Trump administration to pay New York, Minnesota for lost health-care funds

It’s a rare bit of help from the administration in sustaining the Affordable Care Act

Seema Verma, administrator of the Centers for Medicare and Medicaid Services (Jabin Botsford/The Washington Post)

The Trump administration will pay New York and Minnesota close to half a billion dollars this year after the two states sued over lost federal funding for programs that provide health care to tens of thousands of low-income residents.

The two states are the only ones in the country to create “Basic Health Programs,” an option for states created by the Affordable Care Act. Under such programs, people earning between 138 percent and 200 percent of the federal poverty level -- the population earning slightly too much to be eligible for Medicaid -- receive their health coverage from the state. That is about 738,000 people in New York and 84,000 people in Minnesota.

The programs have been financed with federal funds since the ACA was passed in 2010. Under the law, the federal government is charged with paying 95 percent of the funds it would have directed toward subsidies for those needing help with insurance premiums -- as well as toward the cost-sharing reductions (CSRs) the government promised insurance companies for offering lower-price plans through the individual marketplace.

That system worked fine for both states until the Trump administration last fall eliminated CSRs, thus reducing the amount of federal funding those states received to cover people in their Basic Health Programs.

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Forty-eight states -- minus New York and Minnesota -- compensated for the loss of CSRs by “silver loading," which meant they increased premiums on the second cheapest plan available under Obamacare. That didn’t harm most consumers because when premiums increased, so did government subsidies. But this workaround wasn’t feasible for New York and Minnesota residents because most ACA enrollees eligible for subsidies get their insurance from those states Basic Health Programs.

The win by the states is a rare bit of good news doled out by the Trump administration, which has steadily been chipping away at the regulatory framework underpinning Obamacare, which President Trump has called “a disaster."

New York and Minnesota sued the Trump administration in January; the case was settled in May when the administration agreed to work with the states on a new funding formula for their programs. In the meantime, the federal government paid the states an interim payment of $151 million to New York and $17.2 million to Minnesota.

Now, the administration has finalized the revised payment that will compensate for the loss of the CSR payments. An administrative order was quietly posted on the Centers for Medicare and Medicaid Services website on Friday announcing that the federal government will pay $422,206,235 to New York and $46,276,090 to Minnesota for the first three quarters of 2018.

“Last week’s administrative order was issued following an opportunity for the two states to review and comment on a draft of the revised payment methodology," said a U.S. Department of Health and Human Services spokesperson. "CMS believes that the administrative order—and the forthcoming payments to the states—should fully address the concerns raised by the states in the litigation.”

A spokesperson for the New York Attorney General’s office said they were still “sorting through the numbers.”

The agreement between the federal government and the states could simply be a way for the White House to avoid a legal battle with the states, said Larry Levitt, senior vice president of the independent Kaiser Family Foundation, but it’s also “reflective of the schizophrenia of this administration with respect to the Affordable Care Act.”

“One moment they seem to be taking steps to undermine the law and the next it’s doing things to make it function effectively,” he said. “It’s hard to reconcile.”