The State of Health Care in the United States 1
Where Does Health Spending Go? Other Health Spending 19% Remaining Personal Health Care 13% Prescription Drugs 10% Hospital Care 29% Nursing Care 5% Home Health Care 3% Dental Services 3% Physician and Clinical Services 18% Source: Center for Medicare & Medicaid Services 2016 projections. 2
How is Health Spending Financed? Other Health Insurance Programs 4% Other Third Party Payers 16% Out-of-Pocket Payments 10% Medicaid 17% Private Health Insurance 33% Medicare 20% Source: Center for Medicare & Medicaid Services 2016 projections. 3
Total Health Spending by Country 16% Percent of GDP 18% Private Public United States, 16.6% 14% 12% Canada, 10.0% Germany, 11.0% Japan, 11.4% Switzerland, 11.4% 10% 9.0% 8% Luxembourg, 6.3% 6% 4% 2% 0% Source: Organization for Economic Cooperation and Development data. Note: data is from 2014. 4
Federal Health Care Spending, 1966-2046 (Projected) 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% Percent of GDP Projected 0% 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 2026 2031 2036 2041 2046 Source: Congressional Budget Office (CBO) 2016 Long-Term Budget Outlook. 5
Sources of Insurance Coverage for the Non-Elderly Uninsured: 27 Uninsured: 28 Other: 14 Other: 15 Individual: 23 ACA: 24 Individual: 26 ACA: 34 Medicaid/CHIP 68 Medicaid/CHIP 71 Employer Coverage 155 Employer Coverage 152 2016=272 million 2026=280 million Source: CBO 2016 data. Note: this does not reflect the CBO January 2017 baseline estimates. 6
What is Actually in the Affordable Care Act (ACA)? 7
Major Regulations Guaranteed Issue Prevents insurers from being able to deny coverage, or charge more for coverage based on pre-existing conditions Insurance rescission also prohibited, except for fraud Limits on Risk Rating Insurance companies cannot charge different premiums based on risk, except Up to 3:1 age rating Up to 2:1 for tobacco use Adult children can stay on parents insurance until 26 Medical Loss Ratio Limits Limits insurance co. s non-medical expenses, generally to 20% of premiums Essential Health Benefits and Related Rules Individual and small group insurance plans must cover 10 specific types of benefits and offer benefits equivalent to their state s benchmark plan Insurance must cover all cost sharing above ~$7,000/~$14,000 No annual or lifetime limits on insurer cost 8
Individual Mandate Major Coverage Provisions Penalizes/taxes individuals who don t maintain minimum essential coverage Employer Mandate Penalizes/taxes employers with over 50 full-time equivalent employees who do not provide health insurance to their employees Medicaid Expansion Allows states to expand Medicaid to individuals and families up to 138% of the federal poverty level Exchange premium subsidies Provides income-based subsidies for purchasing insurance on health exchanges for those earning up to 400% of the federal poverty level Cost sharing subsidies Subsidizes out-of-pocket costs for low-income individuals and families with silver plans on the insurance exchanges 9
Revenue Major Offsets 0.9% Medicare Payroll Surtax on Income above $200k/$250k 3.8% Net Investment Income Tax on Income above $200k/$250k 40% Cadillac Tax on high-cost employer plans (starts in 2020) Various health care fees/excise taxes (i.e. medical device tax) and other small tax changes Medicare Reductions in Medicare Advantage payments Reductions in various Medicare provider and drug payments Productivity adjustments to slow growth of provider payments Reductions in Disproportionate Share Hospital (DSH) payments Higher means-testing Medicare premiums Various FFS reforms designed to slow cost growth 10
25 20 15 10 5 0 Millions of People Insured How the ACA Changed Coverage +15M +10M +23M -5-10 -9M -1M +8M Insurance Regulations Cadillac Tax Medicaid Expansion Source: CRFB estimates based on CBO data. Note: this does not reflect the CBO January 2017 baseline estimates. Exchange Subsidies Mandates Total 11
The Effects of FULLY Repealing the Affordable Care Act (ACA) 12
Budgetary Effects of Fully Repealing the ACA Billions of Dollars $2,000 $1,500 $1.55 trillion- $1.75 trillion Dynamic Effect $1.9 trillion Health Savings $1,000 $500 Net Cost of Coverage Provisions Tax Increases $350 billion $150 billion $0 Coverage Provisions Offsets Cost of Repeal (Conventional) Cost of Repeal (Dynamic) Source: CRFB calculations based on CBO 2016 data. 12
