Congressional Budget Office Weighs in on the Senate Better Care Reconciliation Act of 2017

26th Jun 2017

The Congressional Budget Office and the staff of the Joint Committee on Taxation (JCT) have completed their estimate of the direct spending and revenue effects of the Better Care Reconciliation Act of 2017.  This Act is really a Senate amendment, in the nature of a substitute, to H.R. 1628.  The estimates , though slightly rosier than the House rendition, still would result in 22 million additional Americans losing health insurance, compared to the scenario under Obamacare, by 2026.  That would equate to 49 million uninsured Americans by 2026 under the Senate proposal.

Even under the Affordable Care Act (“Obama Care”) (ACA) there would remain some uninsured Americans for a number of reasons.  This number is estimated to be 28 million in 2026.

Proponents of the Bill (and their numbers are shrinking quickly) point out that enacting this legislation would reduce the cumulative federal deficit over the 2017-2026 period by $321 billion, but savings to Medicaid, post 2026, are estimated to continue to grow.  Another way of saying this is that reductions in Medicaid spending by the federal government is expected to shrink.  The alternative then would be for Texas to bring more state funding to the table or restrict services.  The $321 billion amount stated above is $202 billion more than the estimated net savings for the version of H.R. 1628 that was passed by the House of Representatives.  The savings would be coming largely from reductions experienced in the Medicaid program which would be reduced 26% by 2026 compared to current law.  The savings in Medicaid would be realized through “the reduction and termination of enhanced federal matching funds as well as a per capita based cap on Medicaid payments.“

Under this estimate, in 2018, 15 million more Americans would be uninsured compared to current law.  This is primarily due to the penalty for not having insurance would be eliminated.   This rises to 19 million in 2020 and then, as stated reaching 22 million in 2026.

The CBO estimates that the insurance market would maintain the stability experienced under the ACA although, initially,  substantial uncertainty about the effects of the new law could lead some insurers to withdraw from or not enter the nongroup market in some states.  CBO estimates that stability in the marketplace would be gained and maintained by 2020.  However, the CBO stated that “a small fraction of the population resides in areas in which— because of this legislation, at least for some of the years after 2019—no insurers would participate in the nongroup market or insurance would be offered only with very high premiums.”

The CBO estimates that under the Senate bill, average premiums for benchmark plans for single individuals would be about 20 percent higher in 2018 than under current law, mainly because the penalty for not having insurance would be eliminated, inducing fewer comparatively healthy people to sign up. Those premiums would be about 10 percent higher than under current law in 2019.  This reduction in premium growth, it is estimated, would be related to provisions in the Bill designed  to impact pricing where premiums are allowed to vary by age.  As such, CBO estimates that the lower premiums for younger individuals would encourage them to seek coverage.

Non-group insurance purchasers are likely to see higher out of pocket expenditures, according to CBO, because nongroup insurance would pay for a smaller average share of benefits under this legislation.

The Senate Bill would eliminate the ACA’s ban on annual and lifetime limits on covered benefits unless individual states define the benefits as “essential” in that state.  As a result, for some enrollees, benefits that might be removed from a state’s definition of Essential Health Benefits, but that might not be excluded from insurance coverage altogether, could see large increases in out-of-pocket spending because annual or lifetime limits would be allowed for those benefits.

In 2019 certain provisions, viewed as controversial would take effect:

  • Appropriating funding for grants to states through the Long-Term State Stability and Innovation Program.
  • Requiring insurers to impose a six-month waiting period before coverage starts for people who enroll in insurance in the nongroup market if they have been uninsured for more than 63 days within the past year.
  • Setting a limit whereby insurers would charge older people premiums that are up to five times higher than those charged younger people in the nongroup and small group markets, unless a state sets a different limit.
  • Removing the federal cap on the share of premiums that may go to insurers’ administrative costs and profits (also known as the minimum medical loss ratio requirement) and effectively allowing each state to set its own cap.

A provisions of concern, that would go into effect in 2020, is “capping the growth in per-enrollee payments for nondisabled children and nondisabled adults enrolled in Medicaid at no more than the medical care component of the consumer price index (CPI-M) and for most enrollees who are disabled adults or age 65 or older at no more than the CPI-M plus 1 percentage point, starting in 2020 and going through 2024. Starting in 2025, the rate of growth in per-enrollee payments for all groups would be pegged to the consumer price index for all urban consumers (CPI-U).”

Among the many concerns that this Bill raises to Texas Insight, one major concern is that the Bill is being proposed at a time when the Legislature has not been able to fully fund Medicaid already.  As stated previously in a white paper by Texas Insight, Medicaid, for the upcoming biennium is under-funded by $7 billion.  This assumes that to fix this problem, through a supplemental appropriation, federal funding for the program will remain the same.  Any change in Medicaid can seriously impact service levels in the out years as the state continues to rebound from its habit of under-funding Medicaid.  The federal participation to continue to back fill the hot checks written to cover Medicaid, just may not be there, requiring even more state funding or service cuts.

Numerous medical related associations have stated their opposition to the Bill but have not yet provided their detailed analysis.  This is a first view of the Senate Bill.  Texas Insight will continue to provide updates on the federal legislation as it is developed and revised.

Thomas Valentine

Texas Insight