Breaking Down the CBO Estimates for Trumpcare

In early March, Republicans in Congress released their plan to replace the Affordable Care Act, finally taking steps to fulfill a key campaign promise. The new healthcare plan is a response to constituents who have seen skyrocketing premiums and loss of coverage since the ACA was legislated in 2010. Officially called the American Health Care Act and unofficially branded “Trumpcare,” the latest Republican bill has been met with significant resistance, not only from Democrats but some Republicans as well. On March 13, the Congressional Budget Office, a non-partisan federal agency that provides budget and economic information to Congress, released its estimates for Trumpcare, and the estimates are highly unfavorable in many areas.

Fewer People Insured

One of the most critical aspects of the CBO report on Trumpcare is that millions would lose healthcare coverage under the GOP plan. The estimate was that 14 million people would lose health insurance by 2018 and 24 million more would no longer be covered by 2026. The total number of people who would lose health insurance by 2026 would be 52 million compared to only 28 million who would be uninsured under the ACA. One reason the CBO estimates such a high number of people losing coverage is the repeal of the individual mandate, which requires Americans to obtain health insurance or face an income tax penalty. Healthcare analysts suspect that if the mandate is eliminated, healthy people will simply drop their health insurance in order to avoid paying premiums.

Medicaid Expansion

Although the mandate is one factor that the CBO took into consideration when determining loss of coverage, there are other factors in play. The majority of those who will lose coverage are Medicaid recipients who will no longer qualify after the new law discontinues Medicaid expansion. Currently, 31 states and the District of Columbia have accepted the federal government’s offer of expansion in their Medicaid program. Under expansion, anyone who is at 138 percent of the federal poverty level, around $16,000 per year for individuals, is eligible for Medicare.

Republicans have consistently opposed expansion of the program, claiming that it encourages able-bodied people to receive subsidized insurance and in turn, leading to rampant abuse and fraud. If expansion is repealed, states will likely end their expanded Medicaid programs because they won’t have federal funding to support them, thereby pushing people from the Medicaid system.

The GOP plan does allow anyone who has already enrolled in Medicaid under expansion to remain on the program even after the AHCA is implemented as long as there is no lapse in eligibility. No new enrollments in an expanded program will be permitted after 2020, and per-enrollee spending for the expansion program will be capped.

Temporary Increase in Premiums

The CBO report also indicates that premiums could rise in 2018 and 2019 as healthy people leave the market when there is no longer a mandate. Because there would be fewer healthy people paying premiums, overall costs would increase, leading to premium cost hikes. However, the CBO report also says that premiums could decrease starting in 2020 as age-based tax credits replace income-based tax credits, which would encourage more young people to purchase health insurance.

Unfortunately, older and low-income Americans could pay higher premiums in future years because insurers would be permitted to charge older people a higher premium, and the age-based tax credits will not be large enough to offset those higher costs.

Loss of Employer-Provided Coverage

Loss of coverage under the AHCA compared to the ACA goes beyond individuals who purchase insurance through the marketplace or who are eligible for Medicaid. The CBO report indicates that the number of people with job-based coverage would drop by about 7 million people. In other words, people who might have had coverage through work will either choose not to because there’s no mandate, or their employer would choose not to offer it, again because there’s no mandate.

Under the ACA, employers with more than 50 full-time employees are required to provide health insurance to their employees. Without the mandate, the CBO predicts that many employers will stop offering health insurance since they will no longer face a penalty for refusing. Republicans counter this argument by claiming that people may drop from employer-based insurance in order to take advantage of better premiums that will be available in the individual market, and that healthy people will not drop insurance because the tax credits will make coverage more affordable.

Premium Changes for Older and Younger People

According to the CBO, older people may see their premiums rise considerably while younger people may see theirs drop. Under Obamacare, a 64-year old would pay around $1,700 annually for health insurance with an income of $26,500. Under the Republican bill, that person’s premium could be as high as $14,600 annually. However, a 21-year old making the same annual salary would pay a premium of $1,700 under the ACA, but only $1,450 under Trumpcare. Insurance companies support lower premiums for younger people. Some insurers, including Aetna and UnitedHealthcare, pulled out of the insurance exchanges because older, sicker individuals were signing up without enough young, healthy individuals to offset higher costs. It can be argued, however, that a 64-year old who has to pay over half of his income for coverage will simply not purchase health insurance.

Lower Deficit Spending

One area where the CBO says that the AHCA will benefit consumers is in federal spending. The Republican plan will reduce government spending by $1.2 trillion over the next 10 years. Some of the savings are reduced by the repeal of taxes that were implemented by the ACA, lowering the amount saved by $900 billion. However, between 2017 and 2026, it’s estimated that as much as $337 billion could be cut from the federal budget, representing almost one percent of all federal spending.

Republicans say that the CBO projections are wrong, citing other instances when the office incorrectly predicted how legislation would affect the American people. However, many analysts agree with the findings of the report, claiming that the AHCA would harm far more people than it would benefit and that the plan needs serious overhaul before it is implemented. The bill faces an uphill battle in the Senate as Senate Republicans are also not comfortable with many facets of the proposal or its implications.