Congressional Budget Office: Cost Estimate for American Health Care Act

The Congressional Budget Office (CBO) has published its ten-year (2017-2026) cost estimate for the American Health Care Act (ACHA), the House of Representatives Republican plan to “repeal and replace” the Affordable Care Act (ACA).  The CBO estimates that by 2026, 24 million more Americans will become uninsured under the ACHA, compared to under the current law (the ACA). The number of Americans losing health insurance under the Republican plan would be immediate: 4 million would lose their health insurance this year, and 10 million more would lose their health insurance next year.

By 2026,with the increase in those uninsured under the ACHA, a total of 52 million Americans, or 19% of the U.S. population under age 65, would be uninsured. Today, under the ACA, only 10% of the U.S. population is uninsured. And for Americans with incomes below 200% of the federal poverty level, the percentage of uninsured by 2026 would be over 30%, and close to 40% for those ages 30-49.

Moreover, in the short term, the CBO estimates that average health insurance premiums in the individual health insurance markets (including the health insurance marketplaces created under the ACA) would increase between 15 to 20 percent in 2018-2019. Premiums would especially increase for older Americans because the ACHA allows health plans to charge premiums 5 times higher for older Americans. Overall, the average premiums would then decrease beginning in 2020 as other changes made by the ACHA get implemented and those age 50-64 begin to drop out of the individual market because they are being charged five times the premiums of younger Americans. Meanwhile, the CBO also estimates that out-of-pocket expenses such as responsibility for higher deductibles and co-payments will continue to increase under the ACHA, even for those continuing to pay those higher premiums for maintaining their health insurance. This means that even for those who remain insured, their health care premiums will actually purchase less health care (since they have to pay more for the health care they actually use through these  higher deductibles and co-payments).

The CBO estimates that the federal government would cut its spending on Medicaid by $880 billion over the ten years, resulting in significant cuts to states who now use federal matching dollars to support their Medicaid programs. The CBO concludes that, after the year 2020, when the ACHA changes Medicaid funding into fixed per capita caps (based on Medicaid spending 4 years earlier, in 2016), states would see a minimum annual reduction in Medicaid funding of at least 0.7%. As a result, 14 million Americans who would have been covered by Medicaid under the ACA will lose their health insurance by 2026.

One of the only pieces of good news in the CBO estimate for the Republican sponsors of the bill is that, by repealing the provisions that resulted in increased health insurance coverage, such as premium and cost-sharing subsidies for low-income Americans and the Medicaid expansion, the ACHA is estimated to result in total net federal government savings of $337 billion over the ten years between 2017-2026. However, the way in which those savings are achieved will carry a high price for the lowest income Americans. For example, while the ACHA includes some tax credits to assist in paying for health insurance, the ACHA’s tax credits over the ten years only total $361 billion, compared to the $673 billion that would have been provided under the ACA. In an understatement, the CBO states that the ACHA tax credits “would generally be less generous for those receiving subsidies under current law.” In fact, later in the report, the CBO concludes that the average tax subsidy would be reduced by 40% compared to the ACA. In other words, $312 billion in “savings” (of the total $337 billion in net savings) comes from taking away assistance from the neediest Americans so that they can afford health insurance. As a result, 10 million Americans will lose their coverage.

Moreover, the ACHA also includes massive tax cuts that results from the repeal of $883 billion in taxes on higher income Americans and taxes on health insurance plans, pharmaceutical companies, and medical device manufacturers. $274 billion of those tax cuts only benefit the richest 2% of Americans: $157 billion from repealing the additional 3.8% net investment tax and $117 billion from repealing the 0.9% Medicare tax; both these taxes only applied to single taxpayers earning over $200,000/year, or couples earning over $250,000/year. In addition, under the ACHA, individuals with incomes ABOVE 400 percent of the federal poverty level would receive tax credits that they currently don’t get (or in almost all cases, don’t need, so it is just a tax cut for the wealthiest). All these tax cuts only benefit higher income Americans and these health care industries, not the tens of millions of Americans who will lose their health insurance under the ACHA.

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