CBO: AHCA saves $337B on deficit spending, but increases uninsured by 14 million in 2018
posted at 5:01 pm on March 13, 2017 by Ed Morrissey
Republicans in the House and Senate wanted to see a score from the Congressional Budget Office on the American Health Care Act before casting a vote either way. The CBO obliged today, giving AHCA backers good news for budget hawks, but potentially bad news on the political front. Despite assurances that the effort would not leave Americans behind, CBO estimates that fourteen million Americans would be added to the rolls of the uninsured, while the AHCA saves the federal government $337 billion in deficit spending over the next decade:
CBO and JCT estimate that enacting the legislation would reduce federal deficits by $337 billion over the 2017-2026 period. That total consists of $323 billion in on-budget savings and $13 billion in off-budget savings. Outlays would be reduced by $1.2 trillion over the period, and revenues would be reduced by $0.9 trillion.
The largest savings would come from reductions in outlays for Medicaid and from the elimination of the Affordable Care Act’s (ACA’s) subsidies for nongroup health insurance. The largest costs would come from repealing many of the changes the ACA made to the Internal Revenue Code—including an increase in the Hospital Insurance payroll tax rate for high-income taxpayers, a surtax on those taxpayers’ net investment income, and annual fees imposed on health insurers—and from the establishment of a new tax credit for health insurance. …
CBO and JCT estimate that, in 2018, 14 million more people would be uninsured under the legislation than under current law. Most of that increase would stem from repealing the penalties associated with the individual mandate. Some of those people would choose not to have insurance because they chose to be covered by insurance under current law only to avoid paying the penalties, and some people would forgo insurance in response to higher premiums.
Later, following additional changes to subsidies for insurance purchased in the nongroup market and to the Medicaid program, the increase in the number of uninsured people relative to the number under current law would rise to 21 million in 2020 and then to 24 million in 2026. The reductions in insurance coverage between 2018 and 2026 would stem in large part from changes in Medicaid enrollment—because some states would discontinue their expansion of eligibility, some states that would have expanded eligibility in the future would choose not to do so, and per-enrollee spending in the program would be capped. In 2026, an estimated 52 million people would be uninsured, compared with 28 million who would lack insurance that year under current law.
By 2026, ABC reports, CBO estimates that the number of uninsured will be 52 million rather tahn 28 million, a number guaranteed to attract lots of attention. Media outlets have already begun highlighting the impact on the uninsured as the lead for their coverage in the CBO analysis. CBS’s Nancy Cordes calls it an “eyebrow raising number”:
— CBS News (@CBSNews) March 13, 2017
By the time 2020 rolls around, that number will increase to 21 million, the CBO predicts, but it matters how they get there, too. By that time, premiums will increase another 15-20% according to this analysis, and without the mandate penalties being enforced, millions of healthier Americans will choose not to purchase insurance on their own. In 2020, though, CBO expects that to shift in the opposite direction because of the other reforms in the bill. By 2026, premiums will have decreased by ten percent over current projections, and the restored ability to use age as a risk factor in pricing will result in premium prices that will attract more younger and healthier consumers into risk pools:
Starting in 2020, the increase in average premiums from repealing the individual mandate penalties would be more than offset by the combination of several factors that would decrease those premiums: grants to states from the Patient and State Stability Fund (which CBO and JCT expect to largely be used by states to limit the costs to insurers of enrollees with very high claims); the elimination of the requirement for insurers to offer plans covering certain percentages of the cost of covered benefits; and a younger mix of enrollees. By 2026, average premiums for single policyholders in the nongroup market under the legislation would be roughly 10 percent lower than under current law, CBO and JCT estimate.
Although average premiums would increase prior to 2020 and decrease starting in 2020, CBO and JCT estimate that changes in premiums relative to those under current law would differ significantly for people of different ages because of a change in age-rating rules. Under the legislation, insurers would be allowed to generally charge five times more for older enrollees than younger ones rather than three times more as under current law, substantially reducing premiums for young adults and substantially raising premiums for older people.
Most of the uninsured would come from new limitations on Medicaid, which will make this politically touchy. However, there are bright spots ahead on this front as well, especially on the budget:
CBO estimates that several major provisions affecting Medicaid would decrease direct spending by $880 billion over the 2017-2026 period. That reduction would stem primarily from lower enrollment throughout the period, culminating in 14 million fewer Medicaid enrollees by 2026, a reduction of about 17 percent relative to the number under current law. Some of that decline would be among people who are currently eligible for Medicaid benefits, and some would be among people who CBO projects would be made eligible as a result of state actions in the future under current law (that is, from additional states adopting the optional expansion of eligibility authorized by the ACA). Some decline in spending and enrollment would begin immediately, but most of the changes would begin in 2020, when the legislation would terminate the enhanced federal matching rate for new enrollees under the ACA’s expansion of Medicaid and would place a per capita-based cap on the federal government’s payments to states for medical assistance provided through Medicaid. By 2026, Medicaid spending would be about 25 percent less than what CBO projects under current law.
One can see why Mick Mulvaney loves the AHCA. The budgetary impact is positive, giving the Republicans some ground gained on runaway deficit spending. It might get even better if House Republicans follow through on their efforts to amend the AHCA to speed up the Medicaid rollback, and with the numbers of uninsured already as high as they are, it might be better politically to rip that bandage off at once rather than drag it out. The CBO inclusion of future Medicaid eligibility should be highlighted too, as the 14 million who will “lose” Medicaid are not all on it now. And it’s always good to point out that ObamaCare was supposed to solve the problem of the uninsured, but never actually closed the gap, even with the skyrocketing costs and market distortions that it imposed on everyone else.
Still, the CBO report demonstrates the political difficulty ahead for the AHCA, Paul Ryan, and Donald Trump. Promises had been made that the repeal wouldn’t kick people out of their health insurance, and that’s largely true in the private market, where the change is going to be voluntary as mandates get set aside. In the public sector, though, having 14 million Americans covered by Medicaid now suddenly left without any kind of insurance will be tough to swallow, in part because of those promises.
Will this change the dynamic of the AHCA debate? The budget hawks in the House might grab the AHCA’s deficit reductions and run with them, but there will be a lot of ads that will accuse each Republican incumbent next fall of having voted to kick 14-24 million people out of “health care.” If they have to fight that narrative, House and Senate Republicans might prefer to have done it with a full repeal rather than an incremental approach.
Addendum: Keep in mind that the CBO score is a projection based on estimates and assumptions, and that it’s not an oracle. Last week, Jeffrey Anderson reminded readers at the Weekly Standard that the CBO projected 23 million would be enrolled in ObamaCare exchanges by 2017. Actual number: 9.2 million. (via Grabien)