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Trump admin can’t use Congress to repeal Obamacare, so it’s asking states to rewrite the health law

States can use waivers to redraft Obamacare rules but they can't, for example, create a Medicare for All program.

President Donald Trump shakes hands with Health and Human Services Secretary Alex Azar at HHS headquarters, October 25, 2018, Washington, D.C. (Photo Credit: Chip Somodevilla/Getty Images)
President Donald Trump shakes hands with Health and Human Services Secretary Alex Azar at HHS headquarters, October 25, 2018, Washington, D.C. (Photo Credit: Chip Somodevilla/Getty Images)

Less than a month after the midterm elections ended the possibility of Obamacare repeal in Congress, the Trump administration has called on states to rewrite the health law in the image of failed GOP health bills.

The Department of Health and Human Services (HHS) issued new guidance on Thursday encouraging states to implement changes to the marketplace that fundamentally undermine the goals of the Affordable Care Act (ACA).

States have always had the ability to modify the ACA, but they required federal permission to do so through what’s known as a “1332 waiver.” To get federal approval, states had to, among other things, abide by statutory guardrails. The new guidance issued on Thursday gives states far more latitude to make drastic changes to the ACA — including how they use tax credits from the federal government.

Thanks to the ACA, the federal government subsidizes private health plans for certain people — tax credits for those earning up to 400 percent of the federal poverty line — who don’t get insurance through work. But the federal government only subsidizes premiums for comprehensive health plans that play by the Obamacare rules and cover, for example, maternity care or addiction treatment.

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The Trump administration is now saying the federal government will subsidize short-term health plans; states just need to ask. The administration expanded these cheaper plans in August and is being sued for it, as these plans have skimpy benefits rendering them useless for people with pre-existing conditions.

When the administration first announced it is allowing patients to purchase skimpy health plans — that can be purchased for up to one year and renewed for up to three —  officials maintained the policy wouldn’t drive up costs for people who purchase ACA-compliant plans because not enough people would exit the marketplace. Indeed, officials projected only somewhere between 100,000 to 200,000 people would desert ACA-compliant plans and purchase short-term health plans at full cost. But subsidizing these cheaper plans definitely makes them more attractive.

Republicans in Congress wanted to repeal and replace Obamacare and give states more flexibility — a talking point that basically means they want to let insurers sell less-regulated plans. But voters, who didn’t like Republicans’ direction on health care, elected enough Democrats to control the House of Representatives next year. Now that Congress cannot rewrite health law, the Trump administration is calling on states to.

As Kaiser Family Foundation’s Larry Levitt wrote on Twitter, the new waiver rules “give states an enormous amount of leeway to move in the direction of the kind of approaches that Congress considered in the repeal and replace debate last year.”

Another measure states are also encouraged to try out through the 1332 waivers, also known as “state innovation waivers,” is rethinking the subsidy criteria. This also mirrors the GOP health bill.

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Under the new guidance, states could set different income limits for premium assistance — higher or lower than the current federal standard — or link subsidies to age, as to “attract more young and healthy consumers into their market,” according to the fact sheet. Premium subsidies currently only account for a consumer’s income and cost of insurance. The Kaiser Family Foundation and the Congressional Budget Office found that, on average, older people with lower-incomes would be worse off under the House GOP health bill than under current health law because of the changes to tax credits.

“The Trump administration is committed to empowering states to think creatively about how to secure quality, affordable healthcare choices for their citizens,” said HHS Secretary Alex Azar in a statement.

But HHS appears to only be uplifting conservative solutions. The department said it would likely deny a waiver to create a state-based Medicare for All program. That means states like New York and California, which already have legislation, wouldn’t be able to implement these ideas. At least 14 states are also eyeing Medicaid buy-in, with legislation or research underway; this policy expands who’s currently eligible for Medicaid. ThinkProgress reached out to HHS to see if they’d approve this type of plan but did not immediately hear back. When Sen. Brian Schatz (D-HI) asked the HHS secretary in May if he’d provide Democrat-leaning states who wanted more flexibility and a Medicaid buy-in, Azar suggested he would.

While the Trump administration is asking states to skirt the ACA, it doesn’t guarantee it’ll happen. Waiver applications have to be approved by independent actuaries, who are obligated to say if ideas weaken the marketplace. The Brookings Institution also makes a compelling argument for how approved waivers mirroring HHS’ ideas could face legal challenges.