CBO Health Plan Score Underscores Deep Medicaid Cuts

 The Congressional Budget Office released its score on the House GOP health plan pushed by House Speaker Paul Ryan to replace Obamacare and the verdict is more uninsured Americans and a federal spending reduction, especially on Medicaid coverage for low-income Americans.

 The Congressional Budget Office released its score on the House GOP health plan pushed by House Speaker Paul Ryan to replace Obamacare and the verdict is more uninsured Americans and a federal spending reduction, especially on Medicaid coverage for low-income Americans.

The just released Congressional Budget Office score on the House GOP plan to replace Obamacare provides a lot to chew on and even more for state lawmakers and GOP backers of the plan – to worry about.

The top line in the CBO score is that as many as 24 million Americans will lose health insurance coverage while the federal deficit declines $337 billion over the next decade. You have to read the fine print to find out what’s behind – and what’s ahead – a projected $1.2 trillion reduction in direct federal outlays combined with an $883 billion reduction in revenues.

"The largest savings would come reduction in outlays for Medicaid and from the elimination of the Affordable Care Act’s subsidies for non-group health insurance,” according to CBO, which estimates an $880 billion reduction in federal outlays for Medicaid. Another $673 billion in savings comes from elimination of ACA health insurance subsidies.

CBO says those reductions are offset by $361 billion in projected spending for health insurance tax credits, the loss of $210 billion from penalties paid by uninsured employees and employers, $80 billion for a new Patient and State Stability Fund grant program and a net increase of $43 billion under Medicare that would go to hospitals that serve a disproportionate share of low-income patients.

As many as 14 million more Americans would be uninsured as early as 2018, CBO says, then rise to 21 million in 2020 and 24 million in 2026, largely because of federal spending cuts on Medicaid.

Changes to Medicaid funding would result in 14 million fewer Americans served by the program by 2026, a reduction of 17 percent of those covered under current law, including the Obamacare expansion. CBO projects the biggest fiscal and enrollment changes will occur in 2020 when the “enhanced federal matching rate” for new enrollees terminates. Oregon was one of the states that agreed to expand its Medicaid eligibility. The House GOP plan contemplates giving states a per capita amount for Medicaid patients. By 2026, federal outlays to states for Medicaid will be slashed by 25 percent of what states would receive under current law.

Despite all the changes, CBO and the Joint Committee on Taxation predict the health insurance market will remain by and large stable. The CBO and JCT report notes:

"Under current law, most subsidized enrollees purchasing health insurance coverage in the nongroup market are largely insulated from increases in premiums because their out-of-pocket payments for premiums are based on a percentage of their income; the government pays the difference. The subsidies to purchase coverage combined with the penalties paid by uninsured people stemming from the individual mandate are anticipated to cause sufficient demand for insurance by people with low health care expenditures for the market to be stable.

"Under the legislation [House GOP plan], in the agencies’ view, key factors bringing about market stability include subsidies to purchase insurance, which would maintain sufficient demand for insurance by people with low health care expenditures, and grants to states from the Patient and State Stability Fund, which would reduce the costs to insurers of people with high health care expenditures. Even though the new tax credits would be structured differently from the current subsidies and would generally be less generous for those receiving subsidies under current law, the other changes would, in the agencies’ view, lower average premiums enough to attract a sufficient number of relatively healthy people to stabilize the market. 

CBO says individual health insurance market will see sharp premium increases until 2020, then lower average premiums than anticipated under the ACA. Premiums for this health insurance market, CBO says, could be 10 percent lower by 2026 than current law projections.

Secretary of Health and Human Services Tom Price disputed CBO’s projections for larger numbers of uninsured Americans under the House GOP health plan. “We believe our plan will cover more individuals at a lower cost and give them the choices that they want for the coverage that they want for themselves and for their family.” Ryan didn’t dispute the findings, but pointed out the CBO projection for lower individual health insurance premiums by 2026.

Democrats needled Republicans over tax cuts for wealthy Americans at the expense of Medicaid patients and the retention of a Medicare spending reduction that the GOP scorned in the ACA. Senate Minority Leader Chuck Schumer noted “The CBO score shows just how empty the President’s promises that everyone will be covered and costs will go down have been. This should be a looming stop sign for the Republicans’ repeal effort.”