Spinning the CBO Report

The nonpartisan Congressional Budget Office’s analysis of the Republican health care bill has been released — so let the spinning begin.

Democrats overstate what the CBO said about the impact on those who now have health insurance, while the White House budget director oversells the impact on premiums.

24 Million More Uninsured

In a video posted to his website and Facebook on March 13, Sen. Bernie Sanders claimed that the GOP legislation would “throw 24 million Americans off of the health insurance that they currently have,” including “14 million who will lose that health insurance next year.”

Reps. Richard Neal of Massachusetts and Frank Pallone Jr. of New Jersey, ranking members of the House Ways and Means and Energy and Commerce Committees, respectively, said in a joint statement that the bill “would rip away health insurance from 24 million Americans over the next decade.”

But those claims go too far.

The analysis by the CBO and Joint Committee on Taxation did say that 24 million fewer Americans would be insured under the American Health Care Act than under current law in 2026, and that 14 million fewer would be insured next year. But not all of them would have their insurance ripped away or would be losing “insurance that they currently have.” The numbers represent a complicated mix of some losing insurance, some deciding not to have it, others gaining it and others not having insurance in the future.

Let’s go through the CBO numbers.

In 2018, “14 million more people would be uninsured under the legislation than under current law,” most of that due to the American Health Care Act’s immediate elimination of the individual mandate to have insurance or pay a tax, CBO said. CBO doesn’t give specific numbers, but says that “[s]ome of those people would choose not to have insurance because they chose to be covered by insurance under current law only to avoid paying the penalties, and some people would forgo insurance in response to higher premiums.”

Six million of that 14 million reduction comes from a decrease in those insured in the nongroup market (including the ACA marketplaces), where those who don’t have employer or government insurance buy their own coverage. Five million comes from a reduction in Medicaid coverage, and 2 million is a decline in employer-based coverage.

So some people wouldn’t be thrown off insurance, but instead they’d make the decision not to have it. Others could be affected by higher premiums brought about by the GOP plan. CBO estimates premiums in the nongroup market would go up in 2018 and 2019, due to healthy people leaving that market since they are not required to have insurance. With fewer healthy people in the nongroup market, overall costs increase.

In subsequent years, circumstances change as the GOP plan’s age-based tax credits replace the Affordable Care Act’s income-based tax credits, beginning in 2020. The CBO expects the increase in premiums to be “more than offset” in 2020 by other factors, including more young people in the nongroup insurance pool.

Older and low-income Americans on the nongroup market could see substantially higher costs in future years under the GOP plan, as insurers would be allowed to charge older people more and the age-based tax credits wouldn’t be large enough to offset those premium increases. These factors mean that the makeup of the nongroup market — who buys coverage and who doesn’t — would be “significantly” different under the GOP plan than under current law, “particularly by income and age,” CBO said. By 2026, CBO estimates that 2 million fewer would have nongroup insurance under the Republican bill.

From 2018 to 2026, the further reduction in the number of the insured, compared with current law, “would stem in large part from changes in Medicaid enrollment,” CBO said.

By 2026, Medicaid enrollment would be 14 million lower under the GOP bill than under current law, and that’s due to the Republican changes to the Medicaid expansion and funding for the state-federal program for those with low incomes. “[S]ome states would discontinue their expansion of eligibility, some states that would have expanded eligibility in the future would choose not to do so, and per-enrollee spending in the program would be capped,” CBO said.

Certainly some of those who wouldn’t have Medicaid coverage under the Republican plan — but would have had it under the Affordable Care Act — could be described as having had their insurance taken away from them. The bill phases out the Medicaid expansion under the ACA beginning in 2020. It doesn’t eliminate that expanded coverage, with enhanced federal matching funds, for those who are enrolled before that time, but if those expansion enrollees have more than a month of a break in Medicaid coverage, they can’t re-enroll under the ACA terms.

The Commonwealth Fund has written about the problem of “churning” in Medicaid, where people cycle in and out of coverage since eligibility is determined on monthly income. Seasonal work or changing jobs, for instance, can cause individuals to qualify some months but not others. The Commonwealth Fund said its survey data on gaps in coverage “indicate that millions of people with Medicaid will lose their coverage” under the GOP health care bill.

CBO agrees that this churn would occur, saying that it “projects that fewer than one-third of those enrolled as of December 31, 2019, would have maintained continuous eligibility two years later.”

Others who would not have Medicaid coverage under the GOP plan but would have it under current law are would-be future enrollees that CBO “projects would be made eligible as a result of state actions in the future under current law (that is, from additional states adopting the optional expansion of eligibility authorized by the ACA).” The CBO report (see Figure 1 on page 36) says that of the 14 million who wouldn’t have Medicaid coverage under the Republican bill in 2026, about 5 million would have been new enrollees from this future projected expansion.

And there are other complicating factors: CBO expects 7 million fewer people to have employer-provided coverage in 2026. That’s partly due to fewer employees signing up for coverage without an individual mandate enticing them to do so and partly due to fewer employers offering coverage because they no longer would face penalties for not providing it.

The continuous coverage provision of the Republican bill — which would allow insurers on the nongroup market to charge a 30 percent higher premium to those with a gap in coverage of more than 63 days — could induce about 1 million people to buy coverage in 2018 to avoid that charge in the future, CBO estimates. But in subsequent years, about 2 million fewer people would buy coverage because of this surcharge.

Here’s the CBO’s chart on the estimated changes in insurance coverage:

The CBO estimates clearly show that 24 million fewer Americans would have insurance under the GOP bill, compared with current law. But that’s a figure that involves fluctuations in coverage. Not all of them would lose insurance “that they currently have,” as Sanders said, and some would choose not to be covered.

GOP Spin on Premiums

The Democrats weren’t alone in spinning the CBO report.

Mick Mulvaney, the director of the White House Office of Management and Budget, said the CBO report confirmed the GOP philosophy that a free market would reduce premiums. “The numbers that I’ve seen in the first glance is that the CBO says that premiums will go down by at least 10 percent with this plan,” Mulvaney told reporters in a briefing shortly after CBO released its report.

Premiums, on the nongroup market, will not “go down” from what they are right now. They will just be lower than what they would be under the ACA, on average, by 2026. Also, Mulvaney ignores two other important points: Average premiums will sharply increase in the first two years, and older Americans will see substantial increases in the short- and long-run.

The CBO report says that in 2018 and 2019 “average premiums for single policyholders in the nongroup market would be 15 percent to 20 percent higher than under current law.” But, by 2026, average premiums “would be roughly 10 percent lower than the estimates under current law.”

As for older Americans, the GOP plan would allow insurers to charge them up to five times as much as younger people. Under the ACA, the ratio was 3:1. That “would directly change the premiums faced by different age groups,” CBO said.

For example, CBO said that premiums would be “20 percent to 25 percent higher for a 64-year-old” by 2026, even though average premiums would be 10 percent lower compared with current law.

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