Exclusive: Congress Should Investigate, Not Bail Out, Health Regulators Who Risked Billions

What if a group of regulators were collectively blindsided by a decision that cost their industry billions of dollars? One might think Congress would investigate the causes of this regulatory debacle, and take steps to ensure it wouldn’t repeat itself.

Think again. President Trump’s October decision to terminate cost-sharing reduction (CSR) subsidy payments to health insurers will inflict serious losses on the industry. For October, November, and December, insurers will reduce deductibles and co-payments for certain low-income exchange enrollees, but will not receive reimbursement from the federal government for doing so. America’s Health Insurance Plans, the industry’s trade association, claimed in a recent court filing that insurance carriers will suffer $1.75 billion in losses over the remainder of 2017 due to the decision.

As Dave Anderson of Duke University recently noted, the “hand grenade” of stopping the cost-sharing reduction payments, “if it was thrown in January or February of this year, would have forced a lot of carriers to do midyear exits and it would have destroyed the exchanges in some states.” Yet Congress has asked not even a single question of regulators why they did not anticipate and plan for this scenario—a recipe for more costly mistakes in the future.

A Brewing Legal and Political Storm

The controversy surrounds federal payments that reimburse insurers for lower deductibles, co-payments, and out-of-pocket expenses for qualifying low-income households purchasing exchange coverage. While the text of Obamacare requires the U.S. Department of Health and Human Services to establish a program to reimburse insurers for providing the discounts, it nowhere includes an explicit appropriation for such spending.

As the exchanges launched in 2014, the Obama administration began making CSR payments to insurers. However, later that year, the House of Representatives, viewing a constitutional infringement on its “power of the purse,” sued to stop the executive from making the payments without an explicit appropriation. In May 2016, Judge Rosemary Collyer ruled the payments unconstitutional absent an express appropriation from Congress.

The next President could easily wade into this issue. Say a Republican is elected and he opts to stop the Treasury making payments related to the subsidies absent an express appropriation from Congress. Such an action could take effect almost immediately….It’s a consideration as carriers submit their bids for next year that come January 2017, the policy landscape for insurers could look far different.

One week after my article, Collyer issued her ruling calling the subsidy payments unconstitutional. At that point, CSR payments faced threats from both the legal and political realms. On the legal front, the ongoing court case could have resulted in an order terminating the payments. On the political side, the new administration would have the power to terminate the payments unilaterally—and it does not appear that either Hillary Clinton or Trump ever publicly committed to maintaining the payments upon taking office.

Yet Commissioners Stood Idly By

In the midst of this gathering storm, what actions did insurance commissioners take last year, as insurers filed their rates for the 2017 plan year—the plan year currently ongoing—to analyze whether cost-sharing payments would continue, and the effects on insurers if they did not? About a week before the Trump administration officially decided to halt the payments, I submitted public records requests to every state insurance commissioner’s office to find out.

Two states (Indiana and Oregon) are still processing my requests, but the results from most other states do not inspire confidence. Although a few states (Illinois, Utah, and California’s Department of Managed Health Care) withheld documents for confidentiality or logistical reasons, I have yet to find a single document during the filing process for the 2017 plan year contemplating the set of circumstances that transpired this fall—namely, a new administration cutting off the CSR payments.

In many cases, states indicated they did not, and do not, question insurers’ assumptions at all. North Dakota said it does not dictate terms to carriers (although the state did not allow carriers to re-submit rates for the 2018 plan year after the administration halted the CSR payments in October). Wyoming said it did not issue guidance to carriers on CSRs “because that’s not how we roll.” Missouri did not require its insurers to file 2017 rates with regulators, so it would have no way of knowing those insurers’ assumptions.

Other states admitted that they did not consider the possibility that the incoming administration would, or even could, terminate the CSR payments. North Carolina said it did not think the court case was relevant, or that cost-sharing reduction payments would be an issue. Massachusetts’ insurance Connector (its state-run exchange) responded that “there was no indication that rates for 2017 were affected by the pendency of House v. Burwell,” the case Collyer ruled on in May 2016.

