The Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) released a cost estimate report (CER) on Monday outlining their analyses of the effects of the proposed American Health Care Act (AHCA) should the AHCA be signed into law.
Below are five takeaways for political observers.
1. DEFICITS WILL GO DOWN
The CER estimates that enactment of the AHCA would reduce federal deficits $337 billion over nine years, across the 2017-2026 period. The CBO estimates the budget deficit will be $559 billion in fiscal year 2017.
The largest savings would come from reduced spending on Medicaid and elimination of the Affordable Care Act’s (ACA) subsidies for persons buying health insurance in the “individual market.”
The CER describes lowered taxes and tax credit for various persons as “costs” to the federal budget. As examples of such “costs,” the CER highlights the AHCA’s proposed repeal of certain ACA regulations:
The largest costs would come from repealing many of the changes the ACA made to the Internal Revenue Code—including an increase in the Hospital Insurance payroll tax rate for high-income taxpayers, a surtax on those taxpayers’ net investment income, and annual fees imposed on health insurers—and from the establishment of a new tax credit for health insurance.
2. NUMBER OF UNINSURED WILL RISE
Democrats and the broader Left will seize on the CER’s estimate of the AHCA’s enactment leading to an increase in the total number of uninsured persons.
By 2018, 14 million more people would be uninsured than under current law, according to the CER’s estimate. The CER further estimates that most of this 14 million person increase would result from persons currently purchasing health insurance in order to avoid the ACA’s penalties via the “individual mandate.” Others would neglect purchasing insurance due to higher premiums in the absence subsidies they previously had access to under the ACA.
By 2026, 52 million people would be uninsured according to the CER's estimate, compared with 28 million if the status quo of the ACA is maintained:
CBO and JCT estimate that, in 2018, 14 million more people would be uninsured under the legislation than under current law. Most of that increase would stem from repealing the penalties associated with the individual mandate. Some of those people would choose not to have insurance because they chose to be covered by insurance under current law only to avoid paying the penalties, and some people would forgo insurance in response to higher premiums. Later, following additional changes to subsidies for insurance purchased in the nongroup market and to the Medicaid program, the increase in the number of uninsured people relative to the number under current law would rise to 21 million in 2020 and then to 24 million in 2026. The reductions in insurance coverage between 2018 and 2026 would stem in large part from changes in Medicaid enrollment—because some states would discontinue their expansion of eligibility, some states that would have expanded eligibility in the future would choose not to do so, and per-enrollee spending in the program would be capped. In 2026, an estimated 52 million people would be uninsured, compared with 28 million who would lack insurance that year under current law.
Political observers should note that health insurance is not synonymous with health care. Also worth noting is the wide range of variation across health insurance options; not all health insurance plans are created equal. North Korea’s and Cuba's subjects, on paper, have guaranteed access to health care.
The Daily Wire's Ben Shapiro noted that mandating health insurance companies to provide benefits to persons with "pre-existing conditions" destroys incentives to be conscientious with health and insurance choices: "Imagine a fire insurance company that allowed you to buy insurance after your house was on fire."
Imagine a fire insurance company that allowed you to buy insurance after your house was on fire.
3. HEALTH INSURANCE COMPANIES WILL NOT SURVIVE HORDES OF ILL CLIENTS
Despite predicting that the status quo would “probably” yield stability in the health insurance market, the CER indirectly notes that health insurance companies cannot remain financially viable while being forced to hemorrhage funds caring for a slew of ill clients.
The CER uses "unstable" as a euphemism for financially unviable:
The market for [nongroup coverage] insurance purchased individually would be unstable, for example, if the people who wanted to buy coverage at any offered price would have average health care expenditures so high that offering the insurance would be unprofitable.
The CER fails to note that the above is true for all health insurance markets, group and individual alike. The CER inadvertently acknowledges that forcing health insurance companies to provide coverage for “pre-existing” conditions among prospective clients is a recipe for destroying the health insurance industry.
Rush Limbaugh and other political commentators have noted that the ACA, by design, destroys the financial viability of health insurance companies over time; eventually justifying future nationalization of the health insurance and health care industries.
4. PREMIUMS WILL RISE
The CER predicts that health insurance premiums in the “individual market” will rise before 2020, mainly due to the withdrawal of younger and healthier persons from the health insurance market in the absence of the ACA’s “individual mandate:”
The legislation would tend to increase average premiums in the nongroup market prior to 2020 and lower average premiums thereafter, relative to projections under current law. In 2018 and 2019, according to CBO and JCT’s estimates, 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.
Democrats and the broader left regularly describe the millions of persons added to health insurance rolls via the ACA as poor and indigent. The CE notes that many post-2010 enrollees of health insurance are younger and healthier persons – arguably with less need for health insurance – coerced into purchasing health insurance via the ACA’s “individual mandate.”
5. HEALTH INSURANCE MARKET PREDICTIONS ARE BEYOND COMPLICATED
The CER notes that its estimates are “uncertain.” Political observers should note the exceeding complexity of the health insurance marketplace and the extreme difficulty in assessing the behavior of millions of persons within dynamic regulatory and market landscapes.
Below is how the CER hedges its estimates:
The ways in which federal agencies, states, insurers, employers, individuals, doctors, hospitals, and other affected parties would respond to the changes made by the legislation are all difficult to predict, so the estimates in this report are uncertain. But CBO and JCT 4 have endeavored to develop estimates that are in the middle of the distribution of potential outcomes.
As Sen. Tom Cotton (R-Ark.) noted yesterday on ABC’s This Week with George Stephanopoulos, the director of the CBO is not Moses. He doesn't come down from the mountaintops with stone tablets. They're human like the rest of us. They can make mistakes. But they do provide an important amount of information and analysis that allows senators and Congressmen to make informed choices.
(Editor's note: The article has been updated with a correction for the CER [cost estimate report] acronym)
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