CMS report on the AHCA differs from CBO’s findings

The CMS Office of the Actuary released its Estimated Financial Effect of the American Health Care Act, as passed by the House, earlier this week, and its projections differ from the Congressional Budget Office’s previously released score, especially in regards to Medicaid, the individual market, and projected cost savings.

CMS’s report projects that by 2026, an estimated 43 million Americans will be uninsured, compared to 31 million under current law. The CBO projects an estimated 51 million Americans will be uninsured by 2026, compared to 28 million under current law.

CMS and CBO have different projections because they expect the states and markets to respond to the AHCA differently. They also view the individual mandate differently, with CBO projecting 14 million Americans losing coverage in 2018 if the individual mandate is repealed, while CMS only projects 4 million.

The CBO estimates that 14 million people will lose their Medicaid coverage, while CMS only estimates that 8 million people will lose their Medicaid coverage. This difference in projected coverage translates to projected spending reduction. The CBO projects a $834 billion reduction in Medicaid spending, comparted to CMS’ projected $383 billion.

The federal government would have a net reduction in spending of $328 billion over ten years according to CMS, while the CBO estimates a net reduction of $119 billion. The federal government would finance $253 billion less in national health care spending according to CMS. Households would have to finance $221 billion more in health care spending, and state and local governments would see an increase of $37 billion in spending for health care.

CMS estimates that under the AHCA, the average gross premiums are estimated to be roughly 13 percent lower in 2026, but the average net premiums would be 5 percent higher than under current law. Average cost-sharing amounts would be 61 percent higher in 2026 than under current law.

CBO estimated that average premium costs would be between an average of 4 to 20 percent lower, depending on what changes states made with waivers, but less healthy people would face higher premiums and out-of-pocket expense would increase, especially in states that obtain waivers for the essential health benefits.

CMS agrees with the CBO that waivers under the AHCA could be damaging. CMS predicts that 25 percent of states would seeks waivers under the AHCA to change the essential health benefits or allow insurers to take pre-existing conditions into account when setting premium costs, which “could result in a deteriorating or possibly failing market depending on how a state chose to implement the waivers.”

CBO expects that the waivers would cause community-rated premiums to rise and less healthy people would be unable to afford to purchase comprehensive health insurance.

While the reports differ in the details, both find that under the AHCA, the insurance rate would rise, the federal government would spend less on health care while individuals would spend more, and premiums would decrease for younger, healthier consumers while increasing for older, less healthy consumers. Both CMS and CBO are guessing how states and markets will respond to the AHCA, so their estimates, while carefully informed by available data, remain estimates as we wait for the Senate to release any details of their proposed changes to the AHCA.