Despite the ongoing court case and the deep partisan disputes over Obamacare, many commissioners’ responses indicate a failure to anticipate difficulties with cost-sharing reduction payments. Mississippi stated that, during the filing process for 2017, “CSRs weren’t a problem then, as they were being funded.” Minnesota added that “it was not until the spring of 2017 that carriers started discussing the threat [of CSR payments being terminated] was a real possibility.” Nebraska stated that “I don’t think that there’s anyone who allowed for the possibility of non-payment of CSRs for plan year 2017. We were all waiting for Congress to act.”

However, as an e-mail sent by the National Association of Insurance Commissioners (NAIC) to state regulators demonstrates, federal authorities at the Centers for Medicare and Medicaid Services (CMS) stated their “serious concerns” with the Texas and New Mexico proposals. Federal law requires insurers to reduce cost-sharing for qualifying beneficiaries, regardless of the status of the reimbursement program, and CMS believed the contingency language—which never went into effect in either Texas or New Mexico—violated that requirement.

In at least one case, an insurer raised premiums to reflect the risk that CSR payments could disappear in 2017. Blue Cross Blue Shield of Montana submitted such request to that state’s insurance authorities. However, regulators rejected “contingent CSR language”—apparently an attempt to cancel the reduced cost-sharing if reimbursement from Washington was not forthcoming, a la the Texas and New Mexico proposals. The insurance commissioner’s office also objected to the carrier’s attempt to raise premiums over the issue: “We will not allow rates to be increased based on speculation about outcomes of litigation.”

Of course, had insurers requested, or had regulators either approved or demanded, premium increases last year due to uncertainty over cost-sharing reduction payments, they would not now face the prospect of over $1 billion in losses due to non-payment of CSRs for the last three months of 2017. But had regulators approved even higher premium increases last year, those increases likely would have caused political controversy during the November elections.

As it was, news of the average 25 percent premium increase for 2017 gave Trump a political cudgel to attack Clinton in the waning days of the campaign. One can certainly question why Democratic insurance commissioners who did not utter a word about premium increases and CSR “uncertainty” during Clinton’s campaign suddenly discovered the term the minute Trump was elected president.

However, at least some ardent Obamacare supporters just did not anticipate a new administration withdrawing cost-sharing reduction payments. Washington state’s commissioner, Mike Kreidler, published an op-ed last October regarding the House v. Burwell court case. He did so at the behest of NAIC consumer representative Tim Jost, who wanted to cite Kreidler’s piece in an amicus curiae brief during the case’s appeal. But despite their focus on the court case regarding CSRs, it appears neither Jost nor Kreidler ever contemplated a new administration withdrawing the payments in 2017.

Congressional Oversight Needed

The evidence suggests that not a single insurance commissioner considered the impact of a new administration withdrawing cost-sharing reduction payments in 2017, a series of decisions that put the entire health of the individual insurance market at risk. What policy implications follow from this conclusion?

First, it undercuts the effectiveness of Obamacare’s “rate review” process. That mechanism requires states to evaluate “excessive” premium increases. However, the program’s evaluation criteria do not explicitly include policy judgments such as those surrounding CSRs. Moreover, the political focus on lowering “excessively” high premium increases might result in cases where regulators approve premium rates set inappropriately low—as happened in 2017, where no carriers priced in a contingency margin for the termination of CSR payments, yet those payments ceased in October.

As noted above, Montana’s regulators called out that state’s Blue Cross Blue Shield affiliate for proposing a rate increase relating to CSR uncertainty. The state’s insurance commissioner, Monica Lindeen, issued a formal “letter of deficiency” in which she stated that “raising rates on the basis of this assumption [i.e., loss of cost-sharing reduction payments] is unreasonable.” But events proved Lindeen wrong—those payments did disappear in 2017. Yet the insurer in question has no recourse after their assumptions proved more accurate than Lindeen’s—nor, for that matter, will Lindeen face any consequences for the “unreasonable” assumptions she made.

