March 14, 2017
The Congressional Budget Office’s (CBO) analysis of the Republican plan to replace ObamaCare is sending shockwaves through Washington.
Democrats have seized on the report, while Republicans have been split over whether to attack the CBO’s conclusions or focus on the more positive aspects of the analysis.
Here are five key findings from the CBO report that is shaking up the ObamaCare debate.
Millions of people would become uninsured
Much of the attention on the CBO score has centered on the projected rise in the number of people without insurance.
The CBO estimates that 24 million more people would be uninsured in 2026 under the Republican bill, known as the American Health Care Act, when compared to ObamaCare. The spike would be immediate, with 14 million additional people becoming uninsured next year.
Speaker Paul Ryan (R-Wis.) has downplayed the coverage losses, saying they reflect the repeal of ObamaCare’s mandate to either have coverage of pay a fine. Freed from the government mandate, Ryan says some people will choose to go without insurance.
The CBO does say that the repeal of the mandate is part of the reason for the coverage drop. But the report also points to cuts in Medicaid and a smaller tax credit as making insurance unaffordable for many people.
The Republicans’ bill both ends the extra federal funding for ObamaCare’s Medicaid expansion and caps overall federal spending on Medicaid. The report projects those changes alone would lead to an additional 14 million uninsured people in 2026.
The effect on premiums would be mixed
The report finds that health insurance premiums would be 10 percent lower, on average, in 2026 under the Republican bill, but that’s not the end of the story.
Premiums would initially rise by 15 percent to 20 percent in 2018 and 2019, largely due to a drop-off in the number of healthy enrollees after the mandate to get coverage is repealed.
And while younger people would see their premiums drop under the GOP plan, older people would face steep price hikes. That could be politically perilous for the law, as groups like the AARP are already hammering the legislation.
By 2026, premiums for a 21-year-old would be 20 percent to 25 percent lower, but premiums for a 64-year-old would be 20 percent to 25 percent higher.
The 10 percent reduction, overall, is also on the sticker price of the premiums, not on the share that people actually pay after receiving financial assistance from the government. That assistance drops significantly under the GOP bill, with tax credits that will be 50 percent less in 2026 than under ObamaCare.
The GOP bill would hit older people and low-income people the hardest, according to the CBO. In an extreme example, the premium for a 64-year-old making $26,500, after factoring in financial assistance, would rise from $1,700 to $14,600 under the GOP plan.
The report finds that people’s out of pocket costs, including deductibles, “would tend to be higher” under the Republican plan than under ObamaCare.
That finding is awkward for Republicans, who have for years decried the high deductibles under ObamaCare plans, arguing that it makes the coverage virtually useless.
The CBO finds that the higher deductibles under the Republican system would come in large part because the bill would loosen restrictions on insurers, allowing them to sell only cheaper, less generous plans if they wanted to, rather than a range of plans.
Another key point is that the GOP bill repeals ObamaCare’s financial assistance, known as cost-sharing reductions, that helps low-income people afford deductibles, thereby “significantly increasing out-of-pocket costs for nongroup insurance for many lower-income enrollees.”
The deficit would be reduced
The CBO found the Republicans legislation would reduce the deficit significantly, by $337 billion over 10 years.
Overall, the bill would reduce federal spending by $1.2 trillion, largely due to cuts in Medicaid and ObamaCare’s subsidies. Revenue to the government would fall by $883 billion, due to the repeal of ObamaCare taxes.
Republicans say they are repealing taxes they say hurt job growth, like the medical device tax, or raise premiums, like the health insurance tax.
Democrats point out that much of the gains from the tax cuts would go to the wealthy.
Major changes would be made to Medicaid
The bill makes major cuts to Medicaid, which Republicans are touting as reforming the entitlement program.
The GOP plan would change Medicaid’s current, open-ended commitment into a capped payment from the federal government. The cap would cut $880 billion in government spending over 10 years, a reduction of 25 percent, according to the CBO.
Those cuts would lead to 14 million fewer people getting Medicaid coverage by 2026, a 17 percent reduction, the report found.
Republicans say Medicaid spending is out of control and needs to be reformed.
The cuts to Medicaid are facing resistant from some GOP governors, however.
A spokeswoman for Massachusetts Gov. Charlie Baker (R) told The Boston Globe the governor “is concerned that the House plan would significantly reduce Medicaid funding for Massachusetts.”