Saturday, June 10, 2017

Senate Republicans may outspend the ACA on individual market subsidies -- at Medicaid's expense

While Republican senators working on ACA repeal will doubtless screw up the individual market for health insurance, they are not planning to spend less money on it. All of their spending cuts -- needed to pay for tax cuts -- will come out of Medicaid's hide. Since the Medicaid expansion they're planning to repeal is a roaring success, they're following the House in diverting everyone's attention with emotionally fraught questions about individual market structure.

According to Vox's Dylan Scott, Senate Republicans are near agreement on the basic outline of their Medicaid cuts -- they will roll back the expansion over more or less years and impose per capita caps on all Medicaid spending, as Ryan's AHCA does. As for the individual market:
There’s broad agreement to increase the money the House bill would spend subsidizing Americans who buy insurance on the individual market. That increase would probably improve, at least somewhat, the Congressional Budget Office’s projection that the House bill would cause 23 million fewer Americans to have health insurance a decade from now.
In fact, any improvement to the AHCA individual market design and funding will improve CBO's uninsured estimate for the AHCA only marginally. In CBO's forecast, the individual market will insure only two million fewer people under the AHCA than under current law ten years from now (though enrollees will be wealthier, younger and more skimpily covered, and most of the roughly 7 million ACA enrollees with incomes under 200% FPL will likely be priced out).

Further, if Senate Republicans add significantly more money to individual market subsidies (including for reinsurance or other indirect subsidies), their bill will probably spend more to subsidize the individual market than does the ACA. By the time you add in indirect private market insurance subsidies* tacked on to the AHCA after its initial release, the price tag comes within 5% of that of ACA subsidies. Here are the ten-year price tags I toted up last week (extracted from the CBO report):

Repeal of ACA premium and Cost Sharing Reduction subsidies:  - $665 billion

AHCA premium subsidies:                                                                 $375 billion
Patient and State Stability Fund (with add-ons)                                 $117 billion
Lowering threshold for medical expense deduction to 5.8%              $126 billion
Raising HSA contribution threshold                                                    $  19 billion  
Total                                                                                                     $637 billion

Viewed from this perspective, AHCA total spending on private market subsidies is all of $28 billion below ACA spending. The Senate seems likely to erase that gap, perhaps reverse it. Medicaid, on the other hand, is cut by $834 billion over ten years in the AHCA, a 25% cut compared to spending under current law. The Senate is not likely to significantly reduce those cuts, though a slower timeline for repeal of the enhanced federal match for expansion enrollees may push them out a few years.

This whole exercise is a gigantic bait-and-switch to slice deep into entitlement spending -- and do it all in Medicaid.

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* The tax breaks go in part to people in employer-sponsored plans, and the medical expense deduction in part to the uninsured.

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