CBO Report: The Fine Print of Creating 23 Million Uninsured

The Report is forty-one dense pages.


If you want to know the basics of what’s in it, there are plenty of headlines today. If you want more in depth analysis, there is also no shortage out there. As always, I’m left with the luxury of writing about only what I want to. Today, I’m going to leisure cherry-pick sections of the report I find interesting and/or underreported. Now – we know about cognitive biases here, and I don’t deny that I’m more likely to choose the sections that re-affirm my priors, proving that I was right all along. I don’t claim to be impartial about a bill that I think is utter garbage, written by a group of people who I think have no little interest in improving the market for health insurance. After reading this report, it seems pretty clear that the CBO agrees with me, but hey, maybe we’re both wrong, along with basically every health advocacy group, policy shop and think tank.

All of the quotes you see here are direct quotes from the Report linked above, with page numbers. It’s going to get technical a few times, my apologies – but asking questions is what Facebook comment section is for!

“…The agencies expect that some people would use the tax credits authorized by the act to purchase policies that would not cover major medical risks and that are not counted as insurance in this cost estimate.” (Page 1)

“CBO and JCT broadly define private health insurance coverage as consisting of a comprehensive major medical policy that, at a minimum, covers high-cost medical events and various services, including those provided by physicians and hospitals.” (Page 2)

“In this estimate, people who have only such policies are described as uninsured because they do not have financial protection from major medical risks.” (Page 2)

We already knew that the CBO considers a person holding only non-comprehensive insurance as being uninsured. They re-affirm this at the beginning; the Report includes some more details about what it means to be comprehensive. The CBO also recognizes that the Government will be spending money on subsidies that go to people who do then not become insured (by the CBO definition). More on this later.

“Under the legislation, a few million of those people would use tax credits to purchase policies that would not cover major medical risks.” (Page 4)

I have to disagree with the CBO here; why would an uninsured person not take advantage of free money to buy whatever coverage they can? States would have to permit it – but they would also be incentivized to let their citizens get their hands on this sweet, sweet Federal cash. The CBO agrees that insurance companies will be incentivized to offer these kinds of plans.

I don’t see where the CBO includes the cost of subsidizing these plans, so I did a back of the envelope calculation. I use the CBO’s estimate of the uninsured and their breakdown by age and Trumpcare’s subsidy levels. I assume that 20% of the uninsured will claim their tax credits in 2018, going up to 50% in 2027; I think this is conservative, as 25 million-odd people would be missing out on free money. The cost for the Government to provide subsidies to people who are still uninsured? Around $750,000,000,000 for the 10-year period. That’s billion. More subsidies would be going to uninsured people than insured people – a truly impressive feat. The CBO assumes “a few million” but I don’t see why this assumption makes any sense. In their analysis, 40-50 million people would give away free money.

“[In the current ACA-based market] Several factors could lead insurers to withdraw from the market—including lack of profitability and 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." (Page 4)

Here the CBO says it explicitly: the work of House Republicans and the Trump White House to un-guarantee the CSR payments and question the Individual Mandate is increasing premiums and causing insurers to leave.

“However, the agencies estimate that about one-sixth of the population resides in areas in which the nongroup market would start to become unstable beginning in 2020.” (Page 5)

The CBO says that states that take the MacArthur waivers will destabilize their health insurance markets. This is the “choice” and “returning decisions to the states” that the GOP always talks about. It goes in to describe that for states that waive the ACA’s health insurance regulations, medical underwriting will return and people with medical conditions will not be able to buy insurance.

Referring to states that eliminate only some of the ACA’s requirements:

“Average premiums in the nongroup market would be roughly 20 percent lower in 2026 than under current law, primarily because, on average, insurance policies would provide fewer benefits.” (Page 6)

“Out-of-pocket payments for people who have relatively high health care spending would increase most in the states that obtained waivers.” (Page 7)

Basically, the reduction of premiums in these states results from the product set being worse. Now, Paul Ryan would tell you that this is a choice: people are buying plans that cover what they need and not spending money on things they don’t. This is NOT what the CBO says – let’s remember the Fundamental Theorem of Health Insurance:

If it's not required for everybody, it will not be available for everybody. If everybody has the choice, then nobody will have a choice.

Going back to the CBO:

“Insurers generally would not want to sell policies that included benefits that were not required by state law. Plans with additional benefits that were not mandated would tend to attract enrollees who would use them and thus increase insurers’ costs.” (Page 25)