Matt O’Brien: No upside to ACA sabotage

President Donald Trump is trying to decide whether he wants to make health insurance more expensive for people purely out of spite.

This is apparently a hard choice for him. Trump has equivocated for months now about whether he will keep making Obamacare’s cost-sharing reduction payments. Those are just the subsidies the government gives insurance companies to make up for the fact that they are now required to subsidize their poorer customers themselves. Trump might be able to cut them off, though, since there is some question whether the money for them was actually appropriated in the first place.

Republicans had successfully sued the Obama administration over this, but the case is still under appeal – an appeal that Trump could drop if he so chooses (although state attorneys general could pick it up). And it looks like he might, now that the Republican attempt to repeal and perhaps replace Obamacare has fallen apart. That, at least, is what he tweeted in the aftermath of the GOP’s failed health-care vote. If Trump can’t get rid of all of Obamacare, it seems like he’ll settle for getting rid of the parts of it that make it work.

Trump did warn us that there was going to be so much winning, we’d get sick and tired of winning.

Now, the important thing to understand about all this is that Obamacare limits how much working- and middle-class households have to pay in premiums and how much everyone pays out-of-pocket. However, it does this in two different ways. When it comes to premiums, it lets insurers charge whatever they want, and then gives people making 400 percent of the poverty level or less – $48,240 for individuals, or $98,400 for a family of four – whatever subsidy they need to keep this from being too much for them. But when it comes to copays and deductibles, it puts a strict cap on how much insurance companies can make people pay.

The problem, though, is that these out-of-pocket limits are still too much for a lot of people. After all, a $7,150 maximum for individuals or $14,300 for families – that’s what the limits are this year – isn’t a lot of help for someone only making, say, $20,000. So to deal with that, Obamacare sets an even lower limit for low-income people, and forces insurance companies to eat the costs.

Well, at least upfront. This, you see, is where the CSRs come in. They subsidize the subsidizers. And with good reason. If the government didn’t, it would actually end up paying more money for everyone to pay higher premiums.

Without the CSRs, insurance companies would lose money on the lower deductibles they have to offer low-income people. To offset this, they would charge higher premiums across the board. The nonpartisan Kaiser Family Foundation estimates it’d be something like a 19 percent increase on average. This wouldn’t be a big deal for people who got health insurance subsidies, since those go up as premiums do, but it’d be a disaster for everybody else.

It wouldn’t be good for the government either. We just said why. It’s that the subsidies it pays go up in tandem with premiums. Spending less on CSRs, then, just means that it would spend more on health insurance subsidies – enough to wipe out all the money it would save on them, and then some. Indeed, the Kaiser Family Foundation thinks that cutting the $7 billion of CSRs would force the government to spend $9.3 billion more on these other subsidies. That’s right: The government would be spending more for us to get less.

So, the way things are now, CSR money is going to get spent one way or another. The government can either do it in time to stop premiums from going up, or wait until they do and spend more money on it. Trump, at least judging by his tweets, seems to favor this second, more destructive option as a way to sabotage Obamacare if he can’t repeal it.

I guess that’s what Trump meant about running the government like a business. A bankrupt business.