Recently, the Senate vote on the Better Care Reconciliation Act (BCRA) was pushed back after the CBO released projections that the act would result in a whopping 22 million Americans losing their insurance by 2026.
In this segment from Industry Focus: Healthcare, Motley Fool analyst Kristine Harjes and contributor Todd Campbell break down the numbers and explain that 22 million figure, what this act would mean for different demographics across the country, how the BCRA would affect Medicaid funding, some important things to keep in mind with any projections like this, and more.
A full transcript follows the video.
This video was recorded on June 28, 2017.
Kristine Harjes: Let's pivot to another very important news item that probably hit slightly bigger headlines than just the quirky biotech news outlets that you and I tend to read most of. This has to do with the healthcare bill, and what the Republican senators have proposed as their potential replacement of Obamacare.
Todd Campbell: Right. Republicans rode into Washington in November on a platform that includes the repeal and replacement of the Affordable Care Act, which is more commonly known as Obamacare. The House passed a bill that would do that last month and advanced that bill to the Senate. The Senate, in hopes of winning over some of the moderates and the centrists of their party, took that bill, did some work to it, lifted up the hood, fixed a couple things, and then rolled it back out, hopefully, in their view, to get a vote on that bill this week. However, that bill vote has now been pushed back until after the July 4th recess, because the CBO has come out and issued some scoring that raises some questions that they want to go back and take a look at.
Harjes: Right. The CBO is the Congressional Budget Office. This is a nonpartisan group that is supposed to crunch the numbers on proposed legislation. They weighed in on Monday on this new bill. What did they find?
Campbell: They found that less people will have insurance in 2018 and through 2026 than will have it under current law. That there will be 22 million fewer people insured in 2026 than under current law, and that 15 million people could drop off of insurance as soon as next year.
Harjes: Right. A large part of that is because of a shift in Medicaid funding, which will become a block grant type of funding. What they're predicting is that an estimated 15 million fewer people will be covered by Medicaid in 2026. So, if you think of the number that Todd threw out there, the 22 million fewer Americans having coverage in 2026, 15 million of those will be directly impacted by this change in how Medicaid is granted.
Campbell: Right. Initially, the people who are going to become uninsured, there are going to be some who do it voluntarily, and some people who do with involuntarily, right? As you probably know, listeners, there are mandates that require you to have health insurance or pay a penalty when you file your tax return. This bill, the BCRA, will rollback those penalties, remove them.
Harjes: Right. And this is one of the most hated parts of Obamacare, according to Republicans.
Campbell: Yes. So, what's going to happen then is you're going to have a lot of people who will say, "OK, I'm 20 years old, I'm completely healthy, I don't need insurance," and they'll stop paying, so they'll cancel. Those will be the people who voluntarily walk away from their insurance. Then you'll have other people who will be forced to walk away because the subsidies that are going to be given to them under the new BCRA are less than what they are currently receiving now, and that could result in higher premiums and out-of-pockets for them that they just can't afford. So, you have a few different things work in there. Initially, you have the voluntary people walking away, and to have the people who are getting priced out of the individual market. And over time, as the BCRA shifts Medicaid funding to block grant funding, they expect that eligibility requirements for Medicaid will tighten, more people will get rolled off of Medicaid, and that's what's going to get us to that number.
Harjes: Right. What's important to understand here is that the impact won't be exactly the same for everybody. If you start to look at different demographics, the impact varies considerably -- it even goes in opposite directions. For example, the biggest negative impact will happen for older, lower-income Americans. The percentage of people that are without insurance will more than double for people who are between ages 50-64 and whose income is below 200% of --
Campbell: Yeah, that's a huge point. You look at it, and the CBO included all sorts of data and fancy charts that show how this breaks out. You definitely see uninsurance rates increasing across all age groups. The biggest hit, however, like you just said, 50-64 with incomes 200% or below the federal poverty level. To put that into perspective, a family of four, 200%, that's about $49,000 a year in income.
Harjes: Exactly. One the other hand, you also could see, for healthy singles, you can have premiums that are reduced by 30% in 2020.
Campbell: And that's the other part of the story, right, Kristine? In the media, you see the headlines, 22 million, you're not really seeing the potentially 30% less expensive plan.
Harjes: Exactly. So, the impact will vary greatly depending on who you are. I also will point out that this bill is projected to save the government quite a bit of money.
Campbell: Yeah. Again, this is mostly due to the change in the way that they're going to fund Medicaid. They're going to shift to a block grant per-person funding program, and then they're going to increase that over time beginning in 2025 by regular inflation rate, not medical inflation rate. If you mix all that altogether and stir it all up and crunch all the numbers, you come out with them spending roughly about $150 billion less in 2026 on Medicaid than they would under current law and Obamacare. You add that plus subsidies and some other savings, and you get around $