Second, it suggests an inherent tension between state authorities and Washington. Several regulators specifically said they looked to CMS’ advice on the cost-sharing reduction issue. Iowa requested guidance from Washington, and Wisconsin said the status of the payments was “out of our hands.” But given the impending change of administrations, any guidance CMS provided in the spring or summer of 2016 was guaranteed to remain valid only through January 20, 2017—a problem for regulators setting rates for the 2017 plan year.

Obamacare created a new layer of federal oversight—and federal policy—surrounding regulation of insurance, which heretofore had laid primarily within the province of the states. The CSR debacle resulted from the conflict between those two layers. Unless and until our laws reconcile those tensions—in conservatives’ case, by repealing the Obamacare regime and returning regulation to the states, or in liberals’ preferred outcome, by centralizing more regulatory authority in Washington—these conflicts could well recur.

Third, and perhaps most importantly, it should spark Congress to examine state oversight of health insurance in greater detail. The fact that insurance commissioners escaped the equivalent of a Category 5 hurricane—the withdrawal of CSR payments in January—and struggled through a mere tropical storm with payments withdrawn in October instead, had no relevance on their regulatory skill—to the contrary, in fact.

Unfortunately, Congress has demonstrated little interest in examining why the regulatory apparatus fell so short. The same Democratic Party that investigated regulators and bankers following the financial crisis has shown little interest in questioning why insurers and insurance regulators failed to anticipate the end of cost-sharing reduction payments. With their focus on getting Congress to appropriate funds restoring the CSR payments President Trump terminated, insurance commissioners’ lack of planning and preparation represents an inconvenient truth that Democrats would rather ignore.

Likewise, Republicans who wish to appropriate funds for the cost-sharing reduction payments have no interest in examining the roots of the CSR debacle. In September, Sen. Lamar Alexander (R-TN) convened a hearing of the Health, Education, Labor, and Pensions (HELP) Committee to take testimony from insurance commissioners on “stabilizing” insurance markets.

At the hearing, Alexander did not ask the commissioners why they did not predict the “uncertainty” surrounding cost-sharing reductions last year. HELP Committee Ranking Member Patty Murray (D-WA) asked Kreidler, her state’s insurance commissioner, about regulators’ “guessing games” regarding the status of CSRs with regard to the 2018 plan year. But neither she nor any of the members asked why those regulators made such blind and ultimately incorrect assumptions last year, by not even considering a scenario where CSR payments disappeared during the 2017 plan year.

Alexander and Murray claim the legislation they developed following the hearing, which would appropriate CSR funds for two years, does not represent a “bailout” for the insurance industry. But the fact remains that last fall, when preparing for the 2017 plan year, insurance regulators dropped the ball in a big way.

Ignoring their inaction, and appropriating funds for cost-sharing reductions without scrutinizing their conduct, would effectively bail out insurance commissioners’ own collective negligence. Congress should think twice before doing so, because next time, a regulatory debacle could have an even bigger impact on the health insurance industry—and on federal taxpayers.

This post was originally published at The Federalist.

CBO Confirms “Stability” Bill Provides a Multi-Billion Dollar Insurer Bailout

Upon release of the Congressional Budget Office (CBO) analysis of the “stability” bill he and Sen. Patty Murray (D-WA) introduced last week, Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R-TN) issued a statement claiming that “we have language in our proposal to make sure that benefits go to consumers and to taxpayers and not to insurance companies” and that “the Congressional Budget Office has found that our proposal benefits taxpayers and benefits consumers, not insurance companies. The specific benefit to the taxpayers is $3.1 billion.”

Unfortunately, Alexander is only half correct. The CBO score reveals that the Alexander-Murray bill would provide some benefit to consumers, but it would also provide a direct, taxpayer-funded bailout to insurers that will likely match, and could well exceed, the benefit to consumers. Overall, insurers could  receive a windfall of $4 to $5 billion—more than the “specific benefit” to taxpayers.

In other words, overall federal spending will rise because insurers will pocket some portion of the CSR payments rather than rebating that money back to taxpayers and consumers.

