Trump’s two-step: Health care and fiscal sabotage

October 13th, 2017 at 12:02 pm

I wanted to bang out a quick note tying a few points together regarding health care and tax policy.

When President Trump said yesterday that his new health care executive order directing agencies to allow people to buy health coverage that doesn’t have to meet ACA standards “will be costless to the government,” he was surely wrong. This is especially the case when you add in his decision to stop paying cost-sharing reductions (CSRs), or subsidies to insurers to lower the costs of coverage to low-income policy holders.

This may seem counterintuitive. If insurers can offer lower-standard (i.e., cheaper) coverage, and if the government can cease paying a subsidy that was to amount to $9 billion next year, why would the government face higher costs?

Because as long as the ACA’s premium subsidies remain in place (income-based subsidies that offset the cost of coverage in the nongroup market), destabilizing insurance markets by raising insurers costs (ending CSRs) and invoking adverse selection (the new EO) will lead to more, not less, government spending on health care. I’ll unpack that in a second, but this is a consistent tactic in Republican slash-and-burn health-care policies: the ignoring of risk-pooling as a cost control.

As CBO recently noted, participating insurers are “still required to bear the costs of CSRs even without payments from the government.” So, premiums for the benchmark “silver” plan would quickly rise, they estimate, by 20 percent. “When premiums for silver plans increased under the policy, tax credit amounts per person for purchasing insurance in the nongroup market would increase because the credits are directly linked to those premiums.” This dynamic would add, they estimate, $200 billion to the deficit over a decade.

To the extent that the EO allows healthier people to enroll in plans that don’t comply with ACA standards, this too leads to higher premiums for the less healthy population now left behind in the diluted risk pool. If that’s the case, their premium subsidies would have to rise as well.

Now, consider these changes in tandem with Trump and the Republicans’ plan to add maybe $2 trillion to the deficit through their big, wasteful, regressive tax cut.

In other words, while they’re busy simultaneously sabotaging health care markets with one hand, they’re cutting off the future resources that will be invoked by that sabotage with the other hand.

It could be a diabolical scheme; it could be just ignorance. Most likely, it’s just a manifestation of the basic mandate from their wealthy donors to cut taxes and shrink government. But it’s very clear what it isn’t: representative governance that meets people’s needs in a fiscally responsible manner.

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2 comments in reply to "Trump’s two-step: Health care and fiscal sabotage"

  1. Wondering says:

    Do you all still believe that Trump doesn’t want a single-payer health system? I’m quite certain he wants a single-payer system more than the big Democratic donors want it (they don’t want it at all).

    He’s just playing the only role that can break up the madness of harmful elite compromise. He’s playing the bad guy all the way through.

    As for the order itself, certainly it was drafted by market fundamentalists that don’t understand health care, but who else could draft an order for him but his own people?

    I do believe he wants to undermine it so that congress can stop playing games and start functioning again someday. This is not an endorsement of his actions, but rather an analysis.

    I’m just not seeing many players in this game that actually care about pushing a proper health system without the subsidies to drug fortunes and insurance empires. If there are any they’re not showing themselves.

    • Brett Showalter says:

      It won’t work. Republicans don’t want Health Care and Democrats have little reason to bother “negotiating” when they can call it now “Trumpcare” and seek mid-terms sweeps.