The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) released today an estimate of the direct spending and revenue effects of H.R. 1628, the American Health Care Act of 2017, as passed by the House of Representatives.
According to CBO and JCT’s analysis, enacting the latest version of H.R. 1628 would reduce the cumulative federal deficit over the 2017-2026 period by $119 billion. The CBO report also estimates that, in 2018, 14 million more people would be uninsured under H.R. 1628 than under current law. The increase in the number of uninsured people relative to the number projected under current law would reach 19 million in 2020 and 23 million in 2026.
“In 2026, an estimated 51 million people under age 65 would be uninsured, compared with 28 million who would lack insurance that year under current law. Under the legislation, a few million of those people would use tax credits to purchase policies that would not cover major medical risks,” the CBO report authors wrote.
That estimate—23 million more uninsured by 2026—is actually lower than CBO’s analysis of an earlier version of the AHCA. In that analysis, which CBO released March 13, the non-partisan organization estimated that 24 million more people would be uninsured in 2026, compared with 28 million who would lack insurance that year if the Affordable Care Act (ACA) stayed in place.
THe CBO score of the AHCA should serve as a wake-up call for hosptial and health system leaders, according to Chas Roades, chief research officer, and Yulan Egan, senior consultant with the Washington, D.C.-based consulting firm The Advisory Board Company.
Given the projections by the CBO that the number of uninsured would increase by 23 million by 2026 and that 14 million fewer people would be insured by Medicaid by 2026, hospital and health system leaders need to assess whether they're best positioned to succeed in the next era of health care reform, Roades and Egan wrote in prepared statements about the CBO score. The CBO analysis also projects that the AHCA would reduce federal funding for Medicaid by $834 million between 2017 and 2026.
Hospitals and health systems will need to be much more proactive in developing their safety net strategy, Roades and Egan wrote. "Providers should collaboriate with state Medicaid officlas to help craft their states' responses, double-down on population health and care management efforts and invest in navigation resources to help the underinsured and uninsured navigate an increasnigly complex insurance landscape," they wrote.
Also, hospitals and health systems will need to redouble their efforts to bring their cost structures into line. "Specifically, leaders would need to improve revene cycle performance through a multi-stakeholder, multidisciplinary approach and craft a cost-reduction strategy that includes both near-term savings and higher-upside, longer-term cost restructuring," Roades and Egan wrote.
Further, they recommend that hospitals and health system leaders focus on developing a cutting-edge consumer strategy as CBO projects that out-of-pocket costs will rise under the AHCA. "To respond to the rise of health care consumerism, hospitals and health systems need a consumer strategy that delives on what patients value, which means improving access and experience, offering more affordable pricing and intuitive transparency tools, and driving patient loyalty over time," Egan and Roades wrote.
They also note that what Congress decides to do regarding the AHCA could have a dramatic effect on hospitals' finances.
According to the CBO analysis, the deficit reduction in the latest version of the bill represents a decline from previous versions. When the CBO first scored the AHCA, it said the plan would save $337 billion over 10 years. Later revisions reduced those savings to $150 billion.
The CBO report authors wrote, “In comparison with the estimates for the previous version of the act, under the House-passed act, the number of people with health insurance would, by CBO and JCT’s estimates, be slightly higher and average premiums for insurance purchased individually—that is, nongroup insurance—would be lower, in part because the insurance, on average, would pay for a smaller proportion of health care costs. In addition, the agencies expect that some people would use the tax credits authorized by the act to purchase policies that would not cover major medical risks and that are not counted as insurance in this cost estimate.”
The latest version of the bill, which included new amendments, passed the House May 4 by a narrow vote of 217-213, one vote more than the majority of 216 required for it to pass. The AHCA represents the Republicans first successful attempt to move forward on a long-held goal of repealing former President Barack Obama’s healthcare reform bill, which was passed in 2010. Twenty Republicans crossed the aisle to vote against the bill along with Democrats.
Regarding the effects on the federal budget, CBO and JCT estimate that, over the 2017-2026 period, enacting H.R. 1628 would reduce direct spending by $1,111 billion and reduce revenues by $992 billion, for a net reduction of $119 billion in the deficit over that period. The provisions dealing with health insurance coverage would reduce the deficit, on net, by $783 billion; the noncoverage provisions would increase the deficit by $664 billion, mostly by reducing revenues.
“The largest savings would come from reductions in outlays for Medicaid and from the replacement of the ACA’s subsidies for nongroup health insurance with new tax credits for nongroup health insurance,” the report authors wrote. “Those savings would be partially offset by other changes in coverage provisions—spending for a new Patient and State Stability Fund, designed to reduce premiums, and a reduction in revenues from repealing penalties on employers who do not offer insurance and on people who do not purchase insurance.”
Regarding the impact on health insurance coverage, CBO’s analysis broadly defines private health insurance coverage as consisting of a comprehensive major medical policy that, at a minimum, covers high-cost medical events and various services, including those provided by physicians and hospitals. The agencies ground their coverage estimates on that widely accepted definition, which encompasses most private health insurance plans currently offered in the group and nongroup markets.
The CBO analysis also projected premiums for single policyholders under H.R. 1628 (before any tax credits were applied) and compared those with the premiums projected under current law for policies purchased in the nongroup market. H.R. 1628, as passed by the House, would tend to increase such premiums before 2020, relative to those under current law—by an average of about 20 percent in 2018 and 5 percent in 2019, as the funding provided by the act to reduce premiums had a larger effect on pricing, according to the report.