Allowing Health Insurers’ ‘Double Dipping’

The report addresses language in Section 3(b) of the Alexander-Murray bill (pages 13-18), intended to prevent “double dipping” for plan year 2018 as it relates to cost-sharing reduction payments. As CBO noted, premiums for the 2018 plan year have already been finalized, with open enrollment starting next week.

In most states, insurers submitted significantly higher premium rates, because they assumed they would not receive CSR payments from the federal government. However, including a CSR appropriation at this late date would allow insurers to “double dip”—receiving both the direct CSR payments and the higher premiums that they calculated in the belief that they would not receive CSR funding.

  • In a September report, CBO concluded that spending on CSR payments would total $9 billion for fiscal year 2018.
  • In that same September report, CBO assumed that, if CSR payments went away, premiums would rise “by an average of roughly 15 percent.” Based on a total of $52 billion in federal insurance subsidies ($47 billion in premium subsidies, plus $5 billion for the basic health program), a 15 percent increase would equal roughly $7.8 billion in higher subsidy payments.
  • Conversely, CBO said yesterday the federal government would receive only $3.1 billion in rebates back from insurers relating to CSR payments for plan year 2018.

Under their best-case scenario, insurers could pocket up to $4 to $5 billion—nearly $8 billion in “excess” premium subsidies, offset by only $3.1 billion in rebates. (Because insurers have to reduce cost-sharing for qualified enrollees regardless, the $9 billion in CSR payments would be considered a “wash.”)

That best-case scenario appears somewhat unrealistic. Some states specifically instructed insurers to assume CSR payments continue, so carriers would not receive “excess” premium subsidies in those states. Regardless, the fact that the $7 to $8 billion in “excess” subsidies dwarfs the $3.1 billion in rebates provided to taxpayers indicates the extent to which insurers would pocket the extra government spending.

A Better Solution: No Bailouts

Given CBO’s conclusions with respect to the Alexander-Murray bill, it is difficult to see how any legislation can resolve the problem of giving windfalls to insurers for the 2018 plan year. Because plan premiums are already set for the upcoming year, and in most cases assume that the federal government will not make CSR payments, there is no feasible way to make those payments yet prevent “double dipping” by insurers. In other words, any bill providing cost-sharing reduction payments for 2018 will by definition give insurers a massive bailout.

This post was originally published at The Federalist.

Alexander-Murray Bill Funds Insurers’ Abortion Coverage

Amidst the rumored press reports about what the supposed “insurer stabilization bill” negotiated between Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA) may contain, one Twitter commenter made an astute observation: Unless the agreement contained explicit language forbidding it—language Murray likely would not endorse—the agreement will appropriate approximately $25-30 billion to subsidize insurance plans that cover abortion.

Follow the Money

Here’s some background regarding federal restrictions on abortion funding. The Hyde Amendment, named for former Rep. Henry Hyde (R-IL), prohibits federal funding of abortion, except in the cases of rape, incest, or to save the life of the mother.

However, this restriction, first enacted in 1976 and renewed every year thereafter, only applies to the Department of Health and Human Services (HHS) appropriations bill to which it is attached annually. If funding flows outside the HHS appropriations measure, those funds would not be subject to the Hyde restrictions, and could therefore subsidize abortion coverage.

Obamacare contained just such funds—for instance, the premium tax credits used to subsidize plans on insurance exchanges. While Obamacare includes a “segregation mechanism” designed to separate the portion of premium payments used to cover abortion, pro-life groups have recognized this mechanism as an accounting gimmick—one the Obama administration didn’t even bother to enforce.

Is Hyde Language Added?

When extending the community health center funding as part of a larger Medicare bill in spring 2015, Republican leaders recognized the lack of pro-life protections, and insisted on adding them to extend the mandatory health center funding. As a result, Section 221(c) of the bill (page 68 here) said that the same requirements that applied to other Public Health Service Act funding provisions—that is, the Hyde Amendment funding restrictions—would also apply to the community health center funding.

