The Congressional Budget Office report on the House-passed version of the American Health Care Act came out last week, and it was pretty much as expected. The headline is “the American Health Care Act would reduce federal deficits by $119 billion over the coming decade and increase the number of people who are uninsured by 23 million in 2026 relative to current law.” That includes a reduction in the amount of insured by 14 million next year alone.
While there are major reasons to doubt the assumptions behind and therefore the conclusions produced by the CBO estimate, this report assures the House-passed version of AHCA will never become law.
This is not meant as a partisan statement, derived from AHCA’s unpopularity, or due to my own analysis of how the AHCA was a poorly conceived bill passed by unpopular methods without the requisite political support. Instead, this is based on statements of Republican senators, the very people whose support should have been locked in before putting this bill to a vote.
“While I am in favor of repealing ObamaCare, I am opposed to the American Health Care Act (AHCA) in its current form,” says Sen. Dean Heller (R-Nev.) “Congress’s focus must be to lower premiums with coverage which passes the Jimmy Kimmel Test,” Louisiana Sen. Bill Cassidy said in a statement. “The AHCA does not.”
If those two Republicans won’t vote for the bill, the AHCA would need every other Republican in the Senate to vote for it. With Susan Collins (R-Maine) coming out against its earlier version, that seems highly unlikely. Even Senate Majority Leader Mitch McConnell thinks so, saying “I don’t know how we get to 50 [votes] at the moment.”
With a bill as unpopular as this one, which only passed a Republican-controlled House by the slimmest of margins, it’s hard to see senators going to bat for it. The CBO numbers only make this harder. Even taking into account the CBO’s poor track record and its inability to predict consumer behavior like insurance usage, it’s hard to spin away their analysis and rally support for the bill.
Why It’s Hard to Take CBO’s Numbers Seriously
Many questionable things stand out when looking at the report in detail. First is the topline number about insurance losses. The CBO gives much weight to the individual mandate, saying “The subsidies to purchase coverage, combined with the effects of the individual mandate, which requires most individuals to obtain insurance or pay a penalty, are anticipated to cause sufficient demand for insurance by enough people.” Evidence to this effect is spotty, considering that 8 million Americans chose not to buy insurance and pay the penalty instead.
This probably undercounts the number of Americans who chose not to buy insurance, since no one who wasn’t receiving a refund could be penalized because the Internal Revenue Service cannot add the penalty to taxes due. Nor does it account for people who chose to game the system, such as coming up with special cases or hardship exemptions.
So the importance of the mandate is likely overstated, overinflating the numbers of people who would lose insurance. Also, counted in their numbers are people who did not want insurance, but bought it to avoid paying the mandate. If you stop forcing people to buy something they do not want, and they don’t buy it, it’s very hard to say they lost it.
Also, this number inexplicably includes people who live in states where they would qualify for Medicaid under the Obamacare expansion but whose states chose not to exercise it yet might in the future, but won’t due to AHCA. Got that? Not only are people being counted as losing something they don’t currently have but they are counted as losing something they were never likely to get. It makes it hard to take the CBO’s numbers seriously when these sorts of assumptions are being baked in.
The topline number also doesn’t really make sense. According to Affordable Care Act (ACA) supporters, about 20 million people gained insurance through the ACA. However, 14 million of those gained it by getting Medicaid. Of those, about half were already eligible for Medicaid before the ACA, and largely only enrolled because of all the implementation marketing. This means that, at best, about 13 million people received new coverage due to rules and funding in the ACA. Yet somehow 14 million people, or more than actually got coverage, would lose it in the first year. It’s hard to square this math.
Let’s Do Some Better Quick Estimates
Frankly, I think these estimates are entirely too high. There is no reason the 7 million previously eligible people who gained Medicaid will lose it. Furthermore, some states will likely find some funding to keep some Medicaid expansion. So let’s say 8 million of the 14 million who got Medicaid after ACA keep it, for a 6 million person loss.
In the individual market, you will likely see a significant loss of enrollment in the subsidized population, whose Obamacare subsidy exceeds what they would receive in AHCA tax credits. You would also see a significant loss of people aged 40 and older, who will see premiums rise due to the increased amounts they can be charged compared to younger people and those whose tax credits will not make up for this. Let’s say this costs us 90 percent, or 5.4 million, of the currently self-insured market.
However, additional people may enter the market due to lower premiums and tax credits. Those people are likely to be younger, wealthier people whose insurance will be cheaper from the increased spread in community rating and will benefit from tax credits, making health insurance essentially free in after-tax dollars. Let’s say this adds 400,000 people to the insurance rolls.
This math yields 11 million people losing insurance due to AHCA. That’s won’t happen immediately, as CBO predicts, but over a course of years. While it’s possible insurers could pull out due to a death spiral, that is already happening. In fact, while provisions of the AHCA would lower the total number of insured, it could help stabilize the pool since, as explained above, older, sicker people would likely leave and likely be replaced by people who are younger, wealthier, and healthier, meaning the number of uninsured is unlikely to double in the next decade due to the AHCA, counter CBO’s estimates.
Too Many Losers, Not Enough Winners
Yet 11 million people is still a huge number. These are largely poorer and middle-class people, those more likely to need subsidized insurance as they’d be less likely to have it through work or cash pay for either policies or insurance. Their horrible anecdotes of losing coverage and care would be played over and over in countless campaign ads. This would be a political nightmare for Republicans, regardless of what steps they take to ensure those with pre-existing conditions are covered, or that some people with higher incomes are actually better off, or that we have some minimal deficit savings.
That’s why a number so large is the death knell for this bill. Produce a massive number on deficit reduction, and Republicans could at least point to cost reduction as a huge benefit. But $119 billion over 10 years, or approximately $12 billion per year, is a rounding error in a nearly $4 trillion annual budget. And it is hard to aggressively market small cost savings or new enrollment against millions newly uninsured. Meanwhile, the clear losses to those who will no longer be subsidized, lose pre-existing condition protections, lose Medicaid, and pay higher premiums due to change in community rating formulas give a significant, visible, and organized constituency to oppose this bill.
The AHCA was an improvement on ACA for those like me who would prefer to see more federalism in health care, would like to equalize taxes for those self-insuring compared to those getting insurance through their employer, want debt reduction, and want the individual mandate repealed on philosophical grounds. But the actual benefits to me aren’t that large, and there are far less winners than there are losers in this bill.
The CBO numbers show very little for conservatives to get excited about and much for liberals to hate. Even taking into account some questionable CBO methods and calculations, the losses are far too big to outweigh the benefits to the population at large, which is why the CBO report put the final nails in the AHCA’s coffin.