The Centers for Medicare and Medicaid Services has estimated that the House-passed American Health Care Act (AHCA) would reduce insurance coverage by 13 million people by 2026—10 million less than the Congressional Budget Office’s (CBO’s) prediction.
The actuary estimated that average net premiums paid by consumers in the individual insurance market in 2026 would be about five percent higher than under current law, and that average cost-sharing amounts would be about 61 percent higher. These approximations represent a marked difference from the CBO’s estimates.
The CMS report estimated the AHCA would reduce federal Medicaid spending by $383.2 billion from 2017 through 2026. The cost reductions would come mainly from repealing the Affordable Care Act’s (ACA’s) Medicaid expansion to low-income adults. That is far less than the $834 billion in Medicaid cuts projected by the CBO.
Which organization’s estimate (the CMS or the CBO) will be the closest to the correct number when the analysis period is completed? It is hard to tell. Neither organization’s analysis on other projections has proven to be infallible. In fact, both organizations’ estimates have historically been incorrect. Performing forward flow financial analysis estimates is extremely difficult, even with granular data. Market dynamics and changing conditions can have a material impact on the assumptions made in all projections making accurate budgetary estimates for legislations virtually impossible.
What is the CBO?
The CBO, established in 1974 is a nonpartisan government agency that reports economic and budgetary data to Congress. The CBO was formed and signed into law by President Richard M. Nixon. The goal of the CBO is to provide timely, accurate reports delivered in a nonpartisan and objective manner about proposed legislation and current law that concerns federal programs funded by U.S. taxpayers. They also guide the Joint Committee on Taxation and the Department of Treasury regarding the fiscal considerations of legislation, as well as the national debt.
The CBO employs more than 230 professionals and maintains a departmental budget of approximately $47 million. All positions within CBO, including the directorship, are hired without regard to an individual’s political affiliation, and all employees are expected to remain expressly nonpartisan.
The CBO director is a joint appointment from the Speaker of the House of Representatives and the President Pro Tempore of the Senate. The director is appointed to a four-year term.
CBO’s Projections for the AHCA
The CBO reported on the cost and coverage impact of the House Republicans’ bill to repeal and replace the ACA. The following are 15 key projections compared to the current law:
- Reduce the cumulative deficit by $119 billion by 2026; the prior version of the AHCA would have cut the deficit by $150 billion.
- Increase the number of uninsured by 14 million in 2018, growing to 23 million by 2026; the previous bill would have raised the number of uninsured by 24 million in 2026.
- Result in a total of 51 million uninsured in 2026, compared with 28 million under current law.
- Significantly increase the number of uninsured among people ages 50 to 64 with income under 200 percent of poverty.
- Lower federal Medicaid spending by $834 billion over ten years.
- Reduce the number of people on Medicaid by 14 million in 2026, a 17 percent decrease.
- Save $290 billion over ten years by replacing the ACA’s premium and cost-sharing subsidies with less generous age-based premium tax credits, reducing spending from $665 billion to $375 billion.
- Increase Medicare disproportionate-share payments to hospitals by $43 billion over ten years due to a jump in uninsured patients.
- Prompt states where half the U.S. population lives to seek waivers from the ACA’s individual insurance market rules on minimum essential health benefits, use of pre-existing conditions for setting premiums and guaranteed issue.
- Reduce individual-market premiums in states that did not seek waivers by about four percent in 2026, mainly because younger, healthier people and fewer older, sicker people would buy coverage.
- Create individual-market instability in states seeking fuller waivers where one-sixth of the U.S. population lives; premiums for people seeking to buy comprehensive plans would become unaffordable.
- Reduce individual-market premiums overall while sharply increasing premiums for older, low-income people.
- Substantially increase out-of-pocket costs for people in states that waived ACA requirements on essential health benefits, particularly for maternity, mental health and substance abuse services.
- Prompt a few million people to use premium tax credits to buy plans that don’t cover major medical costs.
- Result in four million more people in employer-based health plans by 2026, mainly because employers would see the individual market as a less desirable option for their workers.
What is the CMS Office of the Actuary?
The CMS Office of the Actuary (OACT) annually produces projections of healthcare spending for categories within the National Health Expenditure Accounts. These projections track health spending by source of funds (for example, private health insurance, Medicare, Medicaid), by type of service (hospital, physician, prescription drugs, etc.), and by the sponsor (businesses, households, governments). The latest projections begin after the latest historical year (2015) and go through 2025.
