CBO Projects 23 Million Uninsured, More Instability

The Congressional Budget Office on May 24, 2017 released its analysis of the Obamacare repeal-and-replace legislation passed by the House of Representatives 217-213 on May 4, 2017 (H.R. 1628, “American Health Care Act of 2017”).  Following are essential facts, findings, and estimates:

Background on the ACA:  Obamacare is aimed at providing access to health care for uninsured Americans through: (1) expanding Medicaid to cover all Americans up to 138% of the federal poverty level; (2) government subsidies to purchase private health insurance on State or Federal exchanges for people between 138% and 400% of federal poverty level; (3) barring discrimination on coverage or premiums due to pre-existing conditions; (4) barring annual and lifetime limits; (5) requiring all health policies to cover essential health benefits (EHBs); (6) limiting premiums for older Americans; and (7) stabilizing the private insurance market through individual and employer mandates.

The House-passed bill would:

  • Phase out the Obamacare Medicaid expansion.
  • Scale back the pre-Obamacare Medicaid program by making it a ”capped entitlement,” under which federal reimbursements to States for enrollee health expenses would no longer be open-ended; instead, the payments per enrollee would be “capped” at levels short of projected health inflation.
  • Replace the Obamacare insurance subsidies with more limited tax credits of $2000 to $4000, and would prohibit the use of credits to purchase health insurance plans that cover abortion.
  • Creates a “Patient and State Stability Fund” aimed at reducing premiums in the individual market.
  • Repeal penalties for individual and employer mandates, but require insurance companies to charge a 30% penalty up to 12 months for people who haven’t maintained “continuous coverage.”
  • Repeal taxes enacted to fund Obamacare.
  • Permit States to opt-out of pre-existing condition protections, allowing insurers to set higher rates for patients with pre-existing conditions, and provide funds for States to set up high-risk pools.
  • Allow States to waive essential health benefits standards — aimed at allowing insurers to sell less comprehensive plans at lower cost to young people including “plans” that do not cover major medical.
  • Allow insurers to charge older Americans under 65 up to 5 times as much as young adults.
  • Allow larger deposits to tax deductible Health Savings Accounts.

Key Findings and Projections of the CBO/JCT cost estimate:
(Nonpartisan Congressional Budget Office and Joint Committee on Taxation)

  • 23 Million more Uninsured:  “CBO and JCT estimate that in 2018, 14 million more people would be uninsured under H.R. 1628 than under current law. The increase in the number of uninsured people relative to the number projected under current law would reach 19 million in 2020 and 23 million in 2026…. The increase would be disproportionately larger among older people with lower income—particularly people between 50 and 64 years old with income of less than 200 percent of the federal poverty level.”
  • Medicaid Cut by $834 billion:  Medicaid spending would be cut $834 billion due to phasing out the Medicaid expansion and capping federal Medicaid payments to States.
  • Tax Cuts of $664 billion: JCT estimates that the legislation would reduce revenues enacted to pay for the expansion of coverage by $664 billion over the 2017- 2026 period by “repeal or delay of taxes on high-income people, fees imposed on manufacturers, and excise taxes enacted under the ACA and modification of various tax preferences for medical care” — including repeal of a 0.9% increase in payroll taxes for couples earning over $250,000; a 3.8% surcharge on several types of investment income; and an annual fee on health insurance providers.
  • Market Instability: “Even though the new tax credits…would generally be less generous than subsidies under current law, other changes (including the money available through the Patient and State Stability Fund) would…lower average premiums enough to attract a sufficient number of relatively healthy people to stabilize the market.  However…about one-sixth of the population resides in areas in which the market would start to become unstable beginning in 2020….Community-rated premiums would rise over time, and people who are less healthy (including those with preexisting or newly acquired medical conditions) would ultimately be unable to purchase comprehensive health insurance at premiums comparable to those under current law, if they could purchase it at all–despite the additional funding that would be available under H.R. 1628 to help reduce premiums.”
  • Waiving Essential Health Benefits: “Services or benefits likely to be excluded from the EHBs in some states include maternity care, mental health and substance abuse benefits, rehabilitative and habilitative services, and pediatric dental benefits. In particular, out-of-pocket spending on maternity care and mental health and substance abuse services could increase by thousands of dollars in a given year….”
  • Increased Out-of-Pocket Costs:  “Some enrollees could see large increases in out-of-pocket spending because annual or lifetime limits would be allowed, for example, people who use expensive prescription drugs. Out-of-pocket payments for people who have relatively high health care spending would increase most in states that obtain waivers from the requirements for both the EHBs and community rating.”
  • Impact on the Federal Budget:  The following CBO graphic illustrates the bill’s impact on the Federal Budget:

 

Link to our ACA Webpage for more details.