The nonpartisan Congressional Budget Office on Wednesday released their report breaking down the costs and savings at stake in H.R. 1628, American Health Care Act of 2017. The key takeaway – over the next decade, spending would be reduced by $1.1 trillion, but the number of uninsured would rise from 28 million to 51 million. The elimination of the Obamacare taxes would reduce revenue by $992 billion, resulting in a net deficit reduction of $119 billion. This plan would shrink the size of the deficit and the scope of the government, but it would have to make some painful sacrifices to get there.
Compared to the first draft of the bill that the House presented in March, this new edition saves somewhat less money but allows for even lower premiums. The number of uninsured would be slightly higher than in the previous version.
The report drives home the proof that in Washington, you cannot have it all. President Trump promised health care for everyone with less government spending and meddling, and at a lower price, to boot. This plan only hits on two of those points, and while it does save the government money and ends up being cheaper for some policyholders, others will end up paying more. However, there is an important caveat to the idea of an “uninsured” individual in the eyes of the CBO. Policies which do not cover every major medical risk do not count as coverage in the CBO’s score. This criterion means that people who choose to purchase a plan which only covers a specific list of conditions, for instance, would be counted in the “uninsured” number.
The amount that people pay for their insurance would change dramatically under the American Health Care Act for many individuals. The core changes which drive the shifts in paid premiums are the fact that the premium assistance would change from a subsidy that scaled with both age and income, to a tax credit that scaled purely based on age. This revision would result in lower income individuals receiving a smaller subsidy, while those somewhat higher up the income ladder would see a credit for the first time.
(If your eyes glaze over after seeing too many numbers, feel free to skip to the last two sentences of this paragraph). The CBO report presents six hypothetical consumers living in 2026 for comparison. There are two groups of three, both comprised of a 21-year-old, 40-year-old, and 64-year-old. The first group is less affluent, with each individual earning $26,500 a year. The second group is more affluent, making $68,200 a year. Looking at the difference between premiums and subsidies under the current law versus the proposed law, it is clear who the winners and losers are. In the less affluent group, assuming they lived in a state which took advantage of waivers to some of the market regulations, the 21-year-old pays 26% lower premiums. The middle-aged individual has a 24% higher premium, while the oldest consumer would see a 700% increase in premium. In the wealthier group, the youngest person would see a 75% reduction from the current level, the middle individual would see their premium reduced by 68%, and the eldest one would enjoy an 11% reduction in premium. Young, middle-income people would see the greatest reduction in their premiums, while older poorer individuals would experience the highest increase. This high increase is because today, a lower income person is increasingly subsidized throughout their entire life so that they pay the same modest amount each year for health insurance.
Now that the official score is out there, expect many politicians to hold up the ugliest parts of the analysis as reasons to ditch the entire bill. Make no mistake – there are some tough decisions to be made which could hurt certain people. Whatever your thoughts about the AHCA are, it does shrink the size of government by over $2 trillion dollars over a decade and will help to balance the budget. At a minimum, whatever plan the Senate comes up with should be held to the same baseline.