Musk didn't say whether or not there would be replacements or price drops to fill in the gap. We've asked Tesla for comment.
If the starter Model S and X models disappeared with no rough equivalent in place, that would raise the starter prices by $15,000 or more, to $84,750 (from $66,750) and $87,950 (from $72,950) respectively. That could rule them out for some buyers -- you'd have to buy a Model 3 if you wanted a Tesla EV under $80,000. That would simplify production, though, and might spur Model 3 sales as Tesla gradually shifts its focus toward new buyers.
However, Musk's reply suggests it might be more a matter of rethinking trim levels than dropping them entirely. As with the Model 3, you might buy a car more based on how you intend to drive (Long Range or Performance, for example) than picking a battery capacity. It's potentially easier to understand for newcomers to EVs, and might convince some buyers to spring for a more expensive package.