1. Cost. CBO projects premium increases of 20% right off the bat in 2018 and 25% by 2020. Higher premiums mean more people qualify for subsidies, and those subsidies are bigger. CBO projects a 10-year cost of $194 billion — to increase coverage by 1 million. In 2026, that 1-million coverage boost would cost a cool $37 billion. CBO’s 2016 projection for spending on marketplace subsidies in 2026 is $106 billion. Imagine the effects of increasing that spending by 36% in more rational ways. Compare, for example, the comprehensive set of subsidy sweeteners proposed by Urban’s Blumberg and John Holahan in 2015 — which included raising the AV of benchmark plans to 80%, reducing the percentage of income paid at every level and capping premiums for all buyers at 8.5% of income. The authors estimated the ten-year price tag at $221 billion over ten years.
This is a very good point. The coverage gains bought by loading all CSR costs onto Silver only are an extraordinarily inefficient way to expand coverage and improve the law. I am not disputing that at all. There are better ways to spend the money to increase coverage. The same coverage increase can be bought far more cheaply by tweaking Medicaid matching rates or encouraging some creative 1332 waivers.
In Health Affairs, Steven Chen has a good blog post on how states could use the CSR windfall to improve coverage via a 1332 waiver. He uses California and 2016 numbers for his example:
Using California as an example, Covered California showed that the termination of CSR payments by the Federal government would cause insurance premiums for silver plans in the individual market to increase by 16.6 percent in 2018. The study also showed an inverse relationship between CSR and APTC: The Federal government paid $750 million in CSR payments in 2016, but if it were to defund CSR payments, not only would it not receive any savings, it would incur an additional $976 million in APTC spending. Using these figures as illustration, if the Federal government had terminated CSR payments in 2016 and if California had provided CSR payments through a 1332 Waiver, under this scenario California would have to pay $750 million in CSR payments, but it would receive $976 million from the Federal government in lost APTC payments—payments California would have otherwise received without waiver—ending up with a total net profit of $226 million!
The ACA needs a technical corrections bill. It needs a “it’s been live for four to eight years and some things work and some things didn’t, let’s push the things that work and fix or drop the duds… bill”
Not funding CSR sets a plausible outcome absent of an agreement. It is a boundary condition. Deals get made when all sides of a deal believe that they have an outcome that is better through an agreement than the outcome which would occur without an agreement. I can easily and readily see deals.
There could be a trade where CSR is funded and $75 billion dollars are allocated to reinsurance and $30 billion dollars are allocated to increasing subsidies for people who make between 200% and 500% FPL. There could be a trade where $100 billion dollars are spent to up CSR 73 to CSR 80 and then adding a new tier of CSR for people making between 250% and 325% FPL so their Silver is now has an actuarial value of 75%. There could be a trade where Medicaid 1115 waivers can be integrated with 1331 (Basic Health Plan) and 1332 (State Innovation) ACA waivers as well as additional funding for safety net hospitals and community health centers. There could be dozens of deals that spend less money, cover more people and fix known problems. But all of these deals are premised that the outcome due to no agreement is a significant albeit inefficient Democratic policy victory.