The Congressional Budget Office on Monday dropped its highly-anticipated analysis of the House Republicans' healthcare plan, arming all sides with results that can back up their favorite talking points on healthcare. The CBO report, on the one hand, says that millions more people will be uninsured under the law, but it also says that the bill will reduce spending and deficits, as well as (eventually) premiums.
Here are the key takeaways from the CBO:
The bill spends less, taxes less, and reduces deficits by $337 billion
The Republican healthcare plan would reduce deficits by $337 billion over the next decade (through 2026), according to the CBO. It accomplishes this by slashing spending by over $1.2 trillion, which would more than offset the $882 billion of tax cuts. Most of the spending reductions come by gradually repealing much of Obamacare's expansion of Medicaid and Obamacare's subsidies to purchase insurance. Those savings are partially offset by new spending in the form of grants to states and new tax credits to help people purchase insurance. Expect Republicans to use these budgetary findings to sway conservatives who are skeptical the law preserves too much of Obamacare. The deficit reduction also helps them get the bill passed in the Senate by a simple majority through the procedure known as reconciliation.
The bill would reduce insurance coverage by 24 million people by 2026
This is going to be the major talking point from Democrats. The CBO estimated that by 2026 under the GOP plan, 52 million would be uninsured, compared with 28 million if Obamacare stays in place. Within this estimate, the CBO gives some credence to a rhetorical point Republicans have been making: lower coverage numbers are in part because their plan does not force individuals to purchase insurance under the threat of the penalty. At least as of 2018, when the CBO says that 14 million fewer people would have insurance, it says that, "Most of that increase would stem from repealing the penalties associated with the individual mandate." Over time, however, the uninsured numbers grow, especially as the Medicaid expansion starts getting unwound in 2020. In addition to providing a potent line of attack from Democrats that the legislation would hit lower income Americans the hardest, the coverage numbers give ammo to conservatives arguing for a more aggressive market-based approach. Conservatives should argue, why not go further in repealing Obamacare and replacing it with a purer market-freindly bill, if with all of the GOP's compromising, they're still covering 24 million fewer people than Obamacare. In fact, a free market plan that offered more choices and had fewer regulations would make premiums lower (see below), and thus could potentially cover more people.
Premiums would go up at first, but go down eventually
The CBO predicted that in 2018 and 2019, premiums would spike 15 percent to 20 percent relative to Obamacare, as healthier people drop out of the insurance market due to the elimination of the individual mandate. By 2020, other aspects of the Republican plan would start to kick in and lower premiums, reducing them by 10 percent in 2026 relative to Obamacare. The big problem for Republicans is that rising premiums were a central attack on Obamacare they made for years, and President Trump highlighted premium hikes in the final weeks of the campaign. If Republicans pass this legislation and CBO is right about its effects on premiums, then going into the 2018 midterms, the GOP will be subjected to attacks assailing them for promising to lower premiums while actually raising them. Republican promises that if voters just wait a few years, premiums will go down, will likely fall on deaf ears. The finding on premiums also gives fuel to conservative critics of the GOP approach who want Republicans to strip out regulations from Obamacare more aggressively, which would no doubt lead to more substantial premium savings, and sooner. Elsewhere, the CBO report predicted that it would be harder for insurers to offer cheaper basic policies because the bill preserves Obamacare's "essential" health benefit requirements dictating the type of coverage that insurers must offer.
Costs will go down for the young, up for the old
One of the major regulatory features that the GOP bill does change is to allow insurers to charge older people five times as much for insurance that they charge younger people, a change from Obamacare, which sets the ratio at three to one. According to the CBO, this would have the effect of "substantially reducing premiums for young adults and substantially raising premiums for older people." Because Republicans tend to do better among older voters, and the midterm electorate tends to skew toward older Americans, expect Democrats to hammer on cost increases among near-retirees during the 2018 elections. On the other hand, making this regulatory change is one important step toward attracting younger people into the market, who are essentially for it to be functional over time.
Markets will be stable either way
This could be one of the more arbitrary findings of the CBO, and likely to be hotly debated. Republicans have been arguing that the individual insurance market is collapsing under Obamacare and Democrats have countered that the Republican plan would unravel the markets. CBO essentially poured cold water on both of these doomsday predictions, saying instead that markets "would probably be stable in most areas under either current law or the legislation." Under Obamacare, the CBO posits, federal subsidies increase as premiums do, meaning that many individuals will be insulated from rising premiums. Meanwhile, the Republican plan would give more funding to states to stabilize markets, and lower premiums among the young sufficiently to attract healthier individuals into the market.