The increases to premium subsidies in the ACA marketplace provided through 2022 by the American Rescue Plan Act (ARPA) have been a policy success, helping to boost marketplace enrollment by 21% this year. During Democrats' long, weary negotiations over the Build Back Better bill in the fall, extension of those subsidies (first permanently, then, foolishly, for just 3 years) was taken as a given. Even when BBB negotiation collapsed, failure to extend the subsidies seemed unthinkable...until it didn't.
By May, it began to seem that Joe Manchin might not allow any Democratic priorities to pass via a reconciliation (bypassing the filibuster, and requiring all Senate Democrats to be on board). More recently, there's been a pulse -- apparently serious negotiations for a stripped-down bill possibly including climate investments, repeal of Republican tax cuts, empowering Medicare to negotiate prescription drug costs, and, maybe maybe, extension of the ARPA subsidy boosts for marketplace coverage.
Most recently, Manchin has made vaguely sympathetic but equivocal noises about extending the subsidy boosts, which are not a priority for him (the ACA Medicaid expansion insures about ten times as many West Virginians as the ACA private plan marketplace). And as Politico's Adam Cancryn outlines, his maunderings have left Democrats trying to squeeze them in with a dilemma.
Manchin hath decreed that a) any programs included in the reconciliation package be permanent, rather than sunsetting after a fixed number of years, and b) half the money raised through tax increases go to deficit reduction, leaving about $500 billion over ten years for all spending priorities. CBO estimated the 10-year cost of permanent extension of the ARPA subsidies at $210 billion. Prescription drug pricing reforms are projected to raise somewhere over $100 billion, depending on how they're structured. The three-year cost of ARPA subsidy extension, per CBO, is $74 billion. But, per Manchin rules...no temporary programs!
Given this Catch-22, it may be worth thinking about ever-present but studiously ignored (rightly, on the extra-Manchin merits) policy option: Fund the ARPA-level subsidies by funding the marketplace's Cost Sharing Reduction (CSR) subsidies in the original, statutory way, directly reimbursing insurers for their CSR costs. CSR reduces out-of-pocket costs for low income enrollees (a slight majority of enrollees) who select silver plans.