However, if Alexander does not explicitly add the Hyde Amendment protections to the “stabilization bill,” the cost-sharing reduction payments to insurers will be used to fund plans that cover abortion. There is little reason to believe Murray would endorse such a restriction. If the Hyde Amendment restrictions apply to the cost-sharing reduction payments to insurers, then in order to receive said payments, it is likely insurers would have to stop offering abortion coverage on exchanges—an outcome Murray, and Democrats, would not wish to countenance.

Massive Funding Amounts

The “stabilization bill” would likely seek to provide massive funding amounts to insurers—roughly $3 to $4 billion for the rest of this calendar year, and $10 to $11 billion for each of years 2018 and 2019, based on Congressional Budget Office spending estimates. These significant sums would surely represent the second-largest expansion of federal abortion funding, behind only Obamacare itself.

This post was originally published at The Federalist.

Legislative Bulletin: Summary of Alexander-Murray “Stability” Bill

On Tuesday afternoon, Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R-TN) announced he had reached an agreement in principle with Ranking Member Patty Murray (D-WA) regarding an Obamacare “stabilization” package. Unfortunately, legislative text has not yet been released (UPDATE: bill text was released late Tuesday evening), but based on press reports, Twitter threads, and a summary circulating on Capitol Hill, here’s what is in the final package:

Cost-Sharing Reduction Payments:             The bill appropriates roughly $25-30 billion in cost-sharing reduction payments to insurers, which offset their costs for providing discounts on deductibles and co-payments to certain low-income individuals enrolled on insurance Exchanges. Late last Thursday, President Trump announced he would halt the payments to insurers, concluding the Administration did not have authority to do so under the Constitution. As a result, the bill includes an explicit appropriation, totaling roughly $3-4 billion for the rest of this calendar year, and $10-11 billion for each of years 2018 and 2019, based on Congressional Budget Office spending estimates.

For 2018 only, the bill includes language allowing states to decline the cost-sharing reduction payments—if they previously approved premium increases that assumed said payments would not be made. If states do not decline the payments, they must certify that said payments will “provide a direct financial benefit to consumers”—that is, they will result in lower premium rates, and/or rebates to consumers. The bill also includes clarifying language regarding the interactions between any such rebates and premium tax credit levels under Obamacare.

Some conservatives may be concerned that, because insurers understood for well over a year that a new Administration could terminate these payments in 2017, the agreement would effectively subsidize their flawed assumptions. Some conservatives may be concerned that action to continue the flow of payments would solidify the principle that Obamacare, and therefore insurers, are “too big to fail,” which could only encourage further risky behavior by insurers in the future. Moreover, some conservatives may be concerned that, absent Hyde Amendment protections, these payments would subsidize federal insurance plans covering abortion.

State Waiver Processes:     The bill would streamline the process for approving state innovation waivers, authorized by Section 1332 of Obamacare. Those waivers allow states to receive their state’s Exchange funding as a block grant, and exempt themselves from the individual mandate, employer mandate, and some (but not all) of Obamacare’s insurance regulations.

Specifically, the agreement would:

  1. Extend the waivers’ duration, from five years to six, with unlimited renewals possible;
  2. Prohibit HHS from terminating waivers during their duration (including any renewal periods), unless “the state materially failed to comply with the terms and conditions of the waiver;”
  3. Require HHS to release guidance to states within 30 days of enactment regarding waivers, including model language for waivers;
  4. Shorten the time the Department of Health and Human Services to consider waivers from 180 days to 90;
  5. Allow a 45 day review for 1) waivers currently pending; 2) waivers for areas “the Secretary determines are at risk for excessive premium increases or having no health plans offered in the applicable health insurance market for the current or following plan year; and 3) waivers that are “the same or substantially similar” to waivers previously approved for another state. These waivers would initially apply for no more than three years, with an extension possible for a full six-year term;
  6. Allow governors to apply for waivers based on their certification of authority, rather than requiring states to pass a law authorizing state actions under the waiver—a move that some conservatives may be concerned could allow state chief executives to act unilaterally, including by exiting a successful waiver on a governor’s order.

