In early May, House Republicans rushed to pass an amended version of the American Health Care Act (HR 1628) without waiting for the Congressional Budget Office to give them an estimate of how it would affect health insurance coverage nationwide. Now, CBO has released a score that shows just how destructive this legislation will be if it becomes law: It will increase the number of uninsured by 23 million over the next decade by slashing Medicaid, allowing the destabilization of the individual markets in areas where one-sixth of the US population resides, and putting individual policies out of financial reach for all but the wealthiest of older Americans.
Slashing and squeezing Medicaid
A key thing to know about GOPcare is that they're not just unraveling the Affordable Care Act's Medicaid expansion, which allowed millions of adults to gain insurance coverage. They're also fundamentally altering the federal government's role in assuring healthcare coverage to children, pregnant women, seniors, and those living with disabilities. Under the AHCA, states would no longer receive a guaranteed federal contribution to the costs of all enrollees who meet Medicaid eligibility requirements; instead, they would receive a capped amount for enrollees in each category, and that amount would almost certainly grow more slowly than healthcare costs. States would also have the option to get block grants, which would probably be even more inadequate but would come with a small amount of additional flexibility. At the Health Affairs Blog, Sara Rosenbaum (disclosure: a colleague at the George Washington University Milken Institute School of Public Health) considers how states will respond:
The federal Medicaid statute offers states virtually no good options for absorbing federal funding losses of this magnitude, nor is it likely that such options exist. The CBO, the Medicaid and CHIP Payment and Access Commission (MACPAC), and other experts agree that Medicaid’s size is a function of enrollment, not per-beneficiary cost, except in the case of the highest-need beneficiaries. Once the realities of what is driving Medicaid costs are taken into account, it becomes clear that the AHCA is nothing more than a vehicle for clawing back nearly a trillion dollars in federal funding over the next decade for a program that, according to the CBO, already costs 50 percent less per capita than providing private health insurance for an equivalent basket of services.
Assuming that they cannot significantly increase their own expenditures above their specified state share under the federal funding formula as a condition of continued federal funding, states have two basic choices under the law. First, they might eliminate optional populations. Second, they might eliminate optional services. Of course, they might do both.
The benefits that are optional for Medicaid programs to cover include things like prescription drugs and physical therapy, which most of us consider essential.
The Medicaid provisions haven't changed substantially between the latest version of the AHCA and the one that CBO scored previously, although CBO now projects a reduction in federal Medicaid spending of $834 billion over the next decade, as opposed to $880 billion previously. In both cases, it's a major reduction in federal health spending for people who are least able to afford coverage or care on their own.
Effects on the individual market
House Speaker Paul Ryan has trumpeted the fact that the CBO anticipates lower premiums in the individual market under the AHCA -- but Vox's Sarah Kliff provides some crucial context for that: "The Republican plan achieves lower premiums by breaking the promise to protect preexisting conditions. Premiums drop because sick people who need coverage more would drop out of the marketplace. This plan does not deliver on that promise in any way, shape, or form."
GOPcare in its current form would allow states to opt out of two of the ACA's most important protections: the requirement that all insurers cover essential health benefits, like substance abuse treatment and maternity care, and the prohibition on charging enrollees higher premiums based on their health status, when enrollees fail to maintain continuous coverage. The bill would also allow insurers to increase the ratio between what they charge their oldest and youngest enrollees -- from 3:1 to 5:1 -- and give people flat subsidies to purchase insurance rather than pegging the subsidies to the costs of local marketplace plans.
Together, these provisions would make individual coverage more affordable for young, healthy people who either don't get pregnant or don't live in a state that waived the EHB requirement, and less affordable for pretty much everyone else. Everyone in states that waived EHB requirements could face higher out-of-pocket costs for services that become optional. CBO doesn't predict which specific states would adopt either or both waivers, but they consider the proportion of the population likely to be affected. Their latest estimate is that "about one-sixth of the population resides in areas in which the nongroup market would start to become unstable beginning in 2020" due to these waivers.
Vox's Ezra Klein uses the CBO numbers to give this example of how premiums could differ for individual policies sought by younger and older people with annual incomes of $26,500(emphasis added):
If that person is 21 years old, he could benefit from the Republican health care bill. Under the Affordable Care Act (also known as Obamacare), he would on average pay $1,700 in premiums for insurance. Under the Republican plan, he would pay $1,250 if he’s in a state that accepts regulatory waivers and makes moderate changes to market rules — although, again, this also means his health plan would likely be skimpier. If his state doesn’t take up a waiver, his premium would actually increase by $50 to $1,750.
But if that person is 64 years old, he would be hurt by the Republican bill. Under Obamacare, he would also pay $1,700 in premiums for insurance. But under the Republican bill, he would pay $16,100 (about 60 percent of his annual income) if he lives in a state that doesn’t accept regulatory waivers, and $13,600 — still more than half his annual income — if he lives in a state that does adopt waivers to make moderate rule changes. That amounts to as much as an 850 percent increase in premiums from Obamacare to the Republican bill.
The flat subsidies for individual policies will be especially harmful in areas where marketplace premiums are higher than average -- including many rural areas. Tara Straw of the Center on Budget and Policy Priorities notes, "Premiums tend to be higher in rural areas because their low population density often raises medical costs and they generally have a limited array of providers and little competition among insurers."
The bottom line
In exchange for 23 million fewer people with health insurance, higher out-of-pocket costs and premiums for many who do have insurance, several states with worse coverage of benefits like mental health and maternity care, and a severe contraction of the Medicaid program that's supposed to serve the neediest populations, what do we get? $765 billion in tax cuts over the next 10 years, with the vast majority of those benefits going to people earning $200,000 a year or more.