Breaking down the CBO report: How AHCA could affect seniors

The Congressional Budget Office (CBO) and the Joint Committee on Taxation jointly released the eagerly awaited cost analysis on the current House-passed version of the American Health Care Act (AHCA), including how it may affect the population of adults over age 65.

Will Medicaid still be there for older adults who cannot afford private health insurance? What federal standards could be given to individual states instead? Set aside the swirl of national media coverage on the Trump Administration’s proposed revamp of the Affordable Care Act and examine the CBO’s bipartisan math on what the AHCA would mean if it became law.

Breaking it down

The CBO evaluated the current Affordable Care Act (ACA) law and the new version of AHCA (H.R. 1628) under several categories, basing its analyses on the version of the AHCA bill passed by the House of Representatives on May 7, 2017 and awaiting transferral for Senate consideration.

On federal deficit reduction:

Would the AHCA save the federal government money? Yes. The AHCA would reduce the cumulative federal deficit by $199 billion over the 2017-2026 period, the CBO noted. “The largest savings would come from reductions in outlays for Medicaid, and from the replacement of the Affordable Care Act’s subsidies for nongroup health insurance with new tax credits for nongroup health insurance,” the CBO report states.

The AHCA would terminate the federal matching funds for the state Medicaid expansion plans, instituting block grants and per-capita caps for state Medicaid funding instead. The CBO estimates this change alone could result in a deficit reduction of about $834 billion.

However, other federal budget costs would be expected to rise during 2017-2026, the report adds: “The largest increases in the deficit would come from repealing or modifying tax provisions in the ACA that are not directly related to health insurance coverage—such as repealing a surtax on net investment income, repealing annual fees imposed on health insurers, and reducing the income threshold for determining the tax deduction for medical expenses.”

On what happens to Medicaid

Under the AHCA, state Medicaid expansion plans instituted by the ACA would be phased out completely by 2020. This change alone would result in a federal cost savings of $834 billion, while shifting the burden of insurance coverage to individuals, many of whom are not able to afford insurance, or they wouldn’t be qualified Medicaid beneficiaries now.

Therefore, the CBO estimates 14 million more people could become uninsured next year. By 2026, that number is expected to rise to 23 million.

While the CBO report does not specify what would happen to those who are dual-eligibles now, it does acknowledge that, under the AHCA, states would be given broader decision-making capability for how to cover Medicaid beneficiaries under the reduced federal matching funds.

On what happens to insurance coverage

Will the AHCA make it easier for people to find private insurance coverage? It depends. The CBO report acknowledges that under the current ACA law, insurance companies have raised rates for some and have even pulled out of certain markets, citing a “lack of profitability and substantial uncertainty about enforcement of the individual mandate” portion of the ACA.

The AHCA could stabilize the currently skittish nongroup insurance market by 2020 or so, the CBO notes, as long as subsidies to purchase insurance would allow people with low health expenditures to drive the market. The other key item in the AHCA, the CBO notes, would be the Patient and State Stability Fund, “which would lower premiums by reducing the costs to insurers of people with high healthcare expenditures.”

When it comes to what’s provided as a health insurance benefit, providers and seniors should be aware that the AHCA has two waivers: one for states and one for insurance companies.

The states: The first waiver under the AHCA is that states will be given the power to modify the current federal definition of an “essential health benefit” in their own states, including the current list of health services and screening tests employer benefits must offer and insurers must cover in most circumstances. The change could be significant, since the current ACA law includes a ban on caps for the use of essential health benefits, making the definition of them key to ongoing cost analyses.

The insurers: The second waiver “would allow insurers to set premiums on the basis of an individual’s health status if the person had not demonstrated continuous coverage” and eliminate the “community rating” for those people, the CBO report notes. In other words, those without proof of continuous insurance could be charged far higher rates than others. In addition, the “community-rated premiums” will probably increase over time, the report adds, and “people who are less healthy (including those with newly acquired medical conditions) would ultimately be unable to purchase comprehensive nongroup insurance comparable to those under current law—if they could purchase it at all, despite the additional funding that would be available under H.R. 1628 to help reduce premiums.”

In addition, the CBO report adds, the rules governing how much an insurer can charge an older person versus a younger person, which would go into effect in 2019, “would directly alter the premiums faced by different age groups, substantially reducing premiums for young adults and raising premiums for older people.”

On what regional changes might occur

About half the U.S. population lives in states that probably wouldn’t use the waivers because it doesn’t gain them anything in the market, the CBO projects. But in states that choose to narrow the scope of essential health benefits, residents would see increased out-of-pocket costs, especially since the services expected to be first on the states’ cut-list are mental health and substance abuse support, the report notes.

Even the CBO can’t predict every possible impact of the proposed AHCA. For example, any changes to the essential health benefits would create a completely different set of medical underwriting procedures for insurers, the report notes.

As of today, the AHCA is awaiting either revisions by its House sponsors or transferral to the Senate for consideration.

Want to read it all for yourself? Read the original CBO report here.

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