CBO Cost Estimate for the “American Health Care Act” – Cliff’s Notes

The following is a compilation of exerpts from the CBO’s newly released cost estimate (CBO)

• between 2017-2026, reduction of federal defecit by $337 billion, reduction of outlays by $1.2 trillion
• in 2018, potentially 14 million would forgo coverage, rising to 52 million by 2026
• “average premiums for single policyholders in the nongroup market would be 15 percent to 20 percent higher than under current law, mainly because the individual mandate penalties would be eliminated, inducing fewer comparatively healthy people to sign up.”

• Although premium increases would occur, after 2020 they would likely decrease
• $935 billion estimated deficit reduction between 2017-2026
  • reduction of $880 billion of federal outlays for Medicaid
  • saving of $763 billion from eliminiation of ACA subsidies for nongroup health insurance
  • savings of $76 via tax changes to employement based coverage
  • cost of $361 billion for new 2020 tax credit
  • reduction of $210 billion in revenues from ACA penalties
  • increase of $80 billion for new Patient and State Sability Fund grant
  • net increaseof $43 billion under Medicare payment changes to hospitals
  • in 2020, legislation would reduce federal Medicaid matching rates for newly eligible adults from 90% of medical costs
  • in 2020, federal government would establish per capita-based cap on Medicaid payments
  • between 2018-2026, federal government would make a total of $100 billion in allotmnets to states that could be used for a variety of purposes
  • in 2018, legislation would expand limits on how much insurers can vary premiums based on age.  “Under current law, a 64-year-old can generally be charged premiums that cost up to three times as much as those offered to a 21-year-old. Under the legislation, that allowable difference would shift to five times as much unless a state chose otherwise.”
  • in 2020, current premium tax credits and cost-sharing subsidies would be repealed, and replaced with new refundable tax credits for insurance purcahsed in the nongroup market
  • CBO and JCT predict that shopping for a plan on basis of price will be more difficult under new legislation
  • “for many lower-income people, the new tax credits under the legislation would tend to be smaller than the premium tax credits under current law”
  • “lower-income people’s share of medical services paid in the form of deductibles and other cost sharing would increase”
  • tax credits for higher-income individuals would be larger under new legislation compared to current law
  • CBO and JCT anticipate a more stable nongroup market that is not subject to continuous rising premiums spiral
  • estimate of increase of Medicare spending by $43 billion between 2018-2026
  • by 2018, total 14 million estimated uninsured
    • 6 million fewer obtaining coverage in nongroup market
    • 5 million fewer covered under Medicaid
    • 2 million fewer with employment-based coverage
    • further Medicaid reductions would incrase this number to 16 million total uninsured by 2019
  • As people are allowed to forgo insurance under law, CBO and JCT estimate 41 million under 65 uninsured in 2018, increase to 43 million in 2019
  • by 2026, 24 million nonelderly would be without health insurance
    • 9 million fewer Medicaid enrollmentsin 2020, rising to 14 million in 2026
    • nongroup market would shrink from 9 million in 2020 to 2 million in 2026
    • 2 million fewer employment-based covered in 2020 would rise to 7 million in 2026
  • in 2020, 48 million people under 65 would be uninsured, rising to 52 million in 2026
  • in 2018, 2019 premiums would increase 15-20% compared to current law due to elimination of ACA penalties
  • “By 2026, CBO and JCT project, premiums in the nongroup market would be 20 percent to 25 percent lower for a 21-year-old and 8 percent to 10 percent lower for a 40-year-old—but 20 percent to 25 percent higher for a 64-year-old.”
  • reduction in revenues by $592 billion over 2017-2026 period due to repeal of ACA revenue related provisions
  • increase of direct spending for federal health programs by $7 billion over 2017-2026 period
    • 2019 repeal provision that established Prevention and Public Health Fund
    • increase funds available to Community Health Center Program, which offer primary and preventive care regardless of ability to pay
    • for one-year period following enactment, no federal funds for an entity that is
      • a 501(c)(3) and extempt from tax under 501(a)
      • an essential community provider primarily engaged in family planning and reproductive health services
      • an entity that provides abortion
      • an entity that has expenditures under Medicaid that exceed $350 million in fiscal year 2014
      • (This entire section was designed to go after Planned Parenthood)
    • states can elect the Community First Choice option, allowing 6% increase in federal matching for certain home and community-based services, terminating federal matching funds in 2020, decreasing federal spending by $12 billion
    • eliminate cuts for states that have not expanded Medicaid under ACA starting in 2018
    • safety net funding for states that did not expand Medicaid
    • Reduction to state Medicaid Costs
      • statest must treat certain other incomes such as lottery winnings as income for determining eligibility
      • decreasing period of Medicaid benefits retroactive coverage from three months to one month before recipient’s application
      • eliminating federal payments to states for Medicaid services for applicants who do not provide satisfactory evidence of citizenship or nationality
      • eliminating states’ option to increase amount of allowable income from $500,000 to $750,000 for individuals applying for Medicaid long-term services
  • CBO estimates an overall decrease in federal assitance with additional authorities provided to state management of Medicaid funding
  • While no federal mandates as defined by UMRA, two private sector mandates identified:
    • recapture excess advance paymentsof premium tax credits
    • repeal small business health insurance tax credit