Congressional Budget Office (CBO) Report on the BCRA – Executive Summary (as of July 20th)

 

I. Introduction
II. Effect on Federal Budget
III. Effect on Health Insurance Coverage

A. Individual (Non-Group) Market
B. Employer-Based Plans

IV. Medicaid
V. Effect on Stability of Health Insurance Market
VI. Effect on Insurance Premiums
VII. Effect of Age Rating Rules and Other Age-Related Changes
VIII. Other Budgetary Effects

A. Effect of Defunding Planned Parenthood
B. Disproportionate Share Hospital Payments


I. Introduction

The Congressional Budget Office (“CBO”) released its report on the Better Care Reconciliation Act (“BCRA”) as amended by the Senate on June 20, 2017.

According to the analysis, the BCRA is projected to reduce the cumulative federal deficit by $321 billion between 2017 and 2026.  The CBO also projects that the bill would increase the number of uninsured Americans, and that, by 2018, 15 million more individuals would be uninsured than would be under current law.  By 2020, that difference would reach 19 million more people, and in 2026, 21 million more people would be left uninsured compared to current law.

However, with criticism mounting against the bill, Republican leaders released a new version of the BCRA on July 20th that incorporated the July 13th Amendment without the Cruz Amendment.  Minutes later, the CBO released a scoring of this bill.

According to the updated CBO report, by 2018, 15 million more people would be uninsured than would be under current law.  That number would increase to 19 million in 2020, and finally to 22 million in 2026.  The CBO projects that the BCRA would decrease the federal deficit by $473 billion from 2017 to 2026.

Any changes in the CBO’s assessment that are related to the July 20th version of the BCRA will be specified below.  You can view the CBO’s full report on the July 20th version of the BCRA here.  You can view the CBO’s original report on the June 20th version of the BCRA here.

You can read our standalone summary of the July 13th Amendment here.
To read our summary of the BCRA with the amendments, you can go here.


II. Effect on the Federal Budget

The CBO estimates that the BCRA would reduce the federal deficit by $321 billion between 2017-2026.  The change would result from a more than $1 trillion decrease in direct spending offset by a $701 billion reduction in revenues.  The CBO’s key findings regarding the increase in savings are as follows:

– The largest savings would come from a 26% cut to Medicaid funding in 2026, which would result in $772 billion in savings.
– Changes to the ACA’s individual insurance plans’ subsidies would result in savings of $424 billion.
– The remainder of the savings would result from net decreases in the number of people to enroll in employment-based health insurance, which would shift the mix of taxable and non-taxable compensation ($21 billion), and from repealing a tax credit for small employers who provide health insurance to employees ($6 billion).

The CBO also projects the following in decreased revenues:

– Savings would be offset primarily from repealing or modifying tax provisions in the ACA that are not directly related to health insurance coverage, such as the $500,000 limit on business expense deductibility for compensation to insurance executives.  The changes would increase the deficit by approximately $541 billion from 2017-2026.
– The BCRA would reduce revenues by $210 billion by eliminating the individual mandate and the mandate that employers provide insurance for their employees.  (Note: This CBO does not reflect the Senate’s June 26 change to the BCRA’s individual mandate which would implement a penalty).
– The federal government would increase its spending by $107 billion through the State Stability and Innovation Program.
– The Medicare program would receive an additional $42 billion because of changes to disproportionate share hospital payments.

The July 20th Version of the BCRA

The CBO estimates that the BCRA would reduce federal deficits by $420 billion from 2017-2026.  The BCRA would result in a $903 billion decrease in direct spending offset by a $483 billion decrease in revenues.  The CBO’s key findings regarding the increase in savings are as follows:

– Medicaid would lose $756 billion over the next ten years as a result of the BCRA.  By 2026, Medicaid spending on the expansion population would be reduced by 87% (from $134 billion down to $17 billion).
– Projections of greater savings (as compared to the original bill) are a result of the BCRA’s retainment of certain ACA taxes that would increase the federal revenue.
– Provisions dealing with coverage would reduce deficits by $784 billion and non-coverage provisions would raise deficits by $364 billion.

