CBO's cost estimate on the AHCA: What it means

The Congressional Budget Office (CBO) released its cost estimate of the American Health Care Act (AHCA) yesterday afternoon--a significant first step in the legislative process.

The report measures key criteria that will help members of Congress decide how to cast their vote on the bill, or if the bill should be brought up for a vote at all. It includes the AHCA’s impact on the federal budget and debt, the number of Americans covered, and the cost of health care coverage.

The cost estimates or projections from this report are compared to those already done for the Affordable Care Act (ACA). In essence, they’re comparing the “charted courses” of both laws.

Here are the CBO’s key findings:

AHCA would reduce federal debt

The CBO estimates that the AHCA would reduce federal deficit projections by $337 billion over a 10-year period from 2017 to 2026 compared to the ACA. The projected reduction is due in great part to the proposed rollback of Medicaid expansion and the per capita cap being put on Medicaid funding under the law.

This is a critical finding for Republicans. If the CBO determined that the bill wouldn’t save money, under the rules of reconciliation, they could not move it forward.

CBO annual deficit

Fewer Americans covered under the AHCA

According to the CBO, 14 million fewer people would be insured by 2018 under the AHCA than under Obamacare. By 2026, the number of uninsured Americans would climb to 24 million.

This will be a difficult pill for Republicans and their constituents to swallow, especially since vocal Republicans have repeatedly stated that all Americans will continue to be covered. It’s important to note that some of the 14 million Americans that will become uninsured by 2018 will drop coverage of their own volition. This includes Americans who were required to purchase health insurance under the ACA’s individual mandate, which would be repealed under the proposed law. Others will drop coverage because of rising premiums.

AHCA Projected Number of Uninsured Americans

(Sources: U.S. Census Bureau, Congressional Budget Office)

Cost of coverage varies by age group, increases for older Americans

The CBO estimates that, compared to the ACA, the American Health Care Act would increase premiums in the individual market 15 to 20 percent until 2020. By 2026, it projects that premiums would be roughly 10 percent lower than they would be under the ACA.

The CBO explains that premium variations will differ based on age group. Primarily due to adjusted age rating rules under the proposed law, the younger population would experience lower premiums while older Americans will see a significant rise in premiums.

More so than the number of uninsured Americans, it may be even harder for Republicans to justify the projected costs of coverage for Americans. Rising premiums have been a major complaint from Americans about the ACA, and Republicans have touted cost as a major fault of the current law. While the overall reduction in the rise of premiums by 2026 may be a positive note in the report, it’s unclear whether it will outweigh the immediate premium increases, especially for older Americans.

Prior to the release of the CBO report, there was already debate among Republicans whether the AHCA is the right bill to move forward with, and it’s unlikely that this report will help quell any of those lingering concerns. Time will tell.

CBO premiums