Trump scraps Obamacare subsidies in surprise late-night announcement

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Federal payments underpinning healthcare scheme unlawful, says White House, in move that takes a further swipe at Democrats’ signature reform

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Trump scraps Obamacare subsidies in surprise late-night announcement

Federal payments underpinning healthcare scheme unlawful, says White House, in move that takes a further swipe at Democrats’ signature reform


Donald Trump has planted a timebomb under Obamacare, issuing a notice late on Thursday night that scraps vital federal subsidies underpinning the current healthcare system.

The late-night move caught critics off guard and brought immediate accusations that Trump was unilaterally destroying his predecessor’s signature legislation, the Affordable Care Act, after the Republican-controlled Congress failed to secure changes. The announcement stops federal support of up to $7bn (£5.27bn) to insurance companies to help them cover the medical needs of low-income Americans.

The Trump administration sought to lay the blame for the current crisis in healthcare on former president Barack Obama, claiming the federal subsidies, known as “cost-sharing reduction payments”, were unlawful and “yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system”.

Reaction from Democratic politicians and other Trump opponents was swift. Top officials on both coasts leapt to denounce the White House move and threaten legal action to stop the subsidies being revoked.

In California, the state attorney general Xavier Becerra said he was prepared to sue the Trump administration to protect the subsidies. Eric Schneiderman, the attorney general of New York state, followed suit, declaring he would “not allow President Trump to once again use New York families as political pawns in his dangerous, partisan campaign to eviscerate the Affordable Care Act at any cost”.

The attack on the federal subsidies came as a double blow to Obamacare, just hours after Trump had already lashed out at his predecessor’s healthcare reforms by issuing an executive order unilaterally weakening the system. In that order, the president opened the door to cheaper and less comprehensive insurance, which experts predict will result in health plans for the sick becoming more expensive.

Thursday night’s second blow could prove the more deadly of the two as it is targeted at the very foundations of the insurance structures created under Obamacare. A study by the Congressional Budget Office two months ago suggested that terminating the cost-sharing subsidies would lead to a dramatic 20% rise in the average cost of the most popular plans offered by the Affordable Care Act, as well as worsening the federal deficit by almost $200m.

Even moderate conservative voices were aghast by the move. Charlie Sykes, a prominent conservative talkshow host, said: “What we have now, for better or worse, is Trumpcare. Trump has said he wants Obamacare to implode. Is now taking steps to make it implode. Now owns all of the consequences.”

Among Republican leaders in Congress, the speaker of the House of Representatives came to Trump’s support, even though his own party had failed to find a workable replacement for Obamacare. Paul Ryan said the president’s efforts to unpick Obama’s reforms marked a “monumental affirmation of Congress’s authority … Obamacare has proven itself to be a fatally flawed law”.

Trump had earlier hailed his changes as a step that “will cost the United States government virtually nothing and people will have great, great healthcare. And when I say people, I mean by the millions and millions.”

The administration has taken other steps to derail the ACA: cutting the sign-up period for insurance by half; shutting down for maintenance the website people use to sign up for health insurance; slashing funding for outreach; and repeatedly threatening to end subsidies to insurance companies that cover the poor.

Trump acknowledged efforts to repeal and replace the ACA through legislation had been thwarted not just by Democrats but “a very small, frankly, handful of Republicans”. He said: “We will fix that.”

What the executive order changes

The order – whose full text has not yet been released – allows businesses to buy “association health plans” that would let them band together to buy the type of coverage big employers provide.

Small companies usually have difficulty affording insurance for their employees. Because fewer people bear the costs when one person gets sick, their insurance plans can be expensive. The new executive order focuses on those businesses.

However, experts expect the plans will be unlike insurance provided by big firms in a number of ways. For consumers, they will have skimpier benefits and will not have the consumer protections set out by the ACA. That will make costs lower, but it also means fewer benefits.

At the same time, because association health plans are cheaper, healthy people are more likely to enroll, making regulated health plans more expensive. Before the order, small businesses would be required to buy health insurance through exchanges, which are highly regulated and include a standard set of benefits such as prescription drug coverage and maternity care.

Association health plans will not be required to carry those benefits. In addition, the federal government has few resources, which makes oversight weak. In the past, that led to fraud and insolvency, which meant patients were left “high and dry”.

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