Better Care Reconciliation Act (Trumpcare #2) Congressional Budget Office Cost Estimate

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On June 26, 2017, the Congressional Budget Office (CBO) issued a “Cost Estimate” for the Better Care Reconciliation Act (BCRA) being considered by the United States Senate to change the nation’s health care delivery system: see https://www.cbo.gov/system/files/115th-congress-2017-2018/costestimate/52849-hr1628senate.pdf.

The CBO Cost Estimate conclusions for the BCRA are summarized in the categories listed next.

A. EFFECTS ON THE FEDERAL BUDGET. The net effect of the BCRA on the federal budget deficit from 2017 to 2026 would be a $321 billion decrease. Enacting the BCRA would reduce 2017-2026 direct spending by $1.022 trillion and reduce revenues by $701 billion, for a net reduction of $321 billion in the federal budget deficit over that period from the major BCRA components listed next.
(1) Spending would decrease $772 billion on Medicaid – and spending on Medicaid would decline in 2026 by 26 percent in comparison with the current Affordable Care Act (ACA) law – from (a) reducing the federal matching rate starting in 2021 for funding for adults made eligible for Medicaid by the ACA by 5 percentage points per year through 2023 and then fall to equal the rate for other enrollees in a state in later years, (b) capping the growth starting in 2020 and going through 2024 in per-enrollee payments for nondisabled children and nondisabled adults enrolled in Medicaid at no more than the medical care component of the consumer price index (CPI-M) and for most enrollees who are disabled adults or age 65 or older at no more than the CPI-M plus 1 percentage point [starting in 2025 the rate of growth in per-enrollee payments for all groups would be pegged to the consumer price index for all urban consumers (CPI-U)], (c) terminating effective 2020 the Community First Choice option under the current ACA law that allows states to receive a 6 percentage-point increase in their federal matching rate for some services provided by home and community-based attendants to certain Medicaid recipients, (d) decreasing the period for which Medicaid benefits may be covered retroactively from up to three months before a recipient’s application to the first of the month in which a recipient makes an application, and (e) preventing funds for a one-year period following enactment from being made available to Planned Parenthood Federation of America and its affiliates and clinics.
(2) Spending would decrease $423 billion by modifying in 2020 the ACA tax credits for premium assistance to purchase nongroup health insurance and eliminating in 2020 subsidies to reduce cost-sharing payments.
(3) Spending would decrease $22 billion on changes not directly related to health insurance coverage, such as eliminating funds for grants provided through the Prevention and Public Health Fund.
(4) Spending would decrease $6 billion from repealing a tax credit for certain small employers who provide health insurance to their employees.
(5) Revenues would increase $21 billion because of more taxable income from net decreases in most years in the number of people estimated to enroll in employment-based health insurance coverage.
(6) Revenues would decrease $564 billion by repealing or modifying the following tax provisions in the ACA that are not directly related to health insurance coverage: (a) Tax on Employee Health Insurance Premiums and Health Plan Benefits, (b) Tax on Over-the-Counter Medications, (c) Tax on Health Savings Accounts, (d) Limitations on Contributions to Flexible Spending Accounts, (e) Tax on Prescription Medications, (f) Medical Device Excise Tax, (g) Health Insurance Tax, (h) Elimination of Deduction for Expenses Allocable to Medicare Part D Subsidy, (i) Chronic Care Tax, (j) Medicare Tax Increase ($58.6 billion total 2022-2026) from 1.45% to 2.35% on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly, (k) Net Investment Tax ($172.2 billion total 2017-2026) of 3.8% on unearned income for individual taxpayers with a modified adjusted gross income over $200,000 ($250,000 for married couples filing jointly), (l) Tanning Tax, (m) Maximum Contribution Limit to Health Savings Accounts Increased to Amount of Deductible and Out-of-Pocket Limitation, and (n) Allow Both Spouses to Make Catch-Up Contributions to the Same Health Savings Account.
(7) Revenues would decrease $172 billion because the BCRA would, upon enactment, eliminate penalties associated with the requirements that large employers offer their employees health insurance coverage that meets specified standards (also called the employer mandate).
(8) Revenues would decrease $38 billion because, upon enactment, the BCRA would eliminate penalties associated with the requirement that most people obtain health insurance coverage that meets specified standards (also called the individual mandate).
(9) Spending would increase $107 billion for short-term assistance to address disrupted coverage and access and to provide support for states through the Long-Term State Stability and Innovation Program.
(10) Spending would increase $42 billion for the Medicare program stemming from changes in payments to hospitals that serve a disproportionate share of low income patients.

