On March 13, the Congressional Budget Office (CBO) released its cost estimate of the American Health Care Act proposal, which was reported in The Valued Voice last week. Similar to the role of Wisconsin’s Legislative Fiscal Bureau, the CBO is a nonpartisan entity providing budget analyses for Congress. Their latest report underscores several concerns about the proposed legislation.
CBO estimates that the bill would reduce federal deficits by $337 billion over the 2017 to 2026 time period. These reductions would largely result from reductions in federal expenditures for subsidies in the individual insurance market and in Medicaid. The CBO also estimates in 2018 an additional 14 million people nationwide will be uninsured, rising to 24 million in 2026. The increase in uninsured will also stem primarily from changes in the individual insurance (non-group) market and reductions in Medicaid.
With respect to the non-group market, the bill changes the current refundable tax credits for purchasing insurance. Instead of basing the credits on income, the new credits would be based on age and would range from $2,000 to $4,000, indexed for inflation. The bill also would change the age rating rules for the pricing of insurance. According to the CBO, the resulting premiums would differ significantly for people of different ages, so younger adults would see reductions in premiums and older people would see large premium increases.
The CBO analysis includes several examples of how these changes might impact a person’s ability to afford insurance coverage, concluding that people between ages 50-64 years old with income less than twice the poverty level would make up a larger share of the uninsured under the bill.
When applying the CBO examples to Wisconsin, WHA finds that even with lower premiums, the amount lower income young adults might have to pay for their premium could double because the tax credit would be lower. Further, although older individuals would get the highest tax credit—$4,000—that credit could fall far short of making coverage affordable. A low-income 60-year old in Wisconsin, for example, could still face premiums of $10,000 or more.
The overall impact in Wisconsin could be greater compared to other states since Wisconsin relied on affordable coverage in the insurance exchange to help reduce its uninsured rate. As a percentage of overall exchange enrollment, Wisconsin and other non-expansion states have more low income people with income below 150 percent FPL receiving coverage through the exchange compared to other expansion states. Further, the percentage of exchange enrollees who are age 55-64 is higher in Wisconsin compared to the national average.
With respect to Medicaid, the legislation would change Medicaid funding to a per capita allotment. The CBO projects that federal funding for Medicaid would be reduced by $880 billion from 2017 through 2026. Of particular concern is that CBO estimates growth in Medicaid costs for states will average 4.4 percent per year, while federal contributions will grow at just 3.7 percent, putting greater burden and risk on state budgets and on providers of care.
A continuing issue for Medicaid is how states are funded now and into the future, given that some states chose to expand their programs under the ACA’s Medicaid expansion rules and received higher federal funding for doing so. Wisconsin instead chose its own model of coverage—a "partial expansion"—adding about 130,000 childless adults to its program, without receiving enhanced federal funding. Wisconsin is one of 19 states that did not take the expansion as defined by the ACA and the previous Administration.
Under the bill expansion, states would continue to receive their enhanced federal funding through 2020. Non-expansion states, like Wisconsin, would receive a portion of a new "safety net funding pool" based on their share of the population with income below 138 percent FPL. In creating this pool, the bill seems to acknowledge the inequities between expansion and non-expansion states. However, WHA estimates that under the bill Wisconsin could be eligible for about $70 million in the new safety net funding pool. However, if Wisconsin’s partial expansion is counted on par with expansion states, Wisconsin would be getting about $250 million.
The legislation would make several other changes to the insurance markets, such as removing the individual and employer mandates for coverage. In place of the individual mandate, insurers would be required to apply a 30 percent surcharge on premiums for people who have been uninsured for more than 63 days within the past year. The other significant provision is that insurers could lower the "actuarial value" of health plans. The CBO estimates this would result in higher cost-sharing payments – copayments and deductibles.
WHA is continuing to analyze the proposal and the CBO report and will be working with our delegation over the coming weeks. On March 16, the House Budget Committee advanced the bill. The full House is expected to vote March 23.