|(Which Einstein probably never said...|
but if anyone did, he should have)
Health care is complicated enough as it is before thinking about amending, repealing and then replacing ACA with AHCA or BCRA I or II. Some clear thinking and explanation is always in order when you think or talk about health care insurance coverage in America.
Here's a piece by Joseph Antos and Jim Capretta, a health care policy analyst we have known for quite some time. This is a direct reprint of their July 24, 2017 article in the AEI blog so if you have any questions, perhaps I can refer them to the authors to answer.
Annotations are inserted in blue below:
'The Congressional Budget Office (CBO) produced cost estimates for two of the three versions of the Better Care Reconciliation Act (BCRA), sponsored by Senate Republican leaders. A comparison of the June 26 and July 20 estimates confirms that the two BCRA versions do not differ substantially from each other.
CBO has not estimated the impact of the much-discussed amendment to the BCRA sponsored by Senator Ted Cruz (R-TX), which is included in the July 13 draft. That provision would allow insurers to sell products to consumers that are out of compliance with the requirements of the Affordale Care Act (ACA), as long as they also offer at least one ACA-compliant product at each metal level.
The July 20 version of the BCRA incorporates several major policy changes from the June version, including:
- The new taxes on high-income families imposed by the Affordable Care Act (ACA) would be retained. Those taxes, the Medicare payroll tax of 0.9 percent on the wages of high earners and the 3.8 percent tax on the non-wage incomes of the same households, would have been repealed by the earlier version of the BCRA. (As a matter of tax policy, this should be repealed for the simple reason that this is the first time in American tax history that a 'payroll tax' of any kind has been assessed against 'non-wage incomes'. Payroll taxes are either taxes on payroll wages or they are not. This is a bad precedent the Obama Administration and 2009-2010 Congress tried to set)
- An additional $70 billion would be added to the State Stability and Innovation Fund.
- Funds from Health Savings Accounts (HSAs) could be used to pay the premiums of high-deductible health insurance plans purchased on the non-group market.
- A new $45 billion fund would be established to support state efforts in combating the opioid epidemic. This fund does not figure prominently in CBO’s estimates of the coverage and premium effects of the legislation. (Not sure if this is the right vehicle to deal with our opioid crisis. This appears to be adding financial incentives for senators with high opioid addictions and traffic to vote for the underlying reform bill but it appears to us that dealing with the opioid crisis in a separate bill with more discussion and input might have a higher chance of solving the problem)
CBO’s assessment of the most recent BCRA draft includes the following key findings:
- The legislation would reduce federal spending by $903 billion over ten years and reduce federal revenues by $483 billion over the same period. The net deficit reduction over the coming decade would be $420 billion. CBO estimated that the June version of the BCRA would have reduced federal revenue by $701 billion over ten years, or $218 billion more than the tax cuts in the current version of the legislation. (When we have a $20 trillion national debt that is still growing, deficit-reduction would seem to be a welcome outcome of health care reform if it can be done)
- CBO estimates that the revised BCRA would increase the number of people going without health insurance by 15 million in 2018 and 22 million in 2026. These estimates are essentially unchanged from CBO’s previous estimate. (This is mainly due to the dropping of the individual mandate. (see Avik Roy's explanation) If there is no penalty for not having health insurance, it stands to reason that more people, mainly young healthy people not covered by a large corporate or educational network, would just drop paying for coverage. They think they are 'immortal' at that age anyway..until something happens and they realize they are not)
- The largest spending reduction in the revised BCRA is in the Medicaid program. CBO estimates the bill would reduce Medicaid spending by $756 billion over ten years, of which $575 billion comes from pulling back on the enhanced federal matching rate for the ACA’s expansion of the program. (This may be one of the most under-reported stories about the ACA, which also stands to reason given the media's preoccupation with Russia and collusion, etc. The ACA paid 100% of the costs of states expanding their Medicaid population for the first 5 years of expansion and then 90% thereafter...except the Obama Administration and the Democrats in 2010 never expected that a future Republican President in concert with a Republican Congress might just bring the traditional federal-state matches back into line on the expanded population one day.
