Why Republicans May Extend Covid-Era Obamacare Subsidies Post-Shutdown

On the menu today: Audrey Fahlberg here again, National Review’s political reporter helping fill in for Jim Geraghty until he returns to your inboxes on October 10. Passing the Morning Jolt torch to Dominic Pino tomorrow.

Welcome to Day Two of the shutdown. Senate Democrats voted down Republicans’ House-passed continuing resolution yet again on Wednesday. The Senate will not vote today in observance of Yom Kippur. But expect more votes in the Senate through the weekend, and more Reduction in Force notices and agency program revision announcements from Office of Management and Budget Director Russ Vought. The House is out of session until next week.

Yes, Republicans May Vote to Extend Obamacare Subsidies

Republicans insist publicly that they’re not open to negotiating expiring enhanced Obamacare subsidies in the context of a shutdown. But behind the scenes, bipartisan negotiations about what a potential deal might look like are indeed already underway.

The political motivations for such a deal are obvious. Once the government gives something to constituents, it’s hard to take it away without facing immense political pushback from recipients, industry beneficiaries, and special interest groups — especially ahead of a midterm cycle.

The talks are in their early stages. As things stand, a bipartisan cohort of lawmakers — including Republican Senator Mike Rounds of South Dakota and retiring Democratic Senator Jeanne Shaheen of New Hampshire — are debating a few ways to tweak and temporarily extend the existing credits that are set to expire at the end of the year. A deal would require buy-in from President Trump while also somehow appeasing Democrats, who are facing immense pressure from a progressive base that is pushing them to resist the administration at every turn.

According to the Wall Street Journal:

Sen. Mike Rounds (R., S.D.) outlined a possible deal involving a yearlong extension with a phaseout over the next few years that could include income caps and other changes. He said it would take time to craft, and urged Democrats to approve the GOP’s seven-week stopgap bill in the meantime.

Beyond income caps, lawmakers are also discussing ending automatic reenrollment into plans. And Republicans who are eager to extend the credits — which were created in the COVID stimulus package of 2021 and extended by Democrats in the Inflation Reduction Act of 2022 — say they’re amenable to changes that would address fraud in the program.

“There’s a lot of probably legitimate concerns about waste, fraud, and abuse. That’s fine. We’re gonna need to do something though,” Senator Josh Hawley (R., Mo.) insisted in an interview with National Review. “I’m open to any proposal that somebody has as to how to reform different approaches. I’m not wedded to any one thing.”

“The income caps are really important to me because you got a lot of people that are just taking advantage, and that’s not good,” Senator Jim Justice (R., W.Va.) told National Review, who said negotiations should not occur during a shutdown.

Republicans who are open to extending the subsidy will be resistant to Democrats’ desire to make them permanent. “They were called temporary, and they’re supposed to expire. Now, whether we extend them for three months or six months or whatever like that, to give people a little more time and everything, I’d say that’s completely negotiable,” Justice added. “But to say we’re just going to put them in perpetuity? No, that’s not the right thing.”

GOP buy-in on a bipartisan deal to extend the Affordable Care Act credits would be a stunning move for a party that spent years campaigning on repealing Obamacare. As National Review’s health-care-policy whiz Phil Klein wrote yesterday, Republicans back in 2017 “had the difficult task of uniting their disparate caucus around not just a bill to repeal Obamacare but getting them to agree on some sort of comprehensive health-care reform to replace it.” This time around, though, he writes, “There is no heavy lift. In fact, there is no lift at all. Republicans simply have to do absolutely nothing” and simply let the credits expire.

Many Republicans agree with Phil’s analysis that extending the subsidies would be a catastrophic mistake. “It’s a terrible idea” to extend the subsidies, Senator Rand Paul (R., Ky.) told National Review on Wednesday. “But terrible ideas seem to have traction in Washington.”

The political pressure to win the midterms may just be too much for Trump and moderate Republicans to bear. But any package will face immense pushback from resistant fiscal hawks in both chambers. As I reported in yesterday’s Morning Jolt, there’s a huge chunk of GOP lawmakers and policy experts who would much prefer to see the credits expire.

They argue that the credits are expensive, were meant to be temporary, and that the program is rife with fraud. Paragon Health Institute President Brian Blase outlined some of those concerns in a Wall Street Journal op-ed last year:

In several states, the number of people signed up for coverage with an application listing income between 100% to 150% of the federal poverty level exceeds the number of working-age adults with income in that range. Children and seniors in this income range aren’t eligible for exchange plans.

In Florida, 2.7 million people who reported income between 100% and 150% of the federal poverty level signed up for an exchange plan this year. Yet our analysis found that only about 700,000 Floridians with income in this range are eligible for such coverage. In Georgia, the respective figures were 830,000 and 340,000.

Improperly paid ObamaCare subsidies are rife in many states where Medicaid has been expanded, particularly North Carolina and Utah. In expansion states, taxpayers pay the entire premium for enrollees with income between 138% and 150% of the federal poverty level, with Medicaid coverage below that level. The Tar Heel State expanded Medicaid last year, and there are likely hundreds of thousands of people enrolled in both Medicaid and an exchange plan, with insurers receiving payments from both programs. The improper payment of subsidies appears to be a serious problem in nearly half of all states.

Pro-life groups are also extremely worried about an expansion of the subsidy for plans that can be used to cover abortions. Whether the White House cares about that concern is another question entirely.

Meantime, budget hardliners in the House are already standing their ground in opposition to whatever deal is struck. “It would be a bad decision by Speaker Johnson to even bring that to the floor — would not be career enhancing. The last two people who tried that have other jobs,” House Freedom Caucus Chairman Andy Harris (R., Md.) told the Wall Street Journal. “If the package increases spending, it will be an incredibly difficult sell.”

Other House fiscal hawks believe it’s unwise for Senate Republicans to cave to Democrats’ demands by negotiating during a closed government. “It’s profoundly foolish for the usual suspects in the Senate to undermine the strongest position the President and Republicans hold in the wake of the untenable shutdown position Democrats have staked out,” Representative Chip Roy (R., Texas) told Politico. “It’s nuts.”

ADDENDUM: Politico’s Adam Wren took one for the team and watched House Democrats’ shutdown-focused YouTube livestream so the rest of us didn’t have to. The results were . . . exactly what you’d expect: