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Why Trump’s threat to sabotage Obamacare would backfire

Donald, what you doing?

Donald Trump Mike Pence Pool/Getty Images
Dylan Scott covers health care for Vox. He has reported on health policy for more than 10 years, writing for Governing magazine, Talking Points Memo and STAT before joining Vox in 2017.

President Donald Trump has made it explicit: He is taking Obamacare hostage to try to force Democrats to work with him on health care reform.

The president has a real basis for the threat. A lawsuit working its way through the courts right now threatens crucial subsidies that help lower costs for millions of people who bought their insurance through Obamacare. Those subsidies are known as cost-sharing reductions. The Obama administration had been defending the subsidies, but Trump could choose to end them. This could throw the insurance market into chaos. Health insurers are already nervous about that possibility.

Trump just threw more gas on that fire, in an interview with the Wall Street Journal published Wednesday.

“Obamacare is dead next month if it doesn’t get that money,” he mused. “I haven’t made my viewpoint clear yet.”

But, politically speaking, there is a critical flaw in Trump’s plan. Polling pretty definitively shows that Americans will hold the new White House and Congress responsible for what happens to Obamacare. If that’s true, following through on his threat would likely hurt Trump more than his opponents. He doesn’t seem to have any real leverage, and Democrats are already brushing off his threats.

This is likely to be the big health care fight. Now that the GOP’s own bill to overhaul Obamacare has stalled, the next battleground is for Trump to attack the law. But hanging in the balance are these subsidies that help make health coverage affordable for millions of Americans.

The lawsuit that could tank Obamacare

The lawsuit at play is over one Obamacare’s foundations: helping people afford private health insurance. The law offered tax credits to help lower the premiums people pay for their insurance every month. It also created these cost-sharing subsidies — the ones at stake in the Trump gambit — to help lower costs further for people who make less money.

The federal government pays these subsidies to health insurers directly. Insurers use that money to reduce out-of-pocket costs, such as copayments and deductibles, for people with lower incomes who buy health insurance on Obamacare’s marketplaces.

Those subsidies totaled $7 billion in 2016, lowering costs for an estimated 7 million people. This means that, on average, they reduced costs for each person by a little more than $1,000. You qualify for cost-sharing subsidies if your income is 250 percent of the federal poverty line, about $30,000 or less for an individual.

If that money were lost, it would cripple the insurance market. Insurers would still be required to keep costs lower for these people, but plans wouldn’t receive the federal payments to help them do that. That upends Obamacare’s whole financial model for reducing cost-sharing and could drive insurers out of the market.

“While insurers could theoretically raise premiums to offset the loss of the subsidy payments, the administration would be sending a clear signal that it’s not a reliable business partner and is not looking to run the marketplaces effectively,” said Larry Levitt at the Kaiser Family Foundation. “If I were an insurer, I’d just take my marbles with me and focus on other more profitable lines of business.”

But here’s the legal problem: The Affordable Care Act was a little vague on who would pay for the subsidies. So in 2014, the Republican-controlled House sued the Obama administration, arguing that it didn’t have the legal authority to pay these subsidies. They say the Affordable Care Act required Congress to approve that spending, and they hadn’t. That made the payments illegal, according to House Republicans.

A lower court sided with the House last year, ruling that the subsidy payments were unconstitutional without congressional approval. It put that decision on hold to allow the Obama administration to appeal, which it did. That appeal is still pending, but now the Trump administration is in charge of defending the payments.

Health plans are waiting anxiously to find out what’s going to happen. As Vox’s Sarah Kliff reported, insurers are already on edge as they make decisions about whether to participate in Obamacare next year, because they don’t know what will happen with the subsidies.

What Trump is threatening to do

Trump knows all this, and, in an interview with the Wall Street Journal, he threatened to cut the subsidies off unless Democrats worked with him:

“Obamacare is dead next month if it doesn’t get that money,” Mr. Trump said. “I haven’t made my viewpoint clear yet. I don’t want people to get hurt. … What I think should happen and will happen is the Democrats will start calling me and negotiating.”

“It wasn’t authorized by Congress,” Trump added. “I’m going to have to make a decision.”

The president has even worked behind the scenes to send this message. A recent statement from the US Department of Health and Human Services led many people to believe that the Trump administration would keep paying the subsidies. But then HHS put out another statement Tuesday afternoon disputing those reports and again putting the onus on Democrats to do something.

“The administration is currently deciding its position on this matter. We have not been contacted by Democrats to help save Obamacare, perhaps because they consider Obamacare to be a losing cause,” the new statement said. “Democrats need to help solve this failed Obamacare plan.”

Politico reported late Wednesday that Trump himself called HHS and ordered them to rebut the earlier reports that the payments would be made, worried that they would hurt his negotiating position.

Trump’s problem, in one chart

Trump seems to think that taking such a hard line will bring Democrats to the table. Ultimatums were a tactic he also deployed when negotiating with conservatives during the health care debate.

But they didn’t work then. Here is the problem this time, from a recent survey by the Kaiser Family Foundation:

Americans aren’t going to blame Democrats if Obamacare implodes. They’re going to blame Trump and his fellow Republicans. Trump’s now-transparent threat to sabotage the law makes it all the more likely that the fallout will land on him.

Further complicating things: Congressional Republicans might not be willing to let Obamacare fail on their watch. Some of them have suggested that lawmakers should go ahead and approve the subsidy payments for now. A group of leading health care organizations — including the American Medical Association and the US Chamber of Commerce — have urged the government to continue paying the subsidies.

Top Democrats, perhaps aware of all this, quickly dismissed Trump’s threat on Wednesday.

"This cynical strategy will fail,” Senate Minority Leader Chuck Schumer of New York said in a statement. “Our position remains unchanged: drop repeal, stop undermining our health care system, and we will certainly sit down and talk about ways to improve the Affordable Care Act.”

And Trump himself seems to know he’s playing a dangerous game.

“The longer I’m behind this desk and you have Obamacare,” he told the Journal, “the more I would own it.”

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