State Waiver Substance:    On the substance of innovation waivers, the bill would regulatory guidance issued by the Obama Administration in December 2015. Among other actions, that guidance prevented states from using savings from an Obamacare/Exchange waiver to offset higher costs to Medicaid, and vice versa. While supporting the concept of greater flexibility for states, some conservatives may note that, as this guidance was not enacted pursuant to notice-and-comment, the Trump Administration can revoke it at any time—indeed, should have revoked it months ago.

Additionally, the bill amends—but does not repeal—the “guardrails” for state innovation waivers. Under current law, Section 1332 waivers must:

  1. “Provide coverage that is at least as comprehensive as” Obamacare coverage;
  2. “Provide coverage and cost-sharing protections against excessive out-of-pocket spending that are at least as affordable” as Obamacare coverage;
  3. “Provide coverage to at least a comparable number of [a state’s] residents” as under Obamacare; and
  4. “Not increase the federal deficit.”

Some conservatives have previously criticized these provisions as insufficiently flexible to allow for conservative health reforms like Health Savings Accounts and other consumer-driven options.

The bill allows states to provide coverage “of comparable affordability, including for low-income individuals, individuals with serious health needs, and other vulnerable populations” rather than the current language in the second bullet above. It also clarifies that deficit and budget neutrality will operate over the lifetime of the waiver, and that state innovation waivers under Obamacare “shall not be construed to affect any waiver processes or standards” under the Medicare or Medicaid statutes for purposes of determining the Obamacare waiver’s deficit neutrality.

The bill also makes adjustments to the “pass-through” language allowing states to receive their Exchange funding via a block grant. For instance, the bill adds language allowing states to receive any funding for the Basic Health Program—a program states can establish for households with incomes of between 138-200 percent of the federal poverty level—via the block grant.

Some conservatives may view the “comparable affordability” change as a distinction without a difference, as it still explicitly links affordability to Obamacare’s rich benefit package. Some conservatives may therefore view the purported “concessions” on the December 2015 guidance, and on “comparable affordability” as inconsequential in nature, and insignificant given the significant concessions to liberals included elsewhere in the proposed legislative package.

Catastrophic Plans:              The bill would allow all individuals to purchase “catastrophic” health plans, and keep those plans in a single risk pool with other Obamacare plans. However, this provision would not apply until 2019—i.e., not for the upcoming plan year.

Catastrophic plans—currently only available to individuals under 30, individuals without an “affordable” health plan in their area, or individuals subject to a hardship exemption from the individual mandate—provide no coverage below Obamacare’s limit on out-of-pocket spending, but for “coverage of at least three primary care visits.” Catastrophic plans are also currently subject to Obamacare’s essential health benefits requirements.

Outreach Funding:               The bill requires HHS to obligate $105.8 million in Exchange user fees to states for “enrollment and outreach activities” for the 2018 and 2019 plan years. Currently, the federal Exchange (healthcare.gov) assesses a user fee of 3.5 percent of premiums on insurers, who ultimately pass these fees on to consumers. In a rule released last December, the outgoing Obama Administration admitted that the Exchange is “gaining economies of scale from functions with fixed costs”—in part because maintaining the Exchange costs less per year than creating one did in 2013-14. However, the Obama Administration rejected any attempt to lower those fees, instead deciding to spend them on outreach efforts. The agreement would re-direct portions of the fees to states for enrollment outreach.

Some conservatives may be concerned that this provision would create a new entitlement for states to outreach dollars. Moreover, some conservatives may object to this re-direction of funds that ultimately come from consumers towards more government spending. Some conservatives may support taking steps to reduce the user fees—thus lowering premiums, the purported intention of this “stabilization” measure—rather than re-directing them toward more government spending, as the agreement proposes.

The bill also requires a series of bi-weekly reports from HHS on metrics like call center volume, website visits, etc., during the 2018 and 2019 open enrollment periods, followed by after-action reports regarding outreach and advertising. Some conservatives may view these myriad requirements first as micro-management of the executive, and second as buying into the liberal narrative that the Trump Administration is “sabotaging” Obamacare, by requiring minute oversight of the executive’s implementation of the law.

