No Doubt About It: Medicaid Capped, Uninsured Increased, and Taxes Cut

Yesterday the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) released their estimate of the House bill to “repeal and replace” the Affordable Care Act (ACA).  The Senate, and seemingly much of Western Civilization, has been on CBO/JCT watch since the House of Representatives narrowly passed the bill on May 4 with just one vote to spare. Here’s what CBO and JCT think the bill would do:

  • Federal tax revenues would fall by $992 billion and federal spending would drop by $1.111 trillion over the next 10 years. As a result, the federal deficit would decline by $119 billion, which is a good thing. How the bill achieves that deficit reduction, not so much.
  • Three fourths of the spending cuts—$834 billion—come from Medicaid. That is a very bad thing. This is essentially the same amount of federal Medicaid cuts that were in the bill just before it was pulled from the House floor at the end of March ($839 billion), so there is little doubt as to what “repeal and replace” really means: phase out the ACA Medicaid expansion for parents and other adults, and cap federal spending on Medicaid starting in 2020 and every year after in perpetuity.
  • The Medicaid spending cuts, plus changes in subsidies for individual health insurance, will result in an increase of 23 million in the number of uninsured Americans by 2026. Of those 23 million, the large majority—14 million—are people who lose their Medicaid coverage. The Medicaid coverage loss starts right away, in 2018, and ramps up every year after that. That is also a very bad thing. And there is also no doubt about the intent, since the bill that was pulled from the House floor at the end of March also cut Medicaid enrollment by 14 million by 2026.
  • Of the $992 billion in tax cuts, two-thirds result from repeal or delay of taxes on high-income people, fees imposed on manufacturers, excise taxes on medical device manufacturers and others, and taxes on health insurers enacted by the ACA.  The graphic on page 3 of the estimate says it all.

By the time the bill emerged (barely) from the House earlier this month, it had become very complicated. CBO and JCT are in the estimation business so they are no strangers to uncertainty, but they found more than the usual in this bill. They were quite certain about one thing, however:

“the direction of certain effects of the legislation is clear…the amount of federal revenues collected and the amount of spending on Medicaid would almost surely both be lower than under current law. And the number of uninsured people under the legislation would almost surely be greater than under current law.”

In other words, no doubt about it: the House bill caps and cuts federal Medicaid payments to states, cuts taxes, and in the process increases the number of uninsured Americans.

The Senate, informed by the CBO/JCT estimate, will now develop its own version, using the deficit reduction achieved by the House bill as a target. The House chose to reduce federal tax revenues by nearly $1 trillion, increase the number of uninsured Americans, and cap federal Medicaid payments to states, putting states at financial risk for the costs of health and long-term care services for many of their residents who cannot afford to lose their benefits. The Senate is under absolutely no obligation to do the same.

The budget instructions under which the Senate and House are operating require them to reduce the deficit by at least $2 billion over 10 years. The instructions do not require the Senators to increase the number of uninsured Americans or to reduce the number of Americans enrolled in Medicaid. Nor do they require the Senators to cut federal revenues by nearly $1 trillion. Nor do they require them to cap federal Medicaid payments to states, fundamentally disrupting the financing of the nation’s largest health insurer for children. There are ways to reduce the federal deficit that do not put children and families and other Medicaid populations at risk in order to pay for tax cuts.   The Senators should consider those alternatives.

Andy Schneider is a Research Professor at the Georgetown University McCourt School of Public Policy.