Yesterday, the Congressional Budget Office (CBO) released its new analysis of the American Health Care Act (AHCA), the House Republican plan to repeal and replace Obamacare. As has been widely reported, the CBO estimates that 23 million more people would be uninsured by 2026 under the bill. The distributional effects on access to health care, however, are even worse than those numbers imply.
The AHCA would not only change how many people have health insurance, it would also affect who has health insurance and at what cost. The bill would make coverage more affordable for those who are younger and healthier—and prohibitively expensive for many who are poorer, older, or have pre-existing conditions.
Subsidy levels in the AHCA are higher for the younger and wealthier than in the Affordable Care Act (ACA) and much lower for many older and lower income families. In addition, under the AHCA older individuals would return to paying five times as much as younger individuals for coverage, as they did before the ACA.
At the extreme end, a 64-year-old earning $26,500 a year would see their premium costs go up by as much as $14,400 a year for a less generous plan, while a 21-year-old earning $68,200 a year would see their costs drop by $3,350 in 2026, according to the CBO estimates. The net result is that more young and healthy people will buy coverage, while older and sicker people are priced out of the market.
In addition, the AHCA allows states to drop critical protections from higher premiums for those with pre-existing conditions. The CBO estimates that one-sixth of the population live in areas where states would waive essential health benefits and allow premiums to vary for those with pre-existing conditions. As a result, according to the CBO, “over time it would become more difficult for less healthy people (including people with pre-existing medical conditions) in those states to purchase insurance because their premiums would continue to rise rapidly.”
Prior to the ACA, insurance companies made money in the individual market and maintained stable insurance pools by insuring as many healthy people as possible and doing their best to keep those who most need care off of their plans.
The ACA changed all of this. Insurance companies could no longer discriminate in offering or pricing based on pre-existing conditions or gender. Differences in premiums by age were reduced, so older enrollees now pay three times, not five times, what younger people pay for health coverage.
The ACA market reforms could only work if a broad mix of consumers were in the insurance pool. The ACA accomplished this through a carrot and a stick approach. Income-based subsidies made the cost of coverage more affordable to low- and moderate-income families—while the individual mandate nudged healthy people into the market.
House Republicans were intent on ending the individual mandate, cutting the taxes on the wealthy that were used to finance the ACA, and significantly reducing funding for premium subsidies. That leaves a very limited range of choices to maintain a stable insurance market. Eliminating the individual mandate and cutting subsidies raises an immediate danger of sending insurance prices spiraling out of control. The bill attempts to resolve this problem by returning to the logic of the pre-ACA market, where insurance companies cover only the healthiest and avoid those more likely to need care. This is the world the House Republican bill would enshrine into public policy.
Often lost in the discussion about the seismic changes proposed for the individual insurance market is that the largest insurance losses under the AHCA would be among the lowest-income Americans: those eligible for Medicaid. CBO estimates that 14 million fewer Americans would be enrolled in Medicaid in 2026, primarily because the bill would effectively eliminate the Medicaid expansion to low-income adults that most states implemented under the ACA, and it would limit per-person federal spending on Medicaid overall. The cap would force states to make painful reductions in services and enrollment over time. This includes vital health programs for lower income parents, children, seniors, and people with disabilities. It would be extremely difficult for most of those who would lose Medicaid under the bill to purchase private insurance given the low subsidy levels and the market changes that would push out older and sicker enrollees.
These Medicaid cuts would total $834 billion over ten years, according to CBO, offsetting the estimated $664 billion in tax cuts under the bill, the largest of which would go to high-income households.
The AHCA would succeed in cutting taxes for the wealthy and making sure insurance companies can still make a profit. What it doesn’t do is provide access to health coverage to the people who need it the most.