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“Cost-Sharing” Subsidy, CBO and IRS Update

The Ongoing DRAMA Over a “Reconciliation” Bill 

 

by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.

 

  1. Last Thursday evening around 9 pm (after I sent out my most recent update), reports trickled out that Sen. Manchin (D-WV) communicated to Majority Leader Schumer (D-NY) that he cannot support a “reconciliation” bill that includes climate change reforms and tax increases. This appears to mean that the “reconciliation” bill that I have recently talked about (i.e., a bill that includes climate change reforms and deficit reductions paid for with drug pricing reforms and business tax increases) is now DEAD.

 

  1. Analysis: Sen. Manchin’s communications to Leader Schumer prompted some very serious blow-back from Senate Democrats, as well as outside environmental groups. Interestingly though, there was NOT a lot of blow-back from the White House. Instead, President Biden released a strongly worded statement articulating that – in the absence of Congress legislating on the matter – his Administration will use executive actions “to tackle the climate crisis and strengthen [the U.S.’s] domestic clean energy industry.” The President’s statement also included strong directions on health care-related matters. In particular, President Biden virtually demanded that Congressional Democrats pass legislation that would (1) “give Medicare [i.e., HHS] the power to negotiate lower drug prices” and (2) “to prevent an increase in health insurance premiums for millions of families with coverage under the Affordable Care Act.” The President further demanded that Congress should “pass [this legislation] before the August recess, and get it to my desk so I can sign it.” Based on all of that, it appears that the White House has thrown in the towel on climate change reform legislation. AND, it appears that the White House is going ALL IN on enacting (1) drug pricing reforms and (2) at least “some form” of an extension of the “enhanced premium subsidies.”

 

The Increased Likelihood We Will See “Some Form” of an Extension of the “Enhanced Premium Subsidies”

  1. This brings us back to where my head was last Thursday afternoon, which was/is this: The way Sen. Manchin appeared to be playing his cards, I noted that there was a scenario where we could see a “reconciliation” bill that ONLY included (1) drug pricing reforms and (2) “some form” of an extension of the “enhanced premium subsidies.”

 

  1. Analysis: My reference to “some form” of an extension was/is centered on ONLY extending the increased premium subsidy amounts for consumers with income BELOW 400% of FPL. In other words, I suggested that Sen. Manchin may NOT support an extension of the prong of the “enhanced premium subsidies” that allowed consumers with income ABOVE 400% of FPL to access a premium subsidy for the first time (because Sen. Manchin likes to “means test” government spending programs). Soooooooo, the $280+ billion question is this: Paid for with the drug pricing reforms, what “form” will an extension of the “enhanced premium subsidies” ultimately take? This important question prompts the following questions: Will we see an extension of BOTH (1) the increased premium subsidies for consumers BELOW 400% of FPL AND (2) the expanded eligibility for consumers with income ABOVE 400% of FPL (i.e., BOTH prongs of the “enhanced premium subsidies”)? If so, for how long? Alternatively, will we ONLY see an extension of the prong that increased the premium subsidies for consumers BELOW 400% of FPL? If so, how long might this extension be? And lastly, what is the likelihood of ANY “form” of an extension getting across the finish line?

 

Answers to the Above Stated Questions

  1. Let me start by answering the last question first: At least in my opinion, all of this recent activity increases the chances that we will see “some form” of an extension of the “enhanced premium subsidies.” I am now at 80% this happens.

 

  1. Analysis: Regarding what “form” an extension will take, I will say this: Reports are indicating that Sen. Manchin ONLY supports a 2-year extension of the “enhanced premium subsidies.” This makes sense because Sen. Manchin has been adamant that ½ of the $280+ billion in spending reductions from the drug pricing reforms MUST go toward deficit reductions. AND, a permanent extension of BOTH prongs of the “enhanced premium subsidies” was scored by CBO as costing $200+ billion. A 10-year extension would cost around the same. I am not good at math (that’s why I went to law school), but $200+ billion is MORE than ½ of $280+ billion. BUT, could Sen. Manchin be talked into a 4-year extension of BOTH prongs of the “enhanced premium subsidies”? Again, I’m not good at math, but a 4-year extension could be close to ½ of $280+ billion, which could pass Sen. Manchin’s litmus test. BUT, what if Sen. Manchin ONLY supports an extension of ONLY the increased premium subsidies for consumers with income BELOW 400% of FPL (again because of his interest in “means testing”)? While the lion’s share of the spending associated with any extension comes from this prong of the “enhanced premium subsidies,” the cost would BE LESS than if there was ALSO an extension of the expanded eligibility for consumers with income ABOVE 400% of FPL. With LESS spending associated with an extension of “some form” of the “enhanced premium subsidies,” the LONGER the extension can be. Soooooooo, contrary to the reports we are hearing about a 2-year extension of what would appear to be for BOTH (1) the increased premium subsidies for consumers BELOW 400% of FPL AND (2) the expanded eligibility for consumers with income ABOVE 400% of FPL, we MAY see a 4-year (or maybe even a 6-year) extension of ONLY the increased premium subsidies for consumers with income BELOW 400% of FPL.

 

Much of This Now Comes Down to “The Dials”

  1. Because I think “some form” of an extension of the “enhanced premium subsidies” is now at 80% happening, it all comes down to how Sen. Manchin and Democratic Leadership want to “dial up” or “dial down” any said extension.

 

  1. Analysis: What I mean by “dials” relates to what I discussed above. For example, if an extension is for BOTH prongs of the “enhanced premium subsidies,” it would appear that Democratic Leadership can ONLY turn the “dial” to a 2-year extension.  BUT, if an extension is ONLY for the increased subsidy amounts for consumers BELOW 400% of FPL, Democratic Leadership can “dial up” the number of years to say 4 or 6 years. Also, depending on what the Senate Parliamentarian says about the drug pricing reforms, the Parliamentarian’s ruling could impact the $280+ billion in spending reductions. For example, if the Parliamentarian finds that certain aspects of the drug pricing reforms must FALL OUT of the underlying “reconciliation” bill, the spending reductions will come in at something LESS THAN $280+ billion. That then will impact “the dials.” Heck, maybe Democratic Leadership will only have enough $$$ to extend ONLY the prong of the increased premium subsidy amounts for consumers with income BELOW 400% of FPL…ONLY for 2 years. OR, maybe House Democrats DEMAND that with a lower price-tag associated with ONLY extending the prong of the increased premium subsidy amounts for consumers with income BELOW 400% of FPL ONLY for 2 years, at least SOME spending COULD and SHOULD be used for climate change reforms. This last point above (about DEMANDs for at least SOME spending on climate change) should help you understand that even “some form” of an extension of the “enhanced premium subsidies” is NO guarantee. That is, even though President Biden has essentially DEMANDED that Congressional Democrats send him a bill with (1) drug pricing reforms and (2) “some form” of an extension of the “enhanced premium subsidies,” some Congressional Democrats may NOT heed the President’s DEMAND, and instead, these members may come forward with their own DEMANDs. These DEMANDs may ALSO include using LESS $$$ for deficit reductions and MORE $$$ for “some form” of an extension of the “enhanced premium subsidies” OR other government spending programs, which fly in the face of Sen. Manchin’s litmus test. Stay tuned…because what would seem to now be a sure thing, may not be…