The much-anticipated Congressional Budget Office analysis of the American Health Care Act, House Republicans’ plan to do away with the Affordable Care Act, was released Monday afternoon, and the findings were a mixed bag for the GOP. On the positive side of the ledger, the plan would save the government $337 billion over the 10-year budget window, and would not send the healthcare marketplace into a death spiral of escalating premiums.
On the downside, by the end of the 10-year window, there would be 24 million fewer Americans with health care than there would be under the current law, and many of those between 50 and 64 would be paying much, much more for it.
The CBO estimate, chock full of caveats about the difficulty of projecting the results of a complete overhaul of the health insurance system in the US, seems to settle at least one major question about the law: whether it would survive the arcane rules that govern the passage of budget reconciliation bills in the Senate. Had there been evidence that it would significantly increase the federal deficit, the bill would have been dead on arrival.
Concern about the impact of the proposal on the stability of health insurance markets should also be reduced by the report, at least somewhat. There had been concern that by sharply cutting the subsidies available to Americans for the purchase of insurance plans on the nongroup exchanges established by the ACA the law would create a severe imbalance between relatively healthy policyholders and sicker ones.
However, the CBO found that a combination of tax credits and penalties for not maintaining continuous coverage would entice enough healthy consumers to purchase insurance to keep the markets stable. Also helping would be premiums kept lower by federal grants from a Patient and State Stability Fund.
“Even though the new tax credits would be structured differently from the current subsidies and would generally be less generous for those receiving subsidies under current law, the other changes would, in the agencies’ view, lower average premiums enough to attract a sufficient number of relatively healthy people to stabilize the market,” the report found.
However, it won’t do much to settle the many other battles raging around the legislation, particularly its effect on the number of people in the country with health insurance. By 2026, under current law, the CBO projects that the number of Americans without health insurance would be 28 million. Under the ACHA, by contrast, that number would spike to 52 million.
In the first year of the ACHA, the report finds, 14 million additional Americans would be without health insurance, but the majority of those would be people who chose not to purchase a policy, running the risk of paying a penalty if they fall ill and have to sign up for a policy. However, in the out years, this changes, and the majority of people without insurance will be those who would have been eligible for it under the ACA’s Medicaid expansion, which the proposed law would eliminate.
The bill’s effect on the budget, cutting $323 billion from the deficit over 10 years, reflects the net impact of drastic cuts in both spending and revenue. Under the bill, the federal government would reduce outlays by $1.2 trillion dollars, according to the CBO estimate. The of that savings would come from slashing federal Medicaid funding and from replacing the subsidies offered by the ACA with much less generous tax credits under the ACHA.
The spending cuts are offset by some $900 billion in tax cuts, much of which will go to the wealthiest Americans and to corporations. Among the taxes eliminated are an additional payroll tax for the country’s highest earners, a surtax on wealthy investors’ net investment income, and fees on health insurance companies.
Republican promises that the bill would bring down health insurance premiums are supported by the CBO, but with some important caveats. Out of the gate, the bill would actually drive premiums in the nongroup market up by 15 to 20 percent. After three years, though, they would begin to decline, with average levels coming in below current estimate of costs under the ACA.
But it’s important to note that the CBO is talking about average premiums. The cost decreases would not be evenly distributed but would favor the young at the cost of the elderly.
“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.”
Partisan reaction to the CBO score on Capitol Hill broke down along predictable lines.
“This report confirms that the American Health Care Act will lower premiums and improve access to quality, affordable care,” House Speaker Paul Ryan said in a statement. “CBO also finds that this legislation will provide massive tax relief, dramatically reduce the deficit, and make the most fundamental entitlement reform in more than a generation.”
He added a reminder that the GOP sees the ACHA as only the first step in broader health care reform. “It’s important to note that this report does not take into consideration additional steps Congress and the Trump administration are taking that will further lower costs and increase choices.”
Kentucky Rep. John Yarmuth, the ranking Democrat on the House Budget Committee, took a different tack. “Today’s analysis from the CBO confirms that the Republicans’ repeal bill isn’t a health care bill at all. It’s an ideological document with real and incredibly damaging consequences for American families. In order to give another $600 billion in tax cuts to corporations and the wealthiest among us, Republicans are pursuing a path that will leave 14 million Americans without insurance next year, and result in 24 million more people without coverage by 2026.”