CBO’s Estimates Of The Revised Senate Health Bill

The Congressional Budget Office (CBO) produced cost estimates for two of the three versions 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on the wages of high earners and the 3.8 percent tax on the non-wage incomes of the same households, would have been repealed by the earlier version of the BCRA.
• 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 combatting the opioid epidemic. This fund does not figure prominently in CBO's estimates of the coverage and premium effects of the legislation.

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.
• 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.
• 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. 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. 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. 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. 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.

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