B. EFFECTS ON HEALTH INSURANCE COVERAGE. The BCRA would increase the number of people who are uninsured by 22 million in 2026 relative to the number that would be uninsured under the current ACA law. By 2026, an estimated 49 million people would be uninsured under the BCRA, compared with 27 million who would lack insurance that year under the current ACA law.
(1) In 2018, 15 million more people would be uninsured under the BCRA than under the current ACA law – primarily because the penalty for not having insurance would be eliminated.
(2) The increase in the number of uninsured people relative to the number projected under the current ACA law would reach 19 million in 2020 and 22 million in 2026.
(3) Enrollment in Medicaid would be lower throughout the coming decade, with 15 million fewer Medicaid enrollees by 2026 than projected under the current ACA law.
(4) By 2026, among people under age 65, enrollment in Medicaid would fall by about 16 percent.
(5) Because caps on federal Medicaid spending would shift a greater share of the cost of Medicaid to states over time, some states would, use work requirements – allowed under a separate provision that would take effect in fiscal year 2018 – to reduce enrollment and the associated costs.
(6) About 15 percent of low-income people residing in areas with only Planned Parenthood health care clinics and medical practitioners would lose access to family planning and reproductive health services and related medical care for a one-year period following enactment of the BCRA.
(7) The uninsured increase would be disproportionately larger among older people with lower income – particularly people between 50 and 64 years old with income of less than 200 percent of the federal poverty level.
(8) About 9 million fewer people would obtain coverage in 2020 through the nongroup market under the BCRA than under the current ACA law.

C. STABILITY OF THE HEALTH INSURANCE MARKET. Nongroup insurance markets under the BCRA would continue to be stable in most parts of the country.
(1) Although substantial uncertainty about the effects of the BCRA could lead some insurers to withdraw from or not enter the nongroup market in some states, several factors would bring about market stability in most states before 2020. Those key factors include the following: (a) subsidies to purchase insurance, which would maintain sufficient demand for insurance by people with low health care expenditures; (b) the appropriation of funds for cost-sharing subsidies, which would provide certainty about the availability of those funds; and (c) additional federal funding provided to states and insurers, which would lower premiums by reducing the costs to insurers of people with high health care expenditures.
(2) The nongroup market in most areas of the country would continue to be stable in 2020 and later years as well, including in some states that obtain waivers that would not have otherwise done so. The BCRA would make the approval process quicker, more flexible, and less stringent than under the current ACA law for state waivers to (a) change the structure of subsidies for nongroup coverage; (b) the specifications for essential health benefits, which set the minimum standards for the benefits that insurance in the nongroup and small-group markets must cover; and (c) other related provisions of law. Three requirements for waivers to be approved under the current ACA law would be eliminated – that waiver programs provide health insurance coverage to a comparable number of state residents, that they meet requirements for out-of-pocket spending, and that coverage is at least as comprehensive as the federal essential health benefits. As under the current ACA law, however, states could not use waivers to change federal regulations relating to preexisting conditions, requiring insurers to offer coverage to any applicant, requiring that premiums in the nongroup market not be based on an individual’s health (allowing them to vary only on the basis of age, smoking status, and geographic location), and continuous coverage. Also, under the BCRA as under the current ACA law, states could apply to receive funds that would have been provided to their residents in the absence of a waiver that has been granted.
(3) The BCRA would provide $15 billion per year in 2018 and 2019 and $10 billion per year in 2020 and 2021 to fund arrangements between the federal government and health insurers to address instances where coverage and access have been disrupted and to respond to urgent health care needs. Virtually all of these funds would likely be used to reduce premiums for plans offered in the nongroup market, increasing enrollment in them, primarily by people not eligible for premium tax credits.
