M.C. Escher and Erwin Schrodinger Walk into A Bar … Or Are They Walking Out? And How Can The CBO Be Sure?

The pundits and political partisans apparently stopped reading before the heading on page 9 of the CBO’s June 26 report on the Better Care Reconciliation Act (BCRA) Discussion Draft, “Uncertainty Surrounding the Estimates,” which the CBO conceded to be “inherently inexact,” given the complexity of possible reactions to BCRA passage.  Going further, the CBO disclosed that its estimates are based on a March 2016 baseline that materially overstated ACA Exchange enrollment and underestimated average subsidy payments per enrollee. In short, the CBO is confident of the direction that BCRA would push health care markets, but not of the magnitude of any move in any market.   So if you read or hear that BCRA “will” do this or that, rest your eyes or ears.  Here’s what we found interesting in the CBO report.

Turn all the way back to Table 4, three pages from the end. By the end of 2018, compared to the ACA projection (using the 2016 baseline analysis) about seven million fewer will have individual policies if BCRA passes.  The report cites two main reasons:  many who don’t want to buy insurance won’t buy it once the individual mandate vanishes and some who do want it won’t be able to afford it because subsidies will be less generous for those just above the Medicaid eligibility line and we mature Americans will pay more of our true cost.  Medicaid rolls will be slimmer by about four million people, mainly due to the lack of new states expected (in 2016) to adopt Medical expansion and the reduced federal funding of expansion.  Employers will drop coverage for about four million, because there will be no employer mandate.  The aggregate spread, fifteen million, is projected to rise to twenty-two million people by 2026, with Medicaid restraint accounting for fifteen million and individual policy purchases accounting for seven million of the spread. Between 2018 and 2026, the total under-65 population will rise from 274 million to 280 million (2.5%), with the uninsured population rising from 26 million (9.5%) to 49 million (17.5%).  The newly uninsured would be concentrated among those not yet eligible for Medicare and not poor enough for Medicaid.  However, the analysis ignores insurance that would not qualify for sale on an ACA Exchange today.  Some number of the “uninsured” would purchase hospital indemnity plans, catastrophic coverage, skinny med plans, etc.

The report acknowledges that BCRA imposes a six month waiting period for individual market applicants who have allowed coverage to lapse, but it’s not clear how, if at all, CBO considered that to offset the consequences of individual mandate elimination.

According to the CBO, BCRA would free-up about $321 billion of budgetary capacity. The report does not consider the extent to which job gains incident to related tax reform could boost employer-provided coverage.

What insureds pay would rise in the short term, CBO predicts, largely because the demise of the individual mandate would allow relatively healthy people to leave the market without tax penalty. Other factors could include states using § 1332 waivers to drop expensive treatments from Essential Health Benefits. But by 2020, that trend would reverse, and insureds would pay less than under the ACA, left unchanged.

There’s much more worth reading; it’s quite educational, but maybe not prophetic.