 

 


III. Effect on Health Insurance Coverage

The CBO estimates that the BCRA would substantially increase the number of uninsured Americans.  The chart below illustrates the CBO’s findings.

 

Year Number of Uninsured under the BCRA
2018 15 million more uninsured than under the ACA

(Total: 41 million uninsured v. 26 million uninsured under the ACA)

Estimate includes (all figures as compared to the ACA for that year):
4 million fewer insured by Medicaid
7 million fewer insured on individual market
4 million fewer insured by employer

2020 19 million more uninsured than under the ACA

(Total: 46 million uninsured v. approx. 27 million uninsured under the ACA)

Estimate includes (all figures as compared to the ACA for that year):
8 million fewer insured by Medicaid
9 million fewer insured on individual market
1 million fewer insured by employer

2026 22 million more uninsured than under the ACA

(Total: 49 million uninsured v. approx. 27 million uninsured under the ACA)

Estimate includes (all figures as compared to the ACA for that year):
15 million fewer insured by Medicaid
7 million fewer insured on individual market
Between 0 and 500,000 fewer insured by employer

Update with the July 20th Version of the BCRA:
15 million fewer insured by Medicaid
5 million fewer insured on individual market
2 million fewer insured by employer

 

The uninsurance rate would rise primarily because of the cuts to Medicaid and the lower subsidies for the individual market.  Employers would insure fewer people because of the repeal of the employer mandate.  The CBO projects that the increase in uninsured would fall disproportionately among older adults age 50-64 with income below 200% of FPL.


A. Individual (Non-Group) Market

In 2018, fewer people on the individual market would have coverage under the BCRA.  That reduction primarily stems from repealing the individual mandate penalty.

By 2020, more people enrolled in individual plans would purchase plans that pay for a smaller average share of costs because of the increasing cost of premiums.  Because higher out-of-pocket plans would become more popular and would likely dominate the market, the CBO projects that few low-income people would purchase any plan.


B. Employer-Based Plans

The CBO expects that 4 million fewer people would receive employer-based insurance under the BCRA.  Under the ACA, some employers must offer health insurance to their employees or face a penalty.  The BCRA would eliminate this penalty, and thus, the CBO projects that many employers would stop offering insurance.  Additionally, because of the individual mandate, many employees want coverage to avoid paying the penalty.  Because of elimination of the individual mandate penalty, the CBO expects demand for employer-based insurance to decline.  This would cause some employers to not offer health insurance plans and some employees to not enroll in coverage they are offered.


IV. Medicaid

The CBO projects that because of the BCRA’s limitations on the expansion and Medicaid funding, no additional states will expand their Medicaid programs.  Furthermore, because of the decreased matching rates for Medicaid, states would likely have to reduce the expanded eligibility for its residents, thus decreasing the insured rate.  By 2026, enrollment in the Medicaid program would fall by about 16%.  The agencies further expect that after 2026, enrollment in Medicaid would continue to decline relative to the rates under current law.


V. Effect on Stability of the Health Insurance Market

The CBO reports that the health insurance individual market, in many places, would remain relatively stable under either the BCRA or the ACA, as shown below..

 

Stabilizes the Market Destabilizes the Market
ACA Out-of-pocket payments are based on percentage of income and thus insulate subsidized enrollees from experiencing premium increases; the federal government covers the difference
Subsidies PLUS penalties under the individual mandate keep sufficient demand for insurance to keep the market stable
In some areas, market may become unstable because of uncertainty surrounding cost-sharing subsidies to insurers and lack of insurer participation in the market
BCRA Sufficient demand for insurance by people with anticipated lower health costs; funds for cost-sharing subsidies would provide certainty about those funds; additional federal funding to reduce costs to insurers
Substantial federal funding to directly reduce premiums would help stabilize the market through 2021 and future.
Uncertainty about the law could lead some insurers to withdraw from the market;
After 2019, some individuals would live in areas with no insurers on the individual market or very high premiums in this market
Because the BCRA would narrow the scope of EHBs by waiver in some areas, the cost of covering certain services could become extremely expensive.