(4) This BCRA would provide $2 billion in funding in each year from 2018 to 2022 to states that did not expand Medicaid eligibility under the ACA. Those states could use the funding, within limits, to supplement payments to providers that treat Medicaid enrollees. Such payments to providers would not be subject to the per capita caps. Any states that chose to expand Medicaid coverage as of July 1 of each year from 2017 through 2020 would lose access to the funding available under this provision in the following year and thereafter.
(5) Premium tax credits would continue to provide insulation from changes in premiums through 2021 and in later years.
(6) Enough relatively healthy people would be attracted for the market in most areas of the country to be stable. That stability in most areas would occur even though the premium tax credits would be smaller in most cases than under the current ACA law and subsidies to reduce cost sharing (the amount that consumers are required to pay out of pocket when they use health care services) would be eliminated starting in 2020.
(7) A small fraction of the population resides in areas in which, at least for some of the years after 2019, no insurers would participate in the nongroup market or insurance would be offered only with very high premiums. Some sparsely populated areas might have no nongroup insurance offered because the reductions in subsidies would lead fewer people to decide to purchase insurance – and markets with few purchasers are less profitable for insurers. Because the total subsidy per person under the BCRA would be substantially smaller than under the current ACA law, the fraction of purchasers who are subsidized would fall. Among the unsubsidized population, less healthy people are more likely to purchase insurance – and the higher costs for them would put upward pressure on premiums. As unsubsidized people became a greater fraction of the purchasers, that pressure would be greater and could result in very high premiums in some markets – mainly during the second half of the coming decade, when much less federal funding would be provided to reduce premiums.
(8) Instability in a given market would probably be resolved within a few years by states’ actions: (a) states could obtain a waiver that would allow changes to certain market regulations for the purpose of reducing premiums; (b) they could reduce premiums directly using funding obtained through the waiver process; (c) they could obtain a greater share of the funding from the State Stability and Innovation Program to directly reduce premiums; and (d) they could spend their own funds to directly lower premiums.
(9) Insurance covering certain services would become more expensive – in some cases, extremely expensive – in some areas because the scope of the essential health benefits would be narrowed through waivers affecting close to half the population. For example, if the extended health benefits were modified to drop coverage of services that have high costs and are used by few people, coverage for maternity care, mental health care, rehabilitative and habilitative treatment, and certain very expensive drugs could be at risk.
(10) In addition, all insurance in the nongroup market would become very expensive for at least a short period of time for a small fraction of the population residing in areas in which states’ implementation of waivers with major changes cause market disruption.
NOTE: Although premiums have been rising under the current ACA law, most subsidized enrollees purchasing health insurance coverage in the nongroup market are largely insulated from increases in premiums because their out-of-pocket payments for premiums are based on a percentage of their income; the government pays the difference between that percentage and the premiums for a reference plan (which is the second lowest-cost plan in their area providing specified benefits). The subsidies to purchase coverage, combined with the effects of the individual mandate (which requires most individuals to obtain insurance or pay a penalty) are anticipated to cause sufficient demand for insurance by enough people, including people with low health care expenditures, for the market to be stable in most areas. Nevertheless, a small number of people live in areas of the country that have limited participation by insurers in the nongroup market under the current ACA law. Several factors may lead insurers to withdraw from the market – including lack of profitability, substantial uncertainty about enforcement of the individual mandate, and about future payments of the cost-sharing subsidies to reduce out-of-pocket payments for people who enroll in nongroup coverage through the marketplaces established by the ACA.

