When it comes to targeting wasteful, ineffective, and questionable government spending, the Trump administration is not just focused on personnel costs and expensive subscriptions to Politico. It has also shown a desire to tackle the mandatory government spending that comprises the majority (and a growing share) of the federal budget.
The Centers for Medicare and Medicaid Services (CMS) recently released a proposed rule relating to the Obamacare Exchanges. (A summary is available here.) In some cases, the rule, which needs to go through a formal notice-and-comment period before taking effect, restores policies from the first Trump administration that the Biden interregnum undid. Other policies in the rule attempt to tackle new issues that have cropped up more recently. But most of the rule’s provisions focus on combatting waste and fraud within the Obamacare program.
End to Coverage for DACA Participants
Among its many provisions, the proposed rule would end Exchange coverage for Deferred Action for Childhood Arrivals (DACA) participants, months after changes pushed through by the Biden administration. As I previously noted, the Biden administration proposed and then finalized a policy allowing DACA participants not only to apply for Exchange coverage but also to receive taxpayer-funded subsidies. Biden’s actions went further than the Obama administration, which concluded that it lacked the authority to make DACA participants eligible for Exchange coverage.
Shortly after the Biden administration finalized the proposal last summer, a group of Republican attorneys general challenged the action in court. In December, they won a court ruling blocking DACA recipients from applying for coverage in their states. If the Trump proposal is finalized, it will end the legal wrangling over taxpayer-subsidized coverage for illegal immigrants and restore the pre-Biden status quo.
Emphasis on Verification
Another theme running through the proposed rule is an increased emphasis on verification. That applies to verifying income to establish eligibility for federal subsidies, as studies have suggested that some Exchange enrollees may be lying about their income to qualify for the richest possible subsidies. Policies designed to combat this problem include stricter verification of enrollees’ income level when applying, and requiring that enrollees who receive subsidies file income taxes at the end of the year to reconcile the payments they did receive (based on projected income) with the payments they should have received (based on actual income) and repay the difference.
Verification will also apply to special enrollment periods — instances when “life events,” such as the birth of a child, marriage, divorce, etc., allow people to buy Exchange plans outside the annual open enrollment period. Whereas the Biden administration generally allowed for self-attestation of special enrollments, the Trump administration will require verification in most instances.
This policy seeks to ensure that applicants don’t try to “game the system” and only apply for insurance coverage after, for instance, they receive a cancer diagnosis. Of course, people who lie about qualifying for a special enrollment period because they know they are about to incur significant medical expenses raise insurance costs for individuals who have been paying premiums into the system all along. The Trump proposal would also shorten the open enrollment period by one month for much the same reason.
Tackling ‘Free’ Plans
The proposed rule also addresses a related topic: the Biden-era increase in Obamacare subsidies that created zero-dollar premiums for “benchmark” plans. This “free” coverage has led to reports of increased fraud and “zombie” enrollees, who are constantly renewed in taxpayer-subsidized plans because they pay nothing for those plans out-of-pocket.
The Trump rule attempts to tackle this problem by eliminating the automatic special enrollment period for people who qualify for “free” plans because right now such individuals can sign up for coverage any day of the year. The Trump rule would also require those who do not bother to reverify their subsidy eligibility every year to pay a $5-per-month premium (which can be refunded if the individual confirms his eligibility) and permit insurers to require individuals to pay past-due premiums before their new coverage takes effect. All of these policies attempt to give enrollees some stake in their health coverage rather than relying solely upon federal taxpayers’ largesse.
Cracking Down on Fraud
Lest anyone buy into the argument that no fraud exists in government, the Biden administration itself admitted the opposite. Between January 2024 and August 2024, CMS fielded 90,863 “complaints that consumers had their [Exchange] plan changed without their consent,” and another 183,553 “complaints that consumers were enrolled in [Exchange] coverage without their consent.” That’s nearly 300,000 reports of fraudulent enrollment in eight months — and that’s just among the states using the federal Exchange.
The Biden administration took some steps to crack down on the conditions that led to this type of fraud, such as by making the Exchanges’ IT infrastructure more secure. But the Trump administration’s proposals will do more to remedy the underlying policies that encouraged the fraud in the first place.
