House Republicans are pushing for quick passage of The American Health Care Act (AHCA), which would modify or repeal many aspects of the Affordable Care Act (ACA). The bill would substitute largely age-based refundable tax credits for the ACA’s largely income-based premium subsidies (or premium tax credits) and cost sharing provisions while reducing coverage under the Medicaid program.
A key question is how the Congressional Budget Office will score the plan. Its estimates will help answer two questions: How would the measure affect the federal budget deficit and how would it change the number of people with insurance coverage? Backers hope the bill will cut the deficit and increase coverage while critics claim it will boost the deficit and reduce insurance coverage. In reality, each side is likely to be half-right. The more people buy subsidized insurance, the more costly the plan. The fewer people purchase subsidized coverage, the less the proposal will add to the federal budget deficit, all else equal. I suspect the latter is most likely.
The proposed tax credits would provide less support on average for poorer or older people than the ACA, but bigger subsidies for many middle and upper-income households. Overall, however, it appears likely that the total amount of support would fall. And the losses of premium subsidies would be concentrated among lower-income households who are unlikely to make up the difference from their own resources. In addition, the lower outlays for Medicaid under the AHCA would further reduce the number of insured. Although formal estimates are not yet available, the broad outlines of the plan suggest it would likely reduce coverage.
At the same time, other provisions of the AHCA would reduce taxes relative to current law, primarily on higher-income households. Altogether, the plan is likely to lead to fewer people being covered by insurance, lower federal outlays, and lower federal revenues.
Many observers are evaluating the AHCA on these two criteria: the effect on health insurance coverage (how many people would lose insurance under the bill) and the effect on the federal budget deficit (the cost savings from lower insurance subsidies and Medicaid outlays versus the reduced revenues from repealing various ACA taxes). However, those criteria are in fundamental conflict. Because only those who purchase insurance are eligible for tax credits, and only those who are eligible generate Medicaid outlays, the more people (on net) who lose coverage, the better for the federal budget. Evaluating the AHCA therefore requires balancing opposing goals: the reduction in insurance coverage versus the federal budgetary savings.
