President Trump hasn't been able to repeal Obamacare, so he might be trying to destroy it instead. He can't seem to decide.
This would be even more spiteful than it sounds. That's because, in the short run, Trump's latest move would actually make the government spend more money to cover fewer people, not to mention everyone else he's done to sabotage individual insurance markets. The point of it all, as Trump can't help but explain 140 characters at a time like some attention-deficit Bond villain, is to force the Democrats to “call me to fix” the health-care system — and, as part of the deal, to get them to pay for the border wall that Mexico won't cover.
Yes, that really might be the plan. Trump is telling us that he's shooting the hostages he's taken — the health-care system — and hoping that people will blame Democrats for it.
Now, the Trump administration is actually taking a three-pronged approach to undermining Obamacare. The first is drastically cutting back on the government's outreach efforts. Indeed, the Trump team has slashed their Obamacare advertising budgets by 90 percent and the money they spend on walking people through the sign-up process by 40 percent. On top of that, Health and Human Services officials are no longer helping set up state enrollment events. It couldn't be more different from the way President Barack Obama enlisted the likes of LeBron James and Bill Murray and Zach Galifianakis to help get the word out among the young and healthy people that insurance markets need to stay stable. And this matters. Kentucky's enrollment numbers fell 14 percent in 2016 when its new Republican governor cut back on their Obamacare ads.
The second is letting people once again buy bare-bones coverage that doesn't meet Obamacare's minimum standards. The problem with that is that only healthy people would buy those plans, which would eventually mean that those would be the only plans healthy people would buy. Why is that? Well, there would be what's known as a death spiral among the more comprehensive ones. As fewer and fewer healthy people opted for Obamacare-compliant plans, insurers would have to charge more and more for them to make up for the fact that the insurance pool was sicker than before. Which, of course, would only drive even more healthy people out of the market until you had a bifurcated one. In other words, premiums would go up because healthy people had dropped out, at which point more healthy people would drop out because premiums had gone up. It's true that there are limits to how much Trump might be able to subvert Obamacare like this, but he is trying. And even loosening this just a little could make a big difference. As Vox's Sarah Kliff points out, it perhaps isn't a coincidence that the only state that already has rules like this — Tennessee — has some of the highest Obamacare prices in the country.
The third is pulling the plug on Obamacare's cost-sharing reduction payments, or CSRs. These are just the subsidies that insurance companies get for subsidizing poorer patients. Now, the way Obamacare works is that it not only limits how much working- and middle-class people have to pay in premiums, but also how much everyone has to pay out of pocket. It does that first part by giving people making between 100 and 400 percent of the poverty line —$12,060 to $48,240 for individuals, or $24,600 to $98,400 for a family of four — subsidies that go up as premiums do for benchmark silver plans so they're not too much for them. But it does the second by simply setting a hard limit on how much anyone has to pay out of pocket. This year, that's $7,150 for single people or $14,300 for families. Even that, though, is still too much for a lot of low-income people, so Obamacare sets an even lower one for them — and forces the insurance companies to pick up the costs. At least upfront. The government, you see, makes that up to them by giving them the CSRs, which come out to about $7 billion in 2017. That keeps the insurance companies from having to increase premiums even more than they already are and, as we'll get to in a minute, saves the government quite a bit of money as a result.
There's a problem, though. It's not clear that the money for the CSRs was ever actually, you know, appropriated. Republicans successfully sued the Obama administration over this, but the government was allowed to keep making the payments while the case was under appeal. Unless, that is, the president were to drop it, which is what Trump has just decided to do. That's just about the most destructive thing that could happen for the next few years, but it wouldn't be so bad after that, and might even be better for some people — albeit at considerable cost to the government.
Here's why. Getting rid of the CSRs wouldn't get rid of the requirement that insurance companies have to offer lower deductibles to low-income people. It'd just mean that insurers would lose money on them. So, to offset that, they'd have to charge higher premiums across the board. The nonpartisan Congressional Budget Office estimates that it'd be something like a 20 percent increase relative to what was already going to happen next year. The unsurprising result, according to the CBO, is that about a million fewer people would have health insurance then.
But that's not the end of the story. There are two things to remember: Obamacare's subsidies go up with premiums, and they go up with the premiums for silver plans. That means people who are eligible for them are both protected from these higher prices and more likely to use them the higher these prices go. The reason for that, the CBO explains, is that nixing the CSRs would probably push the price of silver plans up more than it would for bronze or gold ones. It'd be easier, then, for people to afford to get covered at all, or, if they wanted to splurge a little, to afford more coverage than they had before. Which is why, a few years down the line, the CBO actually thinks that “the number of people uninsured under this policy would be . . . about 1 million lower in each year starting in 2020.” Yes, more people would be covered.
This wouldn't come cheap, though. Getting rid of the CSRs would make premiums increase so much that Obamacare's subsidies would cost far, far more than was being saved — $194 billion more, according to the CBO, over the next 10 years.
What is Trump hoping to achieve by treating insurance markets like a toddler who didn't get the toy they wanted? Easy: Trump wants to be able to say that he's “dismantled” Obamacare, and that it's “finished,” “dead,” and “gone.” This lets him do that. Beyond that, it's hard to say what he wants. Maybe he really does think that it's a good idea to make health care so much more expensive the next few years that, as even Republican Congresswoman Ileana Ros-Lehtinen (Fla.) points out, more people would be uninsured. Or maybe this is just his way of trying to take credit for the just-concluded bipartisan talks that would fund the CSRs for two years and restore Obamacare's advertising budget while still finding an excuse to call it "repeal and replace." (He actually asked if he could do this before). Who knows. Trump's director of legislative affairs has said that the White House would only accept this latest bill, which would undo most of its sabotage, if it all but repealed Obamacare by eliminating its employer and individual mandates. Trump himself, though, has said that he supports it as is.
The only thing that is clear is that right now Trump is threatening to take steps to make insurance more expensive and markets less stable than they were before. Apparently this is what he meant when he said in March that he'd bring “such great health care at a tiny fraction of the cost.”