Cross-State Purchasing:     Requires HHS to issue regulations (in consultations with the National Association of Insurance Commissioners) within one year regarding health care choice compacts under Obamacare. Such compacts would allow individuals to purchase coverage across state lines. However, because states can already establish health care compacts amongst themselves, and because Obamacare’s regulatory mandates would still apply to any such coverage purchased through said compacts, some conservatives may view such language as insufficient and not adding to consumers’ affordable coverage options.

What’s Congress Doing with SCHIP?

Amidst the wrangling over Obamacare, reauthorization of the State Children’s Health Insurance Program (SCHIP) expired on September 30, the end of the federal government’s fiscal year. The two committees of jurisdiction—energy and commerce in the House, and finance in the Senate—each marked up their reauthorization bills last week. But House Energy and Commerce Committee Chairman Greg Walden (R-OR) said Monday the bill would not come to the House floor this week.

What’s the holdup? Why the delays in bringing to the floor for votes a bill whose authorization has already expired?

A Mixed House Package

The SCHIP reauthorization text varies little between the House and the Senate versions. On that front, conservatives may have qualms with supporting little more than a straight extension of the status quo. The bill extends—albeit for only one year, as part of a more gradual phase-out—enhanced funding to state SCHIP programs. The full 23 percent match increase would end in 2019, as under current law, while states would receive an additional 11.5 percent increase in 2020. Some states have received a 100 percent federal match for their child enrollees due to this Obamacare provision, which is a clear disincentive for states to fight fraud and improper spending.

Moreover, the bill extends Obamacare’s maintenance of effort requirement—limiting states from making changes to their programs—by an additional three years in most cases, from 2019 to 2022. The bill also does not include reforms the House proposed two years ago, which would require states to focus on covering poor children first—the program’s prime emphasis before the 2009 reauthorization signed by President Obama envisioned states expanding their programs to more affluent families.

On the positive side, however, the House did include good reforms to help pay for the new SCHIP spending. It includes several provisions designed to promote program integrity in Medicaid, including one that would effectively ensure that lottery winners, or others who receive large lump-sum payments, do not maintain coverage for this low-income program. The House bill would also increase Medicare means-testing for affluent families, reducing taxpayer subsidies for Part B (outpatient care) and Part D (prescription drug) coverage for individuals making over $160,000, and eliminating the subsidies entirely for individuals making more than $500,000.

In the Senate, a Stalemate

Meanwhile, over in the Senate—which has yet to decide how to pay for the new SCHIP spending—Minority Leader Chuck Schumer (D-NY) demanded last week that the Republican majority “immediately bring this bill to the Senate floor for a vote and include much-needed bipartisan provisions to stabilize the markets, lower premiums for 2018,” and extend other programs.

Schumer made those demands despite two inconvenient truths: Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA) haven’t yet reached agreement on a bipartisan “stabilization” bill—and most states finalized their 2018 insurance premiums on September 27, weeks ago. In other words, Schumer wants to enact an agreement that doesn’t exist to achieve premium reductions that can’t happen.

A cynic might surmise that, with his talk of “stabilization” measures, Schumer wants to use SCHIP to sneak through tens of billions of dollars in cost-sharing reduction payments to insurers—a provision that might prove unpopular, and controversial, as a stand-alone measure, but could pass through relatively unnoticed as part of a larger, “Christmas tree”-sized bill.

While the policy outcomes seem uncertain, and could range from fair to poor, the political ramifications seem clear. In 2007 and 2008, when President George W. Bush vetoed SCHIP bills due to provisions that would have diverted the program from the low-income children for which it was designed, Democrats organized protests, and ran ads against him. This year, when Democrats are holding up an arguably too-generous SCHIP bill literally because they want to defend the wealthy and insurance companies, Republicans have responded by…negotiating with them.

If one wants reasons behind conservative discontent with Washington, look no further than this bill.

This post was originally published at The Federalist.