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CBO Report: My thoughts

March 13, 2017

First, let's get this out of the way. The CBO is an excellent organization, probably one of the best things our government operates. As we discussed in Volume 6, they did an excellent job with a very tough prediction with the ACA. Sure, they had the mix off slightly, but their forecast for total coverage is spot on, and their prediction for individual market premiums has proven a bit conservative (i.e. premiums coming in lower than expected).

 

 

So, when you see the Administration proactively bashing the CBO, you know they are working the refs rather than making a serious complaint. But don't take my word for it - here is Donald Trump repeated using the CBO as a valid source of information and Trump's Office of Management and Budget bragging about good scores, and we have a tough time going 2 paragraphs without Sean Spicer contradicting himself (just one example).

 

 

If you haven't seen the CBO report on the AHA! Act, here it is. The headline is going to be on the loss of coverage: 14 million people next year, rising to 24 million people in 10 years. My estimate was 5 million initially, rising to 25 million. I knew the long-term would be a disaster, but I didn't expect it to hit so quickly. For clarity's sake, I'm going to start referring it to TrumpCare

 

Some other takeaways I have from a first read:

  • The CBO projects that most non-group markets will be stable either under Obamacare or Trumpcare. So basically they think the continuous coverage provision will operate as well as the current mandate. I disagree, but I'll admit that we don't have a lot of datapoints.

  • Based on the projection of stable markets, they project lower premiums in the long-term. Reading between the lines, this seems to be because they expect the loss in coverage to come from older (read: more expensive to insure) people, where younger people might have higher coverage. They also expect the lower premiums to come at expense of fewer benefits (i.e. not necessarily better for consumers).

  • To its benefit, Trumpcare would reduce future budget deficits by $337 billion in the 10-year window. This is a significant amount. It comes largely from $880 billion in cuts to Medicaid (the changes to the non-group market roughly net to zero).

  • They project a net increase of 1 million in the non-group market...wow...they say that increased subsidies among the younger population will more than offset the losses among older population.

  • They project that 2 million fewer people will have coverage due to continuous coverage provision replacing the mandate. They also say that this will worsen the risk pool. I don't see how this squares with the above.

  • For those who believe that high out-of-pocket costs are a problem with Obamacare - they will get higher under Trumpcare, due to the repeal of actuarial value provisions (Bronze, Silver, Gold etc)

  • Interesting to note: they specifically state that with the exchanges going away (by the choice of insurers), that shopping for health insurance will be more difficult for individuals.

  • They note the dynamic where employers will be somewhat less incentivized to offer insurance, but think the effect will be small / over a long term. But it adds up to 7 million fewer by 2026.

  • The end of the individual mandate would result in only 4 million of the incremental uninsured. This kills Ryan's take that the uninsured would be so by their own choice.

  • They project that the Stability Fund money would go almost entirely towards re-insuring - this lowering the premiums after 2020. I don't have any idea if this is right or wrong.

  • The Planned Parenthood defunding...would cut 15% of rural women from care (largely including contraception). Wow.

In short - this is about what I figured, but I expected them to talk more about the possibility of destabilizing non-group markets. The CBO believes in continuous coverage more than I do - so take that as you will.

 

Sorry to keep throwing quick takes - I promise I'll have something more substantive and less-news-y soon.

 

UPDATE: On reading some more + reading commentary, it's important to note that the long-term decrease in premiums is illusory. It is due only to the fact that the pool will be much younger and therefore much cheaper to insure. If you population-weight rather than pool-weight people, premiums will almost certainly be higher. And even if younger-person premiums go lower, they will almost certainly include higher expected out-of-pocket costs. It's not clear to me that any group's expected [Premium + Out-of-pocket costs] will be lower. Some groups (people 50+) will certainly be higher. Translation: if you never plan to be older than 50, this isn't such a bad bill.

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