insurance policies than they do now. The CBO's analysis suggests that the real effect of ending cost-sharing reductions would not be an implosion of the ACA, but an explosion of the deficit.
That might happen anyway. In 2014, House Republicans filed a lawsuit claiming that the cost-sharing reductions are illegal because the Obama administration was paying them without congressional approval. A federal judge ruled in the Republicans' favor last year, but the payments have continued pending an appeal. If the plaintiffs prevail, they and the Trump administration could face an awkward choice between giving formal approval to an element of Obamacare, or allowing the deficit to balloon.
The White House tacitly acknowledged that choice by extending the payments, thereby illustrating the flaw of Trump's implode-then-deal strategy. The ACA, far from imploding, is helping millions of people buy health insurance and providing Medicaid to millions more. Republicans will be held responsible for their failure to repeal and replace the act, and would also be blamed for sabotaging it. Democrats have no incentive to deal unless the goal of negotiations is to make the ACA extend coverage to more people at a lower cost.
That points to another strategy, one that would better serve the interests of Trump, Republicans and the country: The administration and Congress should improve the ACA, recognizing that it was designed from the beginning to achieve the conservative goal of preserving the role of private insurance in health care. Republican Sen. Lamar Alexander of Tennessee, chairman of the Senate Health, Education, Labor and Pensions Committee, is planning hearings next month on ideas for improving the ACA. At least some in Congress are beginning to recognize that implosions can hurt a lot of people, and that those who cause them can expect little applause.