On May 23, the Congressional Budget Office (CBO) released updated projections of federal spending and tax expenditures related to supporting enrollment in health insurance, along with a new forecast of the number of Americans younger than age 65 who will have coverage or will be uninsured in the coming years.
The bottom line: The CBO continues to expect that the Affordable Care Act’s (ACA’s) markets will have relatively stable enrollment, more states will expand their Medicaid programs, and per-person health costs will rise at rates that exceed economic growth. Federal spending on subsidies for health insurance enrollment, along with tax breaks for employer coverage, will continue to grow at a rapid rate, thus intensifying pressure within the overall federal budget.
While the CBO’s new forecast looks in many ways quite similar to previous projections, the agency has revised its views on one very important aspect of its forecast—the effectiveness of the individual mandate—and also updated its forecast to reflect the effects of relevant executive decisions and proposed regulations by the Trump administration. These revisions and updates to the forecast are the primary reasons the current baseline does not differ more than it does from those issued by the CBO previously.
CBO’s Revised View Of The Individual Mandate
The most notable change in the CBO’s new forecast is the agency’s revised view of the effectiveness of the ACA’s individual mandate. During 2017, as Republicans in Congress attempted to pass legislation substantially rolling back and replacing the ACA, the CBO estimated that these efforts would dramatically increase the number of Americans going without insurance coverage. For instance, in July 2017, the CBO estimated that the version of repeal and replace assembled by Senate Majority Leader Mitch McConnell (R-KY) would have increased the number of uninsured from 28 million in 2017 to 41 million in 2018 and 50 million in 2026. There were several reasons that the McConnell proposal would have led to more people going without coverage, but the CBO specifically cited the planned repeal of the individual mandate as the most important factor.
In December, Congress repealed the penalty associated with the individual mandate as part of the sweeping individual and corporate tax reform law. At the time of enactment, the CBO estimated that the repeal would eventually lead to an increase in the number of people going without health insurance by 13 million people annually.
The CBO’s new forecast, however, places less weight on the importance of the mandate. The agency states that, for a number of reasons, it now believes that the mandate’s role in expanding coverage after 2013 is only about two-thirds of what it previously assumed. So instead of repeal adding 13 million more people to the ranks of the uninsured, the CBO now estimates the effect at slightly more than 8 million people.
The CBO cites a number of considerations for making this important revision to its forecast. Among other things, the agency is placing more emphasis on the financial reasons for expanded enrollment into coverage after 2013, such as the ACA’s subsidy structure, instead of nonfinancial factors, such as the expectation, or social norm, of insurance enrollment that the mandate was intended to create.
In the aggregate, the CBO’s updated projections of health insurance enrollment and federal subsidies for coverage do not differ all that much from previous projections. What’s different are some of the assumptions. The CBO expects there will be more uninsured in the future than is the case today, but the agency does not expect a reversion back to the uninsured levels of the pre-ACA era. Furthermore, because of changes in policies set in motion by the Trump administration, there are likely to be more people enrolled in non-ACA compliant insurance plans than is the case today, and that coverage, while different, will still provide a reasonable level of financial protection to enrollees.