Health Care

White House: Sequester No Longer Applies to Part of Obamacare

The administration is no longer applying the mandatory spending cuts to the Affordable Care Act’s cost-sharing subsidies.

President Barack Obama delivers remarks during the Democratic National Committee's Winter Meeting at the Capitol Hilton February 28, 2014 in Washington, DC.
National Journal
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Sam Baker
March 13, 2014, 1 a.m.

The Obama ad­min­is­tra­tion has de­cided that the se­quester’s man­dat­ory spend­ing cuts no longer ap­ply to part of Obama­care.

The health care law provides sub­sidies to help low-in­come people cov­er some of their out-of-pock­et costs. Last year, the ad­min­is­tra­tion said those sub­sidies were tak­ing a 7 per­cent cut be­cause of the se­quester, which im­posed across-the-board re­duc­tions in fed­er­al spend­ing.

But now, the White House has changed its mind. It re­moved the cost-shar­ing sub­sidies from its list of pro­grams that are sub­ject to the se­quester, elim­in­at­ing the 7 per­cent cut for 2015.

The Com­mit­tee for a Re­spons­ible Fed­er­al Budget, which no­ticed the change, said the re­versal would likely re­store about $560 mil­lion to the sub­sidies — and re­quire $560 mil­lion in cuts to oth­er pro­grams to make up for it.

The cost-shar­ing sub­sidies are ex­pec­ted to total $8 bil­lion this year and $156 bil­lion over the next dec­ade.

Who be­ne­fits from the change? The low-in­come fam­il­ies who qual­i­fy for these sub­sidies, as well as the White House and in­sur­ance com­pan­ies.

Some con­sumers have com­plained about high out-of-pock­et costs in the plans they’ve pur­chased through the health care law’s ex­changes. This change will help re­duce those costs, at least for low-in­come fam­il­ies. And be­cause the sub­sidy is paid dir­ectly to in­sur­ance com­pan­ies, the change means more money for in­surers as well.

The cost-shar­ing sub­sidies aren’t the Obama­care sub­sidies that get the most at­ten­tion.

Those high­er-pro­file in­cent­ives are tax sub­sidies to help people cov­er the cost of their in­sur­ance premi­ums. Those sub­sidies wer­en’t af­fected by the se­quester be­cause they’re ad­min­istered as tax cred­its. Rather, the sub­sidies at is­sue here are de­signed to help low-in­come people re­duce their out-of-pock­et spend­ing — costs like co-pays and de­duct­ibles.

An ad­min­is­tra­tion of­fi­cial said the two types of sub­sidies were com­bined, and that’s why the out-of-pock­et sub­sidy is no longer sub­ject to se­quest­ra­tion.

“To im­prove the ef­fi­ciency in the ad­min­is­tra­tion of these pay­ments for both in­surers and the fed­er­al gov­ern­ment, it was de­term­ined that the cost-shar­ing sub­sidy pay­ments would be made as ad­vance pay­ments and thus would be paid out of the same ac­count used for the premi­um tax cred­it por­tion of the ad­vance pay­ments,” the of­fi­cial said.

Cost-shar­ing sub­sidies are avail­able only to house­holds with an in­come between 100 and 250 per­cent of the fed­er­al poverty line — up to roughly $29,000 for a single per­son, or $60,000 for a fam­ily of four un­der this year’s guidelines.

COR­REC­TION: An earli­er ver­sion of this story in­cor­rectly iden­ti­fied the Com­mit­tee for a Re­spons­ible Fed­er­al Budget.


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