March 17, 2017

Expected Effects of AHCA Raise Serious Concerns

The nonpartisan Congressional Budget Office’s (CBO) March 13 analysis of the American Health Care Act (AHCA), the House Republican plan to repeal and replace the Patient Protection and Affordable Care Act (PPACA), estimates that the legislation would produce $337 billion in savings but also lead to 24 million fewer Americans with health insurance by 2026.

CBO “scores” or estimates the net impact of proposed legislation on spending, revenue and behavior over a 10-year period for all types of bills that are likely to receive a vote in Congress. Prior to casting votes on pending bills, federal elected officials often rely on CBO’s unbiased reviews of various policy positions and their interaction with current law. The high stakes surrounding the potential impact of repealing PPACA on the deficit and insurance coverage greatly elevated the importance of this particular fiscal analysis. CBO’s assessment is expected to have a major impact on the political debate surrounding the AHCA.

Overall, the AHCA is expected to reduce net outlays by $1.22 trillion and net revenue by $883 trillion, thus producing $337 in deficit savings in the 10 years following enactment. Other key elements within the overarching analysis include CBO scoring the elimination of financial penalties for noncompliance with the individual and employer mandates at a cost of $210 billion, increasing spending in other areas while instituting new tax subsidies at a cost of $542 billion and repealing numerous PPACA tax provisions at a cost of $575 billion.

CBO also forecasts enactment of the AHCA will result in significant Medicaid funding reductions. For the first time ever, the legislation would impose a per capita cap on federal contributions to the jointly funded program administered by states that provide health care to lower income Americans. Effective in 2020, the AHCA also eliminates the increased federal contributions given to states that chose after PPACA’s enactment to provide Medicaid coverage to individuals with incomes between 138 percent and 400 percent of the federal poverty level. CBO estimates that the combination of these two provisions translates into an $880 billion reduction in federal Medicaid funding over the next 10 years.

Though conservatives will undoubtedly be pleased with the AHCA’s projected impact on the deficit and Medicaid savings, CBO also projects severe reductions in the total number of citizens who will retain insurance coverage as well as steep, short-term increases in annual premiums. More specifically, CBO claims that enactment of the AHCA would translate into 14 million fewer Americans with health insurance in 2018. The total continues to steadily increase over the next 10 years until the ranks of the uninsured swells to approximately 24 million in 2026.

Surprisingly, the analysis doesn’t estimate that only Americans within the individual market will lose health insurance under the AHCA. In fact, of the 24 million Americans expected to lose health insurance by 2026, CBO estimates that 14 million will no longer be covered by Medicaid, 7 million will be dropped from employer-based coverage and 3 million will be prevented from obtaining insurance via other avenues including the health insurance exchanges. The drop in employer-based coverage is due to the removal of the employer-mandate and new tax credits.

CBO also projects that market premiums would spike in the short term by 15 percent to 20 percent on average in 2018 and 2019, respectively, but they would then fall by 10 percent relative to current law by 2026.

Although the House Ways and Means and Energy and Commerce committees passed their respective portions of the bill last week, staunch conservatives and moderate Republicans continue to express doubts about the underlying merits of the AHCA. The hard right wing Freedom Caucus remains opposed to the legislation due to the perception that new tax credits to assist lower-income Americans purchase insurance are equivalent to another federal entitlement program. Moderate Republicans are especially alarmed at the estimates of the total number of Americans expected to lose health insurance over the next decade. Members of Congress who represent states that elected to expand Medicaid under PPACA are also startled by the steep funding reductions.

A final vote has not been scheduled in the House, and is it unclear at this time whether the legislation will pass as currently constructed.

The American College of Radiology will continue to monitor the effort to repeal and replace PPACA. Members are urged to monitor Advocacy in Action eNews for the latest developments.