Budgetary Effects of Fully Repealing the ACA Policy 2018-2027 Cost/Savings (-) Repeal Individual and Employer Mandates $250 billion* Repeal Exchange Subsidies -$900 billion Repeal Medicaid Expansion -$1,100 billion Other Coverage Provisions/Interactions $200 billion^ Subtotal, Coverage Provisions -$1,550 billion Repeal Cadillac Tax on High Cost Insurance Plans Repeal 3.8% Net Investment Income Tax Repeal 0.9% Medicare Hospital Insurance Surtax Repeal Various Insurer, Provider, and Manufacturer Fees Repeal Other Revenue Provisions Subtotal, Revenue Provisions Repeal Reductions in Medicare Advantage Repeal Reductions in Medicare Provider Payment Growth Repeal Other Medicare and Medicaid Savings Subtotal, Medicare and Related Provisions $100 billion $250 billion $150 billion $200 billion $100 billion $800 billion $450 billion $500 billion $150 billion $1,100 billion Total Cost, Conventional Scoring Macro-dynamic Feedback Effects Total Cost, Dynamic Scoring $350 billion -$200 billion $150 billion Source: CRFB calculations based on CBO 2016 data. *Excludes interactions with other provisions. ^Includes Prevention Fund, increased Medicaid spending for territories, and funding for home and community-based services; excludes revenue from the Cadillac tax. 13
15 10 Change in Coverage Under Full Repeal Millions of People in 2026 +10M 5 0-5 -10-15 -20-25 -14M -19M -23M Employer Individual/Exchange Medicaid Insured Source: CBO 2016 data. 15
Select Effects of Full ACA Repeal Insurance Coverage Gross Domestic Product Wages and Incomes Average Individual Market Premiums Health Costs for Older/Sicker/Poorer Americans Health Costs for Younger/Healthier/Richer Americans Federal Budget Deficit Federal Health Spending Overall Health Spending? 16
The Effects of PARTIALLY Repealing the ACA 17
Cost/Savings (-) of Different Repeal Scenarios $1,000 $500 Billions of Dollars $350b ($150b) Conventional Score (Dynamic Score) $0 -$500 -$1,000 -$1,500 -$750b (-$950b) -$550b (-$750b) -$300b (-$500b) -$300b -$2,000 -$2,500 Repeal Full ACA -$1,550b (-$1,750b) Repeal Coverage Provisions Repeal Coverage and Tax Provisions Repeal w/ Two-Year Delay* Repeal w/ Four-Year Delay* Repeal Mandates Source: CRFB calculations based on CBO 2016 data. *Assumes revenue and mandate provisions are repealed immediately, Medicaid expansion and exchange subsidies are repealed on a delay, and most other provisions are retained. 17
Number of Uninsured Under Different Scenarios 70 60 50 Millions of People in 2026 43M (+15M) 59M (+32M) 51M (+23M) 40 30 28M 20 10 0 Current Law (ACA) Repeal ACA Mandates Repeal ACA; Repeal Full ACA Retain Insurance Regs Source: CBO 2016 and early January 2017 data. Note: this has not been updated to reflect the CBO January 2017 baseline. Repeal & Replace ACA 19
Principles for Fiscally Responsible ACA Repeal & Replace 20
Principles for Fiscally Responsible ACA Repeal & Replace 1. Retain or replace, and build upon, the ACA s cost-control measures. 2. Reduce, rather than increase, the debt. 3. Maintain or improve Medicare solvency. 21
190% 170% 150% 130% 110% 90% 70% 50% Debt Held by the Public Under Different Health Care Excess Cost Growth Scenarios Percent of GDP 192% 141% 103% 30% 2002 2006 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 Source: CBO 2016 Long-Term Budget Outlook. *ECG refers to excess cost growth, or growth in per-capita health spending above the rate of per-capita potential GDP growth. Numbers in the graph above are average ECG over the period. 22
Reining in Health Care Cost Growth Cost-Control Measures in ACA: Productivity adjustments for Medicare payments Payment reforms and experiments (i.e. Accountable Care Organizations, bundled payments) New government entities for cost control (i.e. Center for Medicare & Medicaid Innovation, Independent Payment Advisory Board) Demonstration projects for Medicare/Medicaid dual eligibles Cadillac tax on high-cost plans Other Cost Control Ideas: Expand ACOs and bundled payments Modernize benefit design to increase first-dollar cost-sharing, reduce catastrophic out-of-pocket costs Limit Medigap and other wrap-around plans from covering first-dollar costs Reform medical malpractice rules Cap or replace employer health exclusions 23
$250 Medicare Hospital Insurance Trust Fund Balance & Exhaustion Date Under Different Repeal Scenarios Billions of Dollars (Exhaustion Date) $200 $150 $100 $50 ACA Taxes Repealed (2024) Current Law (2026) $0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Source: CRFB calculations based on CBO 2016 data. 24
ACA Repeal and Delay 25
Additional Principles for Repeal and Delay 4. Continue the ACA s offsets as long as coverage provisions are retained. 5. Generate sufficient repeal savings to finance any future replacement. 6. Enact any replacement in a timely and fiscally responsible manner. 26
$100 $80 $60 $40 $20 $0 -$20 -$40 -$60 -$80 -$100 Billions of Dollars Annual Cost of Repeal and Delay Repeal Coverage in 2020 Cost: $50 billion Full Delay Until 2020 Cost: $0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Source: CRFB calculations based on CBO 2016 data. 27
For More Information: Papers: Principles for Responsible Obamacare Repeal and Replace The Cost of Full Repeal of the Affordable Care Act Blogs: Repeal and Delay Shouldn t Increase Near-Term Deficits Full Obamacare Repeal Would Hasten Medicare s Insolvency What s The Plan to Replace Obamacare?