The OACT is led by Chief Actuary Paul Spitalnic. He is responsible for meeting the functional responsibilities of the OACT. Those responsibilities include:
- Conducting and directing the actuarial program for CMS and directing the development of and methodologies for macroeconomic analysis of healthcare financing issues.
- Performing actuarial, economic and demographic studies to estimate CMS program expenditures under current law and proposed modifications to current law.
- Providing program estimates for use in the President’s budget and reports required by Congress.
- Studying questions concerned with financing present and future health programs, evaluating operations of the Federal Hospital Insurance Trust Fund and Supplementary Medical Insurance Trust Fund and performing microanalyses for the purpose of assessing the impact of various healthcare financing factors upon the costs of federal programs.
- Estimating the financial effects of proposals to create national health insurance systems or other national or incremental health insurance reform.
- Developing and conducting studies to estimate and project national and area health expenditures.
- Developing, maintaining and updating provider market basket input price indexes and the Medicare Economic Index.
- Analyzing data on physicians’ costs and charges to develop payment indices and monitor the expansion of service and inflation of costs in the healthcare sector.
- Performing actuarial reviews and audits of employee benefit expenses charged to Medicare by fiscal intermediaries and carriers.
- Publishing cost projections and economic analyses, and providing actuarial, technical advice and consultation to CMS components, governmental components, Congress and outside organizations.
CMS Estimates for the AHCA
The OACT has estimated the financial and coverage effects through 2026 of selected provisions of the AHCA (H.R. 1628), which was passed by the House on May 4,2017. Here are ten key estimates listed in the OACT estimated impact report.
- CMS estimated there would be eight million fewer people covered by Medicaid in 2026 compared with current law. The CBO projected a Medicaid coverage decline of 14 million by 2026.
- The CMS actuary said the AHCA would reduce federal spending by $328 billion over ten years, mainly due to lower Medicaid expenditures. The CBO projected that the bill would reduce federal deficits by $119 billion.
- CMS estimates there will be fewer insurance coverage losses than those projected by the CBO. However, those losses could be in the millions.
- By 2026, the CBO says 43 million people would be uninsured, compared with 31 million estimated by the CMS.
- The CMS actuary predicted that 25 percent of states would seek waivers under the AHCA from Obamacare’s requirements that all insurers offer essential health benefits and not consider applicants’ pre-existing conditions in setting premiums.
- The OACT said it is possible that such waivers “could result in a deteriorating or possibly failing market depending on how a state chose to implement the waiver.”
- That is consistent with the CBO’s prediction that waivers could create instability in the individual insurance market, make premiums unaffordable for people seeking to buy comprehensive health plans, and substantially hike out-of-pocket costs for people seeking maternity, mental health and substance abuse services.
- The AHCA’s per capita cap on total federal Medicaid spending would lead to a 0.5 percent cut per year in federal payments to the states, according to the actuary.
- The reduction from the per capita cap would total $64.9 billion over ten years, while the decrease from the repeal of Medicaid expansion funding would total $274.8 billion.
- Also, the AHCA would cause the Medicare Hospital Insurance Trust Fund for inpatient care to become insolvent in 2026, two years earlier than under current law. That is because the AHCA would repeal the ACA’s additional Medicare payroll tax on wealthy Americans and increase Medicare disproportionate-share payments to hospitals for serving more uninsured patients.
The House Republicans and the White House are now waiting on the Senate Republican leadership to work out their differences on the latest release of a draft of its long-awaited healthcare bill. The legislation—called the Better Care Reconciliation Act of 2017—would roll back much of the ACA, the healthcare law better known as Obamacare, including various tax provisions.
The Senate legislation contains key differences from the AHCA, the House GOP’s legislation to repeal Obamacare. The differences could be sticking points if the two chambers have to compromise on the bill, which they would have to do before it could reach President Donald Trump’s desk.
The legislation faces an uncertain future as the Senate deliberates, and the House, the President and the people, wait impatiently to view the final results of the AHCA or Better Care Reconciliation Act. Will the Senate gain enough votes to pass their legislation? Only time will tell.
Phil C. Solomon is the publisher of Revenue Cycle News, a healthcare business information blog and serves as the Vice President of Marketing Strategy for MiraMed, a healthcare revenue cycle outsourcing company. As an executive leader, he is responsible for creating and executing sales and marketing strategies which drive new business development and client engagement. Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for clinical and revenue cycle performance improvement. He has worked with industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. He can be reached at email@example.com
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