Chart of the Day: Killing CSR Subsidies Will Cost $194 Billion—But Maybe That’s a Good Thing

Here’s one of the most remarkable charts you’re ever likely to see:

This comes from a new CBO report on the likely effects of eliminating Obamacare’s CSR subsidies. Basically, the federal government would save money by not paying the CSR subsidies but lose money by paying more in tax credits to poor families. The net result would be more spending on Obamacare. Here are the effects that CBO forecasts:

  • Net increased spending over the next decade. Once spending and revenue effects are accounted for, net spending over the next decade would increase by $194 billion.
  • A small and temporary reduction in the number of people covered.
  • A small and temporary increase in the number of areas with no insurers.
  • A variable effect on net premiums within the Obamacare marketplaces. Generally, the cost of a silver plan would go up, while the cost of bronze and gold plans would go down, but tax credits would also go up and down. The overall effect would probably be moderately positive, though there would be both winners and losers at different age and income levels.
  • No effect for people who buy outside the marketplaces: “CBO and JCT expect that silver plans would be offered with gross premiums about the same as those charged under the baseline because insurers would design slightly different products for sale there and could therefore price them differently than the plans sold in the marketplaces. Plans outside the marketplaces could be attractive to younger people whose premiums were not a large enough percentage of their income to qualify them for tax credits.”

If CBO is correct, the remarkable conclusion is this: maybe we should kill the CSR subsidies. For Donald Trump, threatening to eliminate CSR is a cynical attempt to garner scary headlines about premium increases, which help him pretend that Obamacare is doomed. But as CBO makes clear, Obamacare will continue to work fine with or without CSR payments, and the premiums people actually pay after tax credits wouldn’t change much. In fact, net spending on Obamacare subsidies would increase, and it’s quite likely that more people would benefit than would be hurt.

POSTSCRIPT: The cynic in me thinks that once Republicans understand what the CBO report actually says, they will suddenly get very enthusiastic about reinstituting CSR subsidies. I will be waiting with bated breath to see if that’s the case.