D. EFFECTS ON HEALTH INSURANCE PREMIUMS AND OUT-OF-POCKET DEDUCTIBLES. The BCRA would increase the average premiums of benchmark “silver plans” (that pay about 70 percent of the total cost of covered benefits) in the nongroup market prior to 2020 and lower average premiums thereafter, relative to projections under the current ACA law.
(1) Average premiums for benchmark plans for single individuals would be about 20 percent higher in 2018 than under the current ACA law, mainly because the penalty for not having insurance would be eliminated, inducing fewer comparatively healthy people to sign up.
(2) Those premiums would be about 10 percent higher than under the current ACA law in 2019 because funding provided by the BCRA to reduce premiums would affect pricing and changes in the limits on how premiums can vary by age would result in a larger number of younger people paying lower premiums to purchase policies.
(3) In 2020, average premiums for benchmark plans for single individuals would be about 30 percent lower than under the current ACA because of the smaller share of benefits paid for by the benchmark plans and federal funds provided to directly reduce premiums.
(4) By 2026, average premiums for benchmark plans for single individuals in most of the country under this legislation would be about 20 percent lower than under the current ACA law.
(5) Under the current ACA law for a single policyholder in 2017, the average deductible (for medical and drug expenses combined) is about $6,000 for a bronze plan and $3,600 for a silver plan – the benchmark plans under this legislation would have high deductibles similar to those for the bronze plans offered under the current ACA law.
(6) Under the BCRA, starting in 2020, the premium for a silver plan would typically be a relatively high percentage of income for low-income people and the deductible would be a significantly higher percentage of income – as a result, despite being eligible for premium tax credits, few low-income people would purchase any plan.
(7) Some people enrolled in nongroup insurance would experience substantial increases in what they would spend on health care even though benchmark premiums would decline, on average, in 2020 and later years. Because nongroup insurance would pay for a smaller average share of benefits under the BCRA, most people purchasing it would have higher out-of-pocket spending on health care than under the current ACA law.
(8) Out-of-pocket spending would also be affected for close to half the population living in states modifying the essential health benefits using waivers. States would be provided funding to develop applications that would allow the states to meet fewer criteria to waive the ACA requirement establishing essential health benefits and many other requirements related to subsidies and the marketplaces. People who used services or benefits no longer included in the extended health benefits would experience substantial increases in supplemental premiums or out-of-pocket spending on health care, or would choose to forgo the services.
(9) Moreover, the ACA ban on annual and lifetime limits on covered benefits would no longer apply to health benefits not defined as essential in a state. As a result, for some benefits that might be removed from a state’s definition of extended health benefits (but not be excluded from insurance coverage altogether), some enrollees could see large increases in out-of-pocket spending because annual or lifetime limits would be allowed.
(10) In 2018, the BCRA would provide funding to health insurers to stabilize premiums and promote participation in the marketplaces.
(11) In 2019, four major coverage provisions would take effect: (a) appropriating funding for grants to states through the Long-Term State Stability and Innovation Program; (b) requiring insurers to impose a six-month waiting period before coverage starts for people who enroll in insurance in the nongroup market if they have been uninsured for more than 63 days within the past year; (c) setting a limit whereby insurers would charge older people premiums that are up to five times higher than those charged a 21-year-old in the nongroup and small group markets, unless a state sets a different limit; and (d) removing the federal cap on the share of premiums that may go to insurers’ administrative costs and profits (also known as the minimum medical loss ratio requirement) and effectively allowing each state to set its own cap.
(12) The Long-Term State Stability and Innovation Program would provide a total of $62 billion to fund grants to states for four purposes. The first, for which a minimum of $5 billion per year is allocated in 2019 through 2021, is to enter into arrangements with health insurers to reduce premiums in the nongroup market – about three-quarters of the total funding would be used for that purpose, which would increase health insurance coverage primarily for people not eligible for premium tax credits. The other three purposes are the following: to help people purchase nongroup coverage if they have or are projected to have high health care costs and do not have access to health insurance offered through an employer; to provide payments to health care providers; and to provide assistance to reduce out-of-pocket costs, such as copayments, coinsurance, and deductibles, in the nongroup market.
(13) Under the current ACA law, states that tax health care providers are required to collect those taxes at uniform rates from all providers of the same type. The federal government limits the amount of such taxes that states can collect without incurring reductions in federal Medicaid payments. Currently, that limit is set at 6 percent of a provider’s net revenues from services for patients. The legislation would lower that limit to 5.8 percent in 2021 and further lower it by 0.2 percentage points annually until the threshold reached 5.0 percent. With those lower limits, states would collect less in provider taxes, and some states would probably reduce their Medicaid spending to compensate for at least part of the lost revenues (about $5 billion over 2017-2026).
(14) The BCRA would provide a net $3 billion in Medicaid and Children’s Health Insurance Program quality performance bonus payments from 2023 through 2026 to states that spend some amount less (as specified by the U.S. Secretary of Health and Human Services) than the cap on their per capita payments and that meet peer-reviewed performance standards for health care quality.
(15) The BCRA would, beginning in fiscal year 2018, repeal the ACA provision that established the Prevention and Public Health Fund. The federal government awards grants through the fund to public and private entities to carry out prevention, wellness, and public health activities. Funding under the current ACA law is projected to be $900 million in 2018 and to rise to $2 billion in 2025 and each year thereafter.
(16) The BCRA bill would provide $2 billion in 2018 for grants to states to support treatment and recovery services for people with substance use disorders or mental health problems.
(17) The BCRA would increase by $422 million in Fiscal Year 2017 the funds available to the Community Health Center Program, which provides grants to health centers that offer primary and preventive care to patients regardless of their ability to pay.
(18) Under the current ACA law, Medicaid allotments to states for payments to hospitals that treat a disproportionate share of uninsured and Medicaid patients are to be cut each year from 2018 to 2025. The cuts are currently scheduled to be $2 billion in 2018 and to increase each year until they reach $8 billion in 2024 and 2025. The BCRA legislation would eliminate these cuts, starting in 2018, for states that did not expand Medicaid under the ACA. In addition, the U.S. Secretary of Health and Human Services would calculate each state’s ratio of its allotments for disproportionate share payments per Medicaid enrollee and increase the allotments for states that did not expand Medicaid by an amount sufficient to bring their allotments for 2020 to 2023 up to the national average per enrollee.
(19) The net premiums for older people ineligible for subsidies would be much higher under the BCRA than the current ACA law.
(20) In 2020, the tax credit for health insurance coverage purchased through the nongroup market would be changed and the current ACA subsidies to reduce cost-sharing payments would be repealed. People with income below 100 percent of the federal poverty level (FPL) who are not eligible for Medicaid would become eligible for the tax credit, and people with income between 350 percent and 400 percent of the FPL would no longer be eligible. The maximum percentage of income specified by the bill that people would pay at different ages toward the purchase of a benchmark plan would be lower for some younger people and higher for some older people. The benchmark plan used to determine the amount of the tax credit would have a lower actuarial value.

This page was last updated on 07/29/17.