On March 13, 2017, the Congressional Budget Office (CBO) released the budget “score” or cost, for the American Health Care Act (AHCA). The headline from the analysis is that the AHCA would cause 14 million people to lose health care coverage. Notwithstanding passage by the House Energy and Commerce and Ways and Means committees last week, the big number of uninsured, coupled with the narrative opponents have created about AHCA’s tax breaks, has made the road for passage longer and steeper.
CBO projects that 14 million people will lose coverage in 2018 relative to current law. They attribute that loss primarily to the repeal of the individual mandate which imposes a penalty on those who forgo coverage. Beyond the impact in 2018, CBO believes that “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 jump in the number of uninsured is due to the restrictions on Medicaid eligibility expansion and per-enrollee caps on spending within the program. According to the House Energy and Commerce Committee section-by-section of AHCA, the per-enrollee cap model “would use each State’s spending in [Fiscal Year (FY)]2016 as the base year to set targeted spending for each enrollee category (elderly, blind and disabled, children, non-expansion adults, and expansion adults) in FY2019 and subsequent years for that State. Each State’s targeted spending amount would increase by the percentage increase in the medical care component of the consumer price index for all urban consumers from September 2019 to September of the next fiscal year. Starting in FY2020, any State with spending higher than their specified targeted aggregate amount would receive reductions to their Medicaid funding for the following fiscal year.”
On the revenue side, the AHCA would reduce the deficit by $337 billion over the customary ten-year budget window (2017-2026). According to CBO, the savings come from the tax provisions, “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.” According to Joint Tax Committee descriptions of these proposals, high-income taxpayers are those earning “$250,000 in the case of a joint return or surviving spouse, $125,000 in the case of a married individual filing a separate return, and $200,000 in any other case.”
Other highlights from the CBO analysis are the estimation that under the AHCA’s Patient and State Stability Fund, insurance markets would stabilize and that after rising in 2018 and 2019, insurance premiums would decrease starting in 2020.
It is important to note that there is a measure of uncertainty with CBO’s estimates. In their analysis, CBO states “[t]he ways in which federal agencies, states, insurers, employers, individuals, doctors, hospitals, and other affected parties would respond to the changes made by the legislation are all difficult to predict, so the estimates in this report are uncertain.” To see how CBO did with Obamacare (hint: not that far off), see this piece from Brookings.
Notwithstanding the uncertainties, opponents of the AHCA including private sector stakeholders, congressional Democrats and even several conservative Republican Senators and members of the House pointed to the numbers as validation for a different approach. Speaker Paul Ryan (R-WI) and House Leadership have attempted to put a positive spin on the numbers and use them to support the argument that the current system is failing and that AHCA is the best replacement. Indeed, following release of the CBO report, Speaker Ryan stated that he does not intend to make significant changes to the AHCA in the House. What will happen in the Senate is far from clear. Several Senators, including moderates such as Sen. Susan Collins (R-ME) and conservatives such as Sen. Rand Paul (R-KY) have said that AHCA is “dead on arrival” and needs to be reworked. Of course, many of the Republican opponents of AHCA have their own plans for repealing and replacing Obamacare, so the CBO numbers come as helpful fuel for their efforts.
As we have previously noted, the effort to repeal and replace Obamacare is far from complete. Look for action in the House next week with a markup in the Budget Committee (where they will combine the Energy and Commerce and Ways and Means recommendations) and debate and votes on the Floor. After that, it’s on to the Senate!
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