Summary of the CBO Analysis (July 20, 2017) of the Better Care Reconciliation Act of 2017
The latest CBO analysis concludes that the most recent Senate Amendments will reduce coverage by 22 million Americans, will increase deductibles very dramatically in the individual market and the Exchanges, and will reduce the federal deficit by $420 billion over the next ten years. The key difference from earlier versions is jettisoning the cuts in taxes for high income Americans.
Medicaid spending from the federal government would be cut by $770 billion over ten years; that is about a 26% reduction. Over twenty years, the reduction is 35%. For the new program eligibles, funding would be cut by 87% from $134 billion to $17 billion. Federal match for the rest of the Medicaid program would be cut by 9%. The House Budget proposal now in the works would increase the federal Medicaid cut to $1.5 trillion and add an additional $500 million in cuts to the Medicare program.
Tax credits for individual insurance in the Exchanges would be reduced by $396 billion. Tax credits for cost sharing reductions would be eliminated entirely. The “reference plan” would be reduced from 70% of actuarial value to 58% of actuarial value (in other words people covered in the Exchanges would have to pay much more out of pocket and the federal government helps a lot less). The combined impacts of these two changes, according to the CBO, mean that most participants in the Exchanges would have coverage with a $13,000 annual deductible. This is a huge and unaffordable increase in out of pocket health costs for very sick people. It also means that the new coverage is virtually worthless for low and moderate-income individuals, whom the CBO projects will simply not buy coverage since the deductibles represent such a high percent of their income.
The latest amendments jettison the tax cuts for very high income Americans (because the optics were awful); the remainder of the taxes under the ACA would be repealed. This includes the Cadillac benefits tax, the taxes on health insurers and medical device manufacturers and prescription drugs. It is likely that the tax cuts for high income Americans will resurface next as part of federal tax reform.
What does this mean in the practical world? The United States would go from 92% insured to 85% insured by 2026. All of those losing coverage would be US citizens and Legal Permanent Residents. Fifteen million poor Americans would lose Medicaid coverage; 5 million moderate and middle income Americans would lose Exchange Coverage, and 2 million working Americans would lose employment based coverage.
For individuals with an income of $26,500 (175% of the federal poverty level) annually, their out of pocket would increase, and their premiums would increase. Their coverage would drop from 87% of actuarial value (13% copays and deductibles) to 70% of actuarial value (30% copays and deductibles), and they would have to pay more for less coverage. The silver plan premiums for a 64 year old would increase from $1700 to $5,500. The premiums for a 40 year old would increase from $1700 to $2650. The premiums for a 21 year old would increase from $1700 to $1900.
For individuals with an income of $56,800 (375% of the federal poverty level) annually, premiums would increase for the older and decline for the younger. The CBO assumed their coverage is at 70% of actuarial value (30% copays and deductibles); they can buy more or less coverage. The premiums for a 64 year old would increase from $6750 to $18,250. The premiums for a 40 year old would decrease from $6500 to $5000. The premiums for a 21 year old would decrease from $5100 to $3250. The declines in premium costs for the 21 year old are due to two factors: the change in age rating from 3:1 to 5:1, and the addition of an HSA option for some individuals to pay premiums with tax protected income.
CBO calculates that premiums in the individual market would fall by 25% by 2026 after rising by 20% in the first two years of the BCRA. They project that the decline in premiums would occur because 1) older individuals are priced out of coverage and will no longer buy individual coverage, 2) people will buy less extensive coverage (reference plans are 58% of actuarial value vs. 70% of actuarial value), and 3) that states will use their new $158 billion Stability and Innovation Fund to write down and subsidize insurer losses in the individual markets, causing insurers to reduce their individual insurance premiums.
Context: It is important to understand that gutting the Affordable Care Act is just Phase 1, next comes Phase 2, a budget which proposes to decimate federal funding for programs from Medicare, Medicaid, Education and Food Stamps to Public Broadcasting and Funding for the Arts and Humanities, and then Phase 3, a huge tax break for high income individuals and corporations, will be introduced. The efforts are interlinked through the use of the Budget Reconciliation mechanism, which only requires 50 votes in the Senate plus the Vice President.
If you have not done so already, please express yourself to your Senators and Representatives and keep doing so. We have 3.5 years to go.
References: CBO Analysis of HR 1628, the Better Care Reconciliation Act of 2017 (July 20, 2017) at https://www.cbo.gov/publication/52941
House Budget Committee, 2018 Budget at https://budget.house.gov/budgets/fy18/
Prepared by: Lucien Wulsin