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The White House announced late Thursday that it would no longer reimburse insurers for lowering costs for customers under the Affordable Care Act, a decision Democrats condemned as "spiteful."
President Donald Trump had indicated he was considering cutting off the payments in order to increase pressure on lawmakers to repeal the ACA, also known as Obamacare.
He later tweeted, "ObamaCare is a broken mess. Piece by piece we will now begin the process of giving America the great HealthCare it deserves!"
"Based on guidance from the Department of Justice, the Department of Health and Human Services has concluded that there is no appropriation for cost-sharing reduction payments to insurance companies under Obamacare," the White House said in a statement.
"In light of this analysis, the Government cannot lawfully make the cost-sharing reduction payments,” the White House statement said.
The Congressional Budget Office, or CBO, has said that in the short term, health care premiums would spike, insurers would exit the market and deficits would increase if Trump followed through with his threat.
Insurers have already submitted their premiums for 2018 and in many cases raised rates on the assumption that CSRs would be cut off. That could somewhat blunt the impact of the White House's move.
Democrats and Republicans in the House and Senate have discussed appropriating the CSR payments themselves, which would negate the impact of Trump's order. But it's not yet clear GOP leaders would support a bill, which is likely to draw fierce conservative opposition.
The move comes the same day that Trump signed an executive order that could undermine the health care law that was President Barack Obama's signature legacy.
Politico earlier reported that Trump was planning on ending the key Obamacare subsidy.
House Speaker Paul Ryan, R-Wis., said the White House announcement Thursday night "preserves a monumental affirmation of Congress's authority and the separation of powers."
"Obamacare has proven itself to be a fatally flawed law, and the House will continue to work with Trump administration to provide the American people a better system," he said in a statement late Thursday.
But Senate Democratic leader Chuck Schumer of New York and House Democratic leader Nancy Pelosi of California said in a joint statement that it would be "a spiteful act of vast, pointless sabotage leveled at working families and the middle class in every corner of America."
"President Trump has apparently decided to punish the American people for his inability to improve our health care system," they said.
"Trumpcare collapsed because Americans overwhelmingly recognized the cruelty and higher costs it meant for them and their loved ones," Schumer and Pelosi said. "Now, millions of hard-working American families will suffer just because President Trump wants them to."
Open enrollment in Affordable Care Act plans for 2018 begins on Nov. 1.
In August, the CBO reported (PDF) that ending the payments would raise the number of uninsured Americans by about 1 million in 2018 but would then start lowering the number of uninsured by about 1 million a year starting in 2020.
The federal budget deficit would rise by $6 billion next year, $21 billion in 2020 and $26 billion in 2026 as low- and moderate-income Americans make more use of tax credits to offset rising premiums, it said.
The CBO said it expected that insurers in some states would withdraw from or not enter some markets because of "substantial uncertainty." But it projected that by 2020, "more insurers would participate, so people in almost all areas would be able to buy nongroup insurance."
And it said most people would pay net premiums for nongroup insurance similar to or less than what they would have paid otherwise over the next decade, after taking premium tax credits into account.
In Thursday night's statement, the White House said: "The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system."
It said that "Congress needs to repeal and replace the disastrous Obamacare law and provide real relief to the American people."