• Trump’s executive order on Obamacare

    Some misconceptions are floating around about what the executive order does and doesn’t do. Let me try to clarify.

    As I explained in a post last week, “[a]uthority to implement the ACA … is vested in the Secretaries of HHS, Treasury, and Labor—not the President. In the context of the ACA, an executive order won’t be anything more than a document containing a president’s instructions to his subordinates.”

    That’s all this E.O. is. It’s a set of marching orders. It has no legal force. It changes nothing on its own.

    And these marching orders are pretty vague. After pruning away the bureaucratese, the executive order tells federal agencies, especially HHS, to do everything they can:

    • To eliminate any “fiscal burden on any State” or any “cost, fee, tax, penalty, or regulatory burden” on individuals and providers.
    • To give the states more flexibility.
    • To encourage the interstate sale of health insurance.

    It remains to be seen how and when these orders will be carried out. But we can make some educated guesses (most of which we could’ve made even in the absence of the executive order).

    The instruction about state flexibility probably relates mainly to Medicaid waivers. Under President Obama, CMS refused to grant waivers that would have allowed states to impose certain types of burdens on Medicaid beneficiaries—especially work requirements, substantial cost-sharing, and time caps on eligibility for non-disabled adults. I expect Trump’s CMS to be more accommodating. I also expect HHS to issue revised guidance expanding the scope of 1332 waivers, which enable states to opt out of the ACA’s regulatory requirements if they devise an alternative.

    On interstate sales, HHS has authority under section 1333 of the ACA to bless “interstate compacts” that allow for the sale of insurance across state lines. Obama’s HHS hasn’t issued rules to implement the provision, but Trump’s HHS could. (Not that it’ll accomplish much. Insurers aren’t much interested in selling across state lines.)

    Much more significant, however, is the instruction to “waive, defer, grant exemptions from, or delay the implementation of” any “cost, fee, tax, penalty, or regulatory burden.” This reads like bureaucratic code for “kill the individual mandate by any means possible.” Some of that should be easy: I expect hardship exemptions to be expanded and IRS enforcement of the mandate to fall.

    What troubles me most is the instruction to “delay the implementation of” any “tax” on individuals. Back in 2013, the Obama administration delayed the implementation of both the employer mandate and some of the ACA’s insurance rules. The implementation delays were unlawful, as I argued at the time. I warned, too, that they were shortsighted:

    A future administration that is less sympathetic to the ACA could invoke the delays as precedent for declining to enforce other provisions that it dislikes, including provisions that are essential to the proper functioning of the law. The delays could therefore undermine the very statute they were meant to protect—and perhaps imperil the ACA’s effort to extend coverage to tens of millions of people.

    Delaying the individual mandate is precisely what I feared most. (The E.O.’s instruction to consider delaying implementation of taxes on “makers of medical devices, products, or medications” could also lead to the suspension of the medical device tax and the tax on the pharmaceutical industry. That’d be a sweetheart gift for industry.)

    If the IRS “delays” the individual mandate, the insurance markets in many states could go into a tailspin. Rates for 2018 will skyrocket and some insurers could fold. In addition, delaying the mandate would preempt any debate in Congress about whether to keep the mandate in place during a transition period to a yet-to-be-disclosed replacement.

    For now, the executive order hasn’t changed anything. Reading between the lines, however, it may signal that Trump has no interest in trying to make the ACA work while Congress debates repeal.

    @nicholas_bagley

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