Historical federal/state matches average 63%/37%. If you live in a state with a 100% match for the expanded Medicaid population, which are not the women with dependent children or disabled already covered by Medicaid prior to 2010, you can expect to see enormous cost hikes at the state level to start paying for that 'fair share' of the 37% match by the states for this expanded population.
Or enormous tax hikes to pay for it. Or a severe reduction in funds appropriated for teacher salaries, new road construction or any other state government function.
- The proposal to impose per-person limits on future federal expenditures for the program accounts for most of the remaining savings. CBO expects Medicaid enrollment to decline by 10 million people in 2021 and 15 million in 2026.
- CBO expects that terminating the penalties associated with the individual mandate would lead to large-scale withdrawals from coverage and additional adverse selection in the individual insurance market. Those changes would not be so severe as to lead to a breakdown in the market. As with current law, the subsidies provided in the BCRA would be sufficient to ensure enough participation to keep the market stable, although at lower enrollment levels.
- The revised BCRA would increase average premiums in the individual market before 2020, and then reduce them in the ensuing years. (Gonna be a hard sell for people who have already seen a doubling or tripling of their health insurance premiums since the advent of ACA. They want to see at least a freeze of premiums starting tomorrow and then a reduction over time.
- The increase would occur primarily because of the elimination of the penalties associated with the individual mandate, which would lead some healthier insurance enrollees to exit the market. CBO expects average premiums in the individual insurance market to increase by 10 percent in 2019. Beginning in 2020, the BCRA would tie the restructured premium tax credits to plans with an actuarial of 58 percent, compared to 70 percent under current law. As a result, average premiums in 2026 would be about 25 percent below the average under current law.
- The BCRA makes income-based tax credits available to everyone with incomes up to 350 percent of the federal poverty level. Households below the poverty level would pay no more than 2 percent of their incomes in premiums to get coverage in the individual insurance market.
- However, CBO estimates that many of these low-income households would not sign up for coverage because of increased deductibles as a result of moving to a lower actuarial value for approved plans.
- In 2026, a single policyholder purchasing a benchmark plan with an actuarial value of 58 percent would face a $13,000 annual deductible. (Most deductibles hovered below $5000 before ACA) That deductible would exceed the annual income of a person at 75 percent of the federal poverty line ($11,400). For a person at 175 percent of the federal poverty line ($26,500 in 2026), the average deductible would represent about one-half of his annual income.
- CBO’s estimates of the revised BCRA make it clear that the new version of the legislation is unlikely to improve how the legislation is perceived by the public. (Maybe if the press would get off of its fixation on shiny objects such as 'The Russian Connection' and try to help explain how these health care proposals will affect every person that would help some)
- Republicans in Congress would like to roll back the penalties associated with the ACA’s individual mandate, but CBO’s methodology for assessing health reform legislation puts great weight on these penalties for inducing enrollment into coverage. The Republican effort to reduce federal spending associated with the ACA also makes it difficult to provide what many would view as reasonable health coverage for low-income households.
- Senate Republicans have been struggling to come up with a formulation that would allow them to move away from the structure of the ACA while still providing reasonable security to people who need support to get insurance. It is clear from CBO’s estimate that they have not yet succeeded — but there is still some maneuvering room, at least in fiscal terms.
- The American Health Care Act, passed by the House of Representatives on May 4, would provide $119 billion in deficit reduction over the next decade. According to congressional rules, the Senate version must provide deficit reduction at least equal to that amount. Given CBO’s latest score, Senate Republicans could spend as much as $300 billion more to create better opportunities for affordable coverage in the private market while transitioning to more prudent financing for the Medicaid program.' (Most individual purchasers of health care insurance would just settle for a freeze in their premiums and then a reduction over time)