Revisiting CSR leverage

The Trump Administration released their demands for funding Cost Sharing Reduction (CSR) subsidies. It is either a poison pill list or a complete misreading of leverage. Any CSR deal needs sixty votes in the Senate which means at least nine Democrats need to vote for it and most likely a dozen or more Democratic votes are needed just in the Senate.

Here is the White House memo on the terms they are asking for in exchange for doing anything to bring premiums down for even 1 year.

I will explain the three items below in this thread. 2/ pic.twitter.com/LdqKmpPh5Y

— Andy Slavitt (@ASlavitt) March 7, 2018

The demands for CSR are to enact into law short term plans, restrict female reproductive health care and relever the price band from 3:1 to 5:1**.

There is a deal that could be made in Congress. This is not the deal. CSR funding is not a peculiarly valuable policy outcome for Democrats who are interested in expanding affordable, low out of pocket coverage any more. As I wrote in October:

At least forty states have taken steps to protect all on-Exchange buyers from CSR costs in 2018. The Congressional Budget Office predicts that all states will converge to local regulations that shift the entire cost of CSR to only Silver plans thus lifting the relative price point of the subsidized Benchmark plan…

It is a shift from a narrowly structured, tightly means tested subsidy to a more broadly structured, loosely means tested subsidy. This gives states a lot of flexibility….

These are acceptable long term outcomes for Democrats and liberals. More people get covered. If there are no 1332 waivers, the coverage expansion is expensive and inefficient. If states use 1332 waivers to subsidize off-Exchange individuals with a reinsurance program, more people will get covered and the spending will be more efficient. The transitional year of 2018 will be a scramble but from a political perspective, this is acceptable for Democrats as the public believes that the Republican party should be responsible for health care.

Funding CSR is a massive spending cut on subsidized health insurance. That is a significant policy concession from Democrats in and of itself.

If CSR is not funded, the premium increases that occurred in 2018 will be baked into the baseline premiums for 2019. Those premiums are likely to increase by 15% to 20% or more due to the combination of short term plans and the pragmatic elimination of the individual mandate. Final premiums are announced a few weeks before election day. The headlines of 20% premium increases are far more beneficial to Democratic political chances than headlines that premiums are flat or declined by 2%.

Not doing anything is a viable political and policy option for Democrats. Requiring Democrats to give up even more policy concessions in order for them to give up another policy and political concession just seems convoluted to me.

Now what could an actual deal be?

Trading CSR funding for expanded subsidies or removal of the income cap for subsidies and technical changes on 1332 waivers, outreach, reinsurance and catastrophic plans could make sense. It gives Republicans a political headline, it takes one of the last major pain points of the ACA (the non-subsidization of premiums for families earning over 400% FPL) and it makes the ACA market more stable.  It would be a policy for politics trade-off.

An honest examination of leverage and outcome preferences if nothing else happens is a critical analysis to perform.

 

 

** On a completely cynical note, a 5:1 age banding is more likely to help Democratic leaning young voters while harming Republican leaning older voters.