Trump Can’t Get Rid Of Obamacare, So He’ll Turn To “Massive Deregulation” Instead

Repealing Obamacare was Plan A. Now the White House is trying to plot out a Plan B.

After Congress failed to repeal Obamacare, the Trump administration is now looking at what it can do on its own to make its mark on the law President Trump has repeatedly called a “disaster.

Trump must now choose between strengthening his predecessor’s system or undermining it. Obamacare remains stable — if troubled in some areas — and the administration has a massive amount of power to make things better or worse for 28 million people insured through the marketplaces.

So far Trump’s team has put off making big decisions about the law, such as whether they’ll keep enforcing the individual mandate or continue funding Obamacare subsidies. But they will have to do so in the next few weeks, as insurers finalize their plans for 2018. In the meantime, the picture of how they will tackle health care is becoming clearer. The plan appears to be to make a push toward “empowering patients,” which in effect means loosening and undoing whatever Obama-era rules and regulations they can without Congress’ approval.

The White House can’t fully repeal Obamacare without Congress, but it can grant state exemptions to some Obamacare rules and do away with others, including reporting requirements leveled on hospitals and other health care providers. The law was written to give a huge amount of power and flexibility to the federal agencies and the Secretary of Health and Human Services. Just as the Obama administration was able to implement large portions of Obamacare through rule-making, the Trump administration will be able to use this same tactic to undo many of those same regulations.

“The last eight years, ten years, have been very tough on providers. There’s been a lot of frustration with all the new regulations,” said an administration official Wednesday. “We’ll have massive deregulation — we’ve already started a lot of that.”

Those plans would alter the federal government’s role in health care delivery, but they still don’t answer the key question facing the Trump administration: Is the plan to stabilize the Obamacare markets or work to undo them?

Trump has repeatedly mused about letting Obamacare collapse on itself. “We’ll let Obamacare fail,” he said as recently as last month. Right now at least, Obamacare does not appear to be collapsing.

One early clue to how the Trump administration will approach Obamacare: they are already drastically slashing the budget for advertising Obamacare's yearly enrollment period. The federal government is obligated to spread the word that people have a certain window to enroll for individual insurance for the year, but there are no directions about how much must be spent.

The Trump administration revealed Wednesday it is cutting the Obamacare advertising budget by 90%, from $100 million down to $10 million. The Department of Health and Human Services called the advertising spending "ineffective."

Heading into the summer, dozens of counties across the country were on pace to have no insurers offering Obamacare plans next year. But over the past two months the trend of insurers pulling out of marketplaces reversed and now every county in the country is set to have at least one provider offering plans. Premiums and out-of-pocket costs remain high in many areas, but there are a half million fewer uninsured people this year and experts generally agree the markets are stable.

In short, the reason is because Obamacare subsidies help people buy insurance who could not otherwise afford it, making the markets more viable. Insurers can set prices high enough to recoup their costs knowing that the federal government will pick up a good portion of the bill.

But if the Trump administration wanted to send shockwaves through the market they could do so easily by canceling a key subsidy known as cost-sharing reduction payments, or CSRs.

CSRs are paid to insurance companies to bring down prices for people who make below a certain income threshold. Trump has dismissed them as an insurance bailout. While Trump has tweeted threats to end the payments, thus far his administration has not signaled whether they will continue to fund the CSRs but also won’t say if they will stop paying for them.

The result is a baffling middle ground that features the worst of both worlds. Because they have no commitment that CSRs will be there in the future, insurance companies could set future rates around 20% higher than they otherwise would, experts say. Meanwhile, the Trump administration is continuing to pay out the subsidies on a month-to-month basis with no long-term stability.

Another option for the Trump administration would be to provide more flexibility to the states under Medicaid, including allowing them to implement work requirements.

Under Obama, some states wanted to introduce work requirements to Medicaid that would force able-bodied recipients to work or prove they are actively seeking employment. At the time, those requests were denied. But Trump’s pick for head of Medicare and Medicaid Services, Seema Verma, is an advocate of letting states set their own regulations and has long been a proponent of work requirements.

Currently, five states have requests in for Medicaid waivers to implement work requirements — Kentucky, Indiana, Arkansas, Utah, and Maine. While none have gone through the full approval process yet, all are expected to ultimately be approved. (Before taking her current job, Verma helped write the Indiana and Kentucky proposals. She has recused herself from handling them.) But this could be just a first step, as the administration is considering radically altering the approval process itself.

“We’re looking at revamping the whole Medicaid (waiver) process to make sure that it’s easier for states,” said the administration official. “Any time they want to do something innovative or novel, the fact they even have to come to us and ask for permission is problematic.”

Deregulation has been a popular approach for Republicans, who argued Obamacare robbed individuals of the ability to make choices. But several analysts argue that what’s needed to fix Obamacare is stricter regulations, such as tightening the enrollment periods. Even an analyst who helped shape Obamacare concedes they went too far in trying to be accommodating and opened the door to gaming the system.

This presents a paradox to Trump: He argues that Obamacare doesn’t work but one way to improve things may be to enforce Obamacare harder than Obama did. Pursuing a deregulation approach while balancing it with running a health care system the president continues to condemn will be the main health care challenge for this administration for the foreseeable future.

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