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New Alert- March 17, 2017

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Unfavorable CBO score slows momentum for ACA repeal bill

            The House Budget Committee narrowly passed the American Health Care Act (AHCA) yesterday despite increasing concerns from Republicans that the bill lacks the vote to clear either House or Senate.

             The cost estimate released earlier in the week by the Congressional Budget Office (CBO) effectively put the brakes on House efforts to repeal and replace key provisions of the Affordable Care Act (ACA), after it predicted the bill would result in dramatic coverage losses, higher out-of-pocket costs, and premium spikes for older Americans.  This only raised concerns among both conservative and more moderate Republicans that the bill would not be politically palatable without major changes.

             The non-partisan scorekeeper concluded that AHCA would eliminate coverage for about 14 million Americans in 2018 and 24 million by 2026 (including seven million enrolled in employer-based plans).  The brunt of these losses would occur among those age 50-64, the hardest group to insure in the pre-ACA individual market.  Out-of-pocket costs would also dramatically increase for this group as the AHCA would allow insurers to charge them 66 percent more than their ACA premiums while their tax credits would be cut in half.

             The CBO did project that the AHCA would eventually decrease overall premiums in the individual market by an average of ten percent (after an initial 15-20 percent spike over the next two years).  However, it attributed the decline to the age 50-64 population losing coverage and exiting the risk pool. 

             As a result, those age 50-64 who earn less than 200 percent of the federal poverty level (FPL) would be hit exceptionally hard.  For example, the CBO noted that a 64 year old with an average annual income at 175 percent of FPL (or $26,500 per year) would face a 27.5 percent premium increase by 2026.  When combined with the loss of half of their tax credits, their total costs would spike by more than 750 percent (from $1,700 in 2018 to $14,600 in 2026).  By contrast, average costs for a 40 year old at the same income level would rise by only $700 and even fall by $250 for a 21 year old.

             In addition, CBO noted that most consumers would be paying more for less, as plans would become skimpier with the ACA’s actuarial values removed.  For example, a silver-tier plan that now covers 70 percent of costs on average would like now cover only half of all costs.  Per CBO, this could result in a $2,500 increase in deductibles (the average Marketplace deductible for 2016 was $850).

             Supporters of the AHCA highlighted the CBO’s findings that the bill would dramatically reduce the federal budget deficit by $337 billion by 2026, mostly through a 25 percent reduction in federal Medicaid spending through the proposed per capita spending caps and the phase-out of Medicaid expansion funding that is expected to drop more than 14 million enrollees from Medicaid coverage.  They also stressed that CBO expected premiums among those aged 21-25 would decrease by 20-25 percent.

             However, AARP and other consumer groups referred to the bill as an “age tax” which disproportionately shifts costs to those approaching Medicare age, who nearly triple the number of young adults in the ACA Marketplaces.  Hospital groups also warned that the nearly $900 billion in Medicaid cuts calculated by CBO would dramatically increase uncompensated care costs on safety net providers.        

             The Trump Administration sought to shore up support among wavering Republicans by insisting that CBO’s estimate of coverage losses “defy logic” and would likely be proven as inaccurate as their estimate of the ACA coverage expansion (which was eight million below projections due largely to 19 states opting out of the Medicaid expansion and transitional ACA-deficient plans remaining in effect past 2014).  However, their argument was hampered somewhat by a leaked internal analysis showing that the White House expected CBO to project an even broader scope of coverage losses.

             In addition, the CBO report weakened the White House’s principal claim that repeal was immediately needed to prevent the ACA from “imploding” following a series of insurer defections and premium spikes in less competitive markets.  The CBO concluded that these were largely a one-time correction to the end of the temporary reinsurance program under the ACA and would abate in subsequent years, leading to a stable individual market under either the ACA or AHCA. 

            Despite surviving by a 19-17 vote in the Budget Committee, the AHCA faces a very uncertain fate on the House floor if not first substantially amended in the Rules Committee.  The Trump Administration has offered to speed up the bill’s phase-out of the Medicaid expansion (from 2020 to next year) in order to bring the Freedom Caucus on board.  However, that move would increase the opposition from Senate Republicans, at least seven of whom are demanding that the Medicaid expansion be retained (the loss of three Senators would block the bill).

           As a result, leading Senate Republicans like Bill Cassidy (R-LA) have acknowledged that the “awful” numbers from CBO should force lawmakers to “slow down” and “retool” the AHCA.

 RELATED LINKS

 https://www.cbo.gov/sites/default/files/115th-congress-2017-2018/costestimate/americanhealthcareact.pdf

 http://time.com/money/4700402/republican-obamacare-replacement-cbo-numbers

 http://thehill.com/policy/healthcare/323652-cbo-millions-would-lose-coverage-under-gop-healthcare-plan

 http://www.modernhealthcare.com/article/20170316/NEWS/170319929


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