Health and Human Services Secretary Tom Price claimed that under the GOP health care plan, “I firmly believe that nobody will be worse off financially.” But there are plenty of reasons to doubt that.
Price made the claim on NBC’s “Meet the Press” on March 12, saying: “I firmly believe that nobody will be worse off financially in the process that we’re going through, understanding that they’ll have choices that they can select the kind of coverage that they want for themselves and for their family, not the government forces them to buy. So there’s cost that needs to come down, and we believe we’re going to be able to do that through this system. There’s coverage that’s going to go up.”
But the nonpartisan Congressional Budget Office’s analysis of the Republican legislation shows there will be winners and losers under the plan financially — as could well be expected from any major change to the country’s health care system. It certainly happened under the Affordable Care Act. Some gained Medicaid coverage or purchased heavily subsidized insurance on exchanges set up for people who needed to buy coverage on their own. But others on that individual, or nongroup, market saw their premiums go up and didn’t qualify for financial assistance.
Why would changing the ACA — in particular the Medicaid expansion and the structure of the tax credits — not result in some coming out ahead financially and others being worse off than they were before?
When answering questions from the press on March 14, Price said CBO “looked at a portion of our plan but not the entire plan,” adding that there were regulatory changes he would make through the Department of Health and Human Services. “[W]e want to use it to make certain that patients are helped and that costs are decreased,” he said.
It’s true that CBO didn’t analyze the impact from potential regulatory changes. It is generally standard practice for CBO to analyze pieces of legislation, which is what the House GOP introduced with the American Health Care Act.
And that analysis gives some indication of who would likely be “worse off financially” under that bill.
Medicaid
The CBO report estimates that 24 million fewer Americans would be insured under the GOP bill in 2026, as compared with current law. Some, as we’ve explained, would choose not to have insurance. But others would find themselves without health care that they could have had under the ACA.
Medicaid is the source of insurance that will experience the biggest change: 14 million fewer Americans would have Medicaid coverage in 2026. Some — about 5 million — don’t have that coverage now, but CBO had expected them to gain it under current law as “additional states adopt[ed] the optional expansion of eligibility authorized by the ACA,” CBO said.
What about the rest? They include some who would have lost their Medicaid coverage under the ACA because of the GOP legislation.
Beginning in 2020, the bill phases out the Medicaid expansion, which provided enhanced federal matching funds to states to expand eligibility to all individuals under age 65 who earn up to 138 percent of the federal poverty level. That’s about $16,643 a year for an individual or $33,948 for a family of four. More than 11 million newly eligible adults had enrolled through early 2016, according to a Kaiser Family Foundation analysis of Centers for Medicare & Medicaid Services figures.
Under the Republican bill, those who sign up before 2020 can continue to be enrolled under that expansion. But if they have more than a month of a break in Medicaid coverage, they can’t re-enroll under the ACA expansion terms, unless states wanted to cover the additional cost.
CBO expects some states to drop expanded coverage in response to these changes. Right now, CBO estimates that the 31 states plus the District of Columbia that expanded Medicaid cover about half of the newly eligible population in the country. But states with expanded eligibility would only cover 30 percent of that population in 2026, CBO estimates, because some of the current expansion states “would no longer offer that coverage,” it said.
And then there’s that break-in-coverage provision. Medicaid eligibility is determined on monthly income, causing “churn” as some people move on and off coverage due to factors such as changing jobs or seasonal work. Because of this, CBO “projects that fewer than one-third of those enrolled as of December 31, 2019, would have maintained continuous eligibility two years later.”
Some may get higher-paid jobs, or even work-based insurance. But would “nobody” be “worse off financially”? Medicaid coverage is free or low-cost. That’s a tall order for the Republican plan.
Premium Tax Credits and Older Americans
Another group at risk of paying more under the GOP plan are older Americans.
As we wrote in “The Facts on the GOP Health Care Bill,” the American Health Care Act would allow a wider variation in pricing based on age. Under current law, insurers can charge older individuals no more than three times as much as younger people. Under the GOP proposal, insurers would be allowed to charge older individuals up to five times more, beginning in 2018. (States can change that 5:1 ratio, but the CBO expects that most will not. CBO also expects that the age-rating rules will not take effect until 2019, because there will not be enough time for the federal and state governments to adopt the new rules in time for insurers to set premiums for 2018.)
It is true that the GOP plan would provide older individuals with more financial help to pay for insurance than younger people. Those earning under $75,000, or $150,000 for a married couple, in modified adjusted gross income, would get a fixed premium tax credit based on age groups — starting at $2,000 a year for those under age 30, increasing in $500 increments per decade in age, up to $4,000 a year for those 60 and older.
But CBO says that the new tax credit structure, which would begin in 2020, will not be enough to offset the premium increases for older individuals.
“Under the legislation, premiums for older people could be five times larger than those for younger people in many states, but the size of the tax credits for older people would only be twice the size of the credits for younger people,” CBO says.
As a result, there would be a disproportionate increase in the number of low-income older individuals without insurance, and higher premiums for those who remain in the nongroup market, CBO says.
The GOP bill “would increase the number of uninsured broadly,” but the increase “would be disproportionately larger among older people with lower income,” the CBO report says, “in particular, people between 50 and 64 years old with income of less than 200 percent of the [federal poverty level] would make up a larger share of the uninsured.” (See Figure 2 in the CBO report.)
As for premiums, CBO said: “The change in age-rating rules, effective in 2019, would directly change the premiums faced by different age groups, substantially reducing premiums for young adults and raising premiums for older people. By 2026, CBO and JCT project, premiums in the nongroup market would be 20 percent to 25 percent lower for a 21-year-old and 8 percent to 10 percent lower for a 40-year-old — but 20 percent to 25 percent higher for a 64-year-old.”
A 64-year-old individual earning $26,500 would see an increase in the premium paid of $12,900 in 2026, from $1,700 paid under current law on the nongroup market to $14,600 paid under the GOP bill, according to the CBO. (See Table 4.) The AARP described the bill as “harmful” for older Americans.
The bill’s new tax credit structure also would no longer take into account the variation in insurance costs based on geography, affecting low-income people eligible for tax credits in high-insurance areas such as Alaska. Karina Petersen, a spokeswoman for Alaska Sen. Lisa Murkowski, said the Republican senator has “some concerns” about the House GOP bill. “The tax credits that are being proposed won’t be as helpful in a high-cost, rural state like Alaska,” Petersen told The Hill.
And then there are decisions that employers could make that the administration would have little control over without employer regulations. CBO expects the number of people with employer-based insurance to drop by 7 million, on net, partly because fewer employees would take up the offer without an individual mandate and partly because “over time, fewer employers would offer health insurance to their workers.”
As we said back in 2009, when then-President Obama was promising that you could “keep your health care plan,” it’s difficult to make such sweeping guarantees to everyone.