Obamacare’s individual mandate is forcing millions of people to buy coverage they don’t want—but the GOP’s replacement plan wouldn’t give them desirable insurance options either.
That’s one potential conclusion from a report released today by the Congressional Budget Office (CBO estimating the coverage and budget effects of the American Health Care Act, the House Republican bill to repeal parts of Obamacare and replace it with a new system of subsidies through the tax code. The report contains some questionable assumptions, but overall serves as a useful guide to the failings of both Obamacare and the GOP’s replacement plan.
Under the GOP’s Obamacare repeal plan, 14 million fewer people would have health insurance coverage in 2018 than under current law, according the CBO. The biggest reason why: “Most of that increase would stem from repealing the penalties associated with the individual mandate.”
Part of what’s going on in the CBO’s scenario is that in some cases, people would forego insurance as a result of insurance premium increases due to changes in the insurance pool. The report projects that without a mandate, younger and healthier people would exit the market, and as a result, premiums would rise in the first several years after the passage of the GOP’s repeal bill before declining in the next decade as a result of a government-funded backstop. (The second stage decline presumes, of course, that the law is implemented as planned over the course of a decade. Pretty much the entirety of our experience so far with Obamacare shows how unlikely that is.)
In any case, it’s clear that the CBO is assigning an awful lot of weight to Obamacare’s individual mandate—more, it’s safe to say, than some experts who believe that the mandate is weak and that the law’s subsidies for the purchase of insurance are heavily if not chiefly responsible for Obamacare’s individual market coverage numbers.
But let’s assume for a moment that the CBO’s understand of the mandate is basically correct. If so, what that means is that millions of people don’t want health insurance enough to pay for it, and that in the absence of a tax penalty, many of them wouldn’t. As the CBO report puts it, the decline in coverage would happen in part because “some people would choose not to have insurance because they chose to be covered by insurance under current law only to avoid paying the penalties.” Emphasis on choose to. That’s another way of saying that lots of people are being forced to buy insurance they don’t want at the price at which it is offered.
Not all of the projected decline in coverage is in the individual market. Some of the losses are in the employer market as well. And, importantly, some of the projected decline over the next decade is associated with people who do not currently have coverage under Obamacare—but might get it in the future.
Remember, the projected decline is relative to what CBO expects to happen under current law, not to current enrollment. This is important to understand when looking at the CBO’s Medicaid enrollment projections.
By 2026, the report estimates that 14 million fewer people will be covered by Medicaid, the joint federal-state program for the poor and disabled that was expanded under Obamacare, than under current law. Currently, the program offers essentially unlimited funds to states on a matching basis. Starting in 2020, however, the AHCA transforms Medicaid into a per-capita block grant program.
Thanks to a 2012 Supreme Court decision, however, the Medicaid expansion is optional for states, and 31 have gone ahead with building out the program. The CBO’s estimate is based on the belief that, under current law, additional states would expand Medicaid, resulting in increased Medicaid coverage—but that under the GOP repeal plan, that won’t happen. As CBO puts it, some of the decline “would be among people who CBO projects would be made eligible as a result of state actions in the future under current law (that is, from additional states adopting the optional expansion of eligibility authorized by the ACA).”
This is not entirely implausible; after all, under the governorship of Mike Pence, Indiana, a conservative holdout, expanded Medicaid under Obamacare, with a few state-specific carve outs, while claiming to oppose the federal health care law.
Still, it means the CBO’s coverage loss estimate is based partly on what you might think of as hypothetically covered individuals—not individuals who actually covered now.
Still, it’s safe to say that under the GOP’s plan, far fewer people would be covered than on our current trajectory. About 52 million Americans would not have health insurance coverage a decade from now, versus about 28 million who would be uninsured under current law, according to the CBO.
And what if the CBO is wrong? Led by the White House, Republicans spent the weekend blasting the agency, pointing out that its estimates on Obamacare were substantially off the mark—which, as Josh Blackman notes, they very much were. The Trump administration has already dismissed the CBO report as unbelievable.
On a basic level, though, the CBO’s Obamacare estimates were directionally correct with respect to coverage. And, importantly, they were closer than most competing estimates, including those produced by the Obama administration, which estimated that individual market coverage under the law would be far higher. One of the values of the CBO is that it acts as a check on overly optimistic estimates from the White House, which has a political motivation to make rosy economic estimates. The CBO’s estimates are too often taken as facts rather than as expert-but-not-infallible projections, and this report’s estimates are almost certainly off the mark in some form or fashion—perhaps even by a lot. But they outline the type of shifts that are likely to occur under the GOP’s plan.
So whatever the actual figure, the CBO’s estimate contrasts sharply with the repeated promises from President Trump and senior administration officials that his health care plan would cover everyone. And it does not exactly provide a lot of evidence for the Republican argument that the plan will provide more choices and access for everyone. Presuming the CBO’s estimates are basically sound, access to Medicaid would be reduced, and the coverage choices available under the GOP plan would be undesirable to millions of people. And so people would choose to remain uncovered instead.
That’s an option people don’t have now—at least not without obtaining a waiver or paying a tax penalty—but it speaks to the paucity of other health coverage options that would be available under the GOP plan.
Part of the reason why is that the Republican plan would leave in place much of Obamacare’s essential policy scheme, setting up a system of tax credits for people to buy coverage, retaining slightly tweaked versions of Obamacare’s preexisting conditions regulations for insurers, and leaving the law’s insurance mandates in place (although they could, perhaps, be altered later through the regulatory process). Yes, the law would overhaul Medicaid, but not until the next decade, and there are already legitimate concerns that the timing could result into a system of delays in which the reforms never go into place. The GOP’s plan is not an exact replica of Obamacare, but it shares many of Obamacare’s assumptions about the role of government in health care. What the CBO’s report suggests is that it would bring different problems than the ones we’ve seen under Obamacare, but not necessarily better ones.