Trump’s Plan to Sabotage Obamacare Costs $200 Billion and Doesn’t Really Even Sabotage Obamacare

For months, President Donald Trump has flirted with a tactic that could help make “Obamacare implode” — thus potentially forcing House and Senate Democrats to negotiate on a way to dismantle the law. On Tuesday, however, the Congressional Budget Office (CBO) released a report on what would actually happen if Trump implemented this tactic, and the results are less than spectacular.

For the most part, Obamacare would continue chugging along as usual. But the federal government would wind up spending $194 billion more.

The tactic Trump has considered revolves around the Affordable Care Act’s Cost Sharing Reductions (CSRs), which reimburse health insurers for the cost of reducing deductibles, co-payments, and other expenses for people with modest incomes. In part due to a federal court decision, Trump could likely cut off these CSRs, thereby throwing the insurance markets into a bit of turmoil.

The good news for people who are insured through the Obamacare exchanges, however, is that that turmoil is likely to sort itself out in a few years — at least according to the CBO. Many exchange customers won’t be impacted at all by the loss of CSRs, and some people could actually be better off.

According to the CBO analysis, if Trump cuts off the CSRs, the number of people with insurance would drop by about 1 million in 2018, but the insurance rate would more than recover within two years. By 2020, about 1 million more people would be insured than otherwise would be if the CSRs remain in place.

This small uptick the insurance rate, however, will come at a high price: “$194 billion from 2017 through 2026.”

Plans sold on Obamacare exchanges are segmented into categories such as “Bronze,” “Silver,” “Gold,” or “Platinum,” depending on how much coverage they offer patients. Individuals who earn below a certain amount of income receive subsidies to help them purchase health insurance, and the amount of this subsidy is tied to the second-least expensive silver plan available in a particular market.

CSRs, meanwhile, help reduce insurance premiums, but they are only available under silver insurance plans. Thus, if Trump cuts off CSRs, that will raise the cost of silver plans — which will itself trigger higher subsidies for everyone in the Obamacare exchanges who qualifies for one, even if they purchase a bronze, gold, or platinum plan.

These higher subsidies partially explain why the federal government would pay so much more if Trump cuts off the CSRs. Trump would cut off a subsidy that only impacts the silver plans, and wind up jacking up subsidies for all plans in the process. Additionally, because cutting off the CSRs would increase premiums in the silver market, the government would wind up paying more to subsidize silver plans than it would if those premiums stayed low.

The higher subsidies also explain why the uninsurance rate would drop by 2020. As CBO explains, “the effect on coverage would stem primarily from the increases in premium tax credits, which would make purchasing nongroup insurance more attractive for some people. As a result, a larger number of people would purchase insurance through the marketplaces, and a smaller number of people would purchase employment-based health insurance.”

To be clear, none of this makes cutting off CSRs good policy. Especially in the short term, premiums would rise and insurers may drop out of some insurance markets entirely — or, at least, they may do so temporarily until the industry adjusts to its new reality. People with higher incomes who do not qualify for subsidies would be particularly hard hit, as they would need to cover higher premiums out of pocket. And the government would wind up wasting a lot of money on a less efficiently policy.

But it wouldn’t be the Obamacare implosion Trump hopes for. It would just be really expensive.


Reposted from ThinkProgress