As the premium tax credit fight continues, obvious health care compromises are overlooked

While members of Congress are laser-focused on ACA subsidies, they overlook other ways to lower the cost of health care and deliver financial relief to Americans. Reintroducing cost-sharing reductions (CSRs) would be a logical solution for policymakers across the political spectrum.

The CSR compromise

Before we get into the specifics of health care policy, let's agree on some basic fundamentals. Everyone wants health insurance to be less expensive for Americans. Democrats want to continue to support the individual market; Republicans want to decrease government spending and reduce the deficit. The debate is around how to achieve those goals.

CSRs are discounts that lower health insurance costs for certain Americans who buy coverage on the individual market. Remember: premium tax credits also apply only to coverage purchased on the individual market. However, the consequences apply to everyone; if people who previously bought insurance on the individual market can no longer afford it, costs will end up increasing for everyone regardless of whether they purchase insurance themselves or get it from their employer. Previously, CSRs were available to individuals and families with incomes between 100–250% of the federal poverty level who purchase Silver plans on the marketplace. CSRs lowered the amount those individuals paid for deductibles, copays and coinsurance; data from KFF found that CSRs lowered the average deductible by anywhere from $1,000 to $4,500 depending on the income level of the recipient. The Trump administration ended CSR subsidies in 2017.

If Republicans moved against CSRs once before, why does it make sense now as a better compromise than extending premium tax credits?

While ending CSR subsidies lowered government spending in theory, the result in practice was a massive increase in insurance costs. Lower-income Americans need medical care regardless of whether they have premium tax credits, CSRs, or no insurance at all. CSR subsidies ensure that those low-income patients pay at least something for the care they receive, even if a larger portion of their insurance bill is shouldered by the government. Without those subsidies, low-income Americans are more likely to forgo insurance entirely; when they need emergency health care, the cost of that care raises premiums for everyone. Over the past two years, both Democrats and Republicans have suggested re-funding CSRs at various points as part of their overall health care proposals. This is an easy win that would stabilize health care costs and the ACA marketplace, both for individual buyers and for those who purchase coverage through employee-sponsored HRAs like QSEHRA and ICHRA.

Why premium tax credits are the wrong path forward

Even after months of turmoil, politicians on both sides of the aisle are still considering extending the premium tax credits. In December, moderate Republicans forced a vote on the issue in the hopes of resurrecting the ACA subsidies before the end of open enrollment in January.

But while premium tax credits undoubtedly lower costs for Americans, they're not a sustainable solution. You can take Advil to reduce your pain for a while, but if you don't treat an underlying infection, your problems are only going to get worse. The reality is that the cost of health care is increasing, and the cost to the government of extending premium tax credits will balloon with each passing year.

There's a key difference between premium tax credits and CSRs that explains why one is more sustainable than the other. Premium tax credits lower the cost of insurance coverage, while CSRs lower the cost of the care itself. Insurance premiums are unavoidable: every person with health insurance has to pay them every month. You only pay for the care itself (through deductibles and copays) when you actually need it. Directing government support towards care doesn't just lower the overall cost of the subsidies, but it also ensures the help is going to people rather than insurance companies.

Other opportunities for common ground

As legislators work to stabilize the health insurance market, there are other opportunities for compromise. The expiration of premium tax credits reintroduced illogical income cliffs for those that receive tax credits, and some Americans who receive a promotion could find their raises wiped away entirely by increased insurance payments. These are straightforward issues with simple policy fixes, and legislators can score an easy victory by addressing them. Congress could also consider other policies that, like CSRs, help to lower the cost of care rather than the cost of coverage. Creating separate risk pools for high-utilization people, reforming pharmacy policies, and offering incentives for healthier lifestyles could all help make insurance more affordable for Americans. Creativity should help legislators find common ground.

And while a long-term extension of premium tax credits isn't sustainable, Democrats and Republicans could work together to introduce a more gradual phase-out. A recent Marist poll found that 70% of Americans say that the cost of living in their area is not very affordable or not affordable at all. Phasing out premium tax credits over the course of two to three years could provide important relief to those who don't already benefit from CSRs.

Health insurance will always be a hot topic for debate in Washington, but American citizens shouldn't suffer endlessly as a result of Congressional gridlock. Legislators can provide immediate relief by focusing on the subjects that both sides agree on. The perfect long-term solution may not be in reach, but incremental progress is still a worthwhile goal.