The nonpartisan Congressional Budget Office (CBO) has released its highly anticipated scoring of the American Health Care Act (AHCA), and many commentators have observed that several of the CBO’s findings will make the legislation a tougher sell for Republicans. The CBO estimated that enacting the AHCA would reduce federal deficits by $337 billion over the 2017-2026 period, largely based on an $880 billion cut to Medicaid. The CBO also estimated that, by 2018, 14 million more people would be uninsured under the AHCA than under current law, the increase in the number of uninsured people relative to the number under current law would rise to 21 million in 2020 and then to 24 million in 2026. To estimate the budgetary effects, CBO and JCT projected how the legislation would change the number of people who obtain federally subsidized health insurance through Medicaid, the nongroup market, and the employment-based market, as well as many other factors.

CBO estimates that several major provisions affecting Medicaid would decrease direct spending by $880 billion over the 2017-2026 period. That reduction would stem primarily from lower enrollment throughout the period, culminating in 14 million fewer Medicaid enrollees by 2026, a reduction of about 17 percent relative to the number under current law. Some of that decline would be among people who are currently eligible for Medicaid benefits, and some would be among people who CBO projects would be made eligible by additional states adopting the optional expansion of eligibility authorized by the ACA before 2020, when the legislation would terminate the enhanced federal matching rate for new enrollees under the expansion of Medicaid and would place a per capita-based cap on the federal government’s payments to states for medical assistance provided through Medicaid.

Per Capita-Based Cap on Medicaid Payments for Medical Assistance. CBO also indicated that he per capita cap limit on federal Medicaid reimbursement would reduce outlays because “Medicaid spending would grow on a per-enrollee basis at a faster rate than the CPI-M (Medical component of the Consumer Price Index).” According to CBO’s projections, Medicaid spending would increase at an average annual rate of 4.4 percent while the CPI-M would grow 3.7 percent per year over the 2017-2026 period. With less federal reimbursement for Medicaid, CBO predicts that “states would need to decide whether to commit more of their own resources to finance the program at current-law levels or whether to reduce spending by cutting payments to health care providers and health plans, eliminating optional services, restricting eligibility for enrollment, or (to the extent feasible) arriving at more efficient methods for delivering services.” CBO anticipates that states would adopt a mix of those approaches, which would result in additional savings to the federal government.

FMI: The CBO estimate is available at https://www.cbo.gov/system/files/115th-congress-2017-2018/costestimate/americanhealthcareact.pdf