VI. Effect on Insurance Premiums

The CBO estimates that under the BCRA insurance premiums would increase substantially starting in 2018 but would then decrease in 2020.  In 2018, repeal of the individual mandate would cause fewer healthy people to enroll in the marketplace, thereby causing a spike in premiums.  Average premiums for a benchmark plan (70% AV) under the BCRA would be 20% higher than under current law in 2018.  In 2019 that figure would increase and premiums would be about 10% higher than under the current law.

In 2020, however, premiums for the benchmark plan would be about 30% lower than under the ACA in large part because the plans would no longer offer the same comprehensive benefits as they would under the ACA.  The BCRA would switch the benchmark plan to only require an AV rating of 58% and, as a result, these plans would have much higher deductibles.  Premiums for these plans would be lower because they would offer less coverage.  The CBO anticipates that lower-income individuals would no longer be able to afford plans with higher AV ratings because the premiums would be too high.  At the same time, these individuals likely would not purchase plans with a low AV because they would end up with high out-of-pocket costs.  Thus, the CBO projects many lower-income individuals would go without insurance.

The CBO estimates, however, that starting in 2020, costs for healthcare in the individual market would substantially increase even though benchmark premiums would decline.  In states that elected for EHB waivers, people would have higher out-of-pocket costs for healthcare no longer considered an EHB, or alternatively, would forgo that service.  In addition, because bans on lifetime and annual limits would not apply to any benefit that was not an EHB, some individuals would see substantial increases because lifetime or annual limits would apply.

In 2026, premiums would be 20% lower compared to under current law.

 

The July 20th Version of the BCRA:

Under the BCRA, premiums for bronze plans (the new benchmark plan) on the individual market would be 25% lower compared to under current law in 2026.  These lower premiums are a result of increased funding for the State Stability and Innovation Program.  As a result, more people would purchase insurance through the individual marketplaces and fewer would receive coverage through their employer.

 


VII. Effect of Age Rating Rules and Other Age-Related Changes

Beginning in 2019, the BCRA would increase the age rating from 3:1 to 5:1, meaning insurers can charge older adults five times what they charge younger adults. The CBO expects most states to accept that change.  This would reduce premiums for younger people and increase premiums for older people, resulting in an overall slight increase in insurance coverage.  The CBO expects that those in the individual market who are eligible for subsidies would largely not be affected by the changes in premiums because of the available tax credits.  However, older people ineligible for subsidies would have much higher premiums under the BCRA than the ACA.


VIII. Other Budgetary Effects

A. Effect of Defunding Planned Parenthood

The BCRA eliminates all federal funding for Planned Parenthood.  Between 2017-2026, this would result in reduced direct spending of $225 million.  The CBO anticipates that defunding Planned Parenthood would detrimentally affect women without access to other health services, and would especially affect low-income populations.  Without access to reproductive services (including contraceptive services), more women would give birth and a large number of these children would utilize Medicaid.  Thus, the CBO anticipates that as a result of defunding Planned Parenthood, Medicaid spending would increase by $79 million between 2017-2026.


B. Disproportionate Share Hospital Payments

The ACA made substantial cuts and will continue to make cuts to disproportionate share hospital payments because of the anticipated gains in insurance coverage through the Medicaid expansion and the individual mandate.  The increase in uninsured patients under the BCRA would necessitate substantially higher lump-sum DSH payments to these hospitals.  The ACA cuts $2 billion for these payments in 2018 and this amount would gradually increase each year until reaching $8 billion in 2024 and 2025.

The BCRA would eliminate those cuts in 2018 for non-expansion states.  In addition, the Department of Health and Human Services would calculate each state’s ratio of its allotments for disproportionate share payments per Medicaid enrollee.  Allotments for states that did not expand Medicaid would increase by an amount sufficient to bring their 2020 to 2023 payments up to the national average per enrollee.  This would result in $19 billion in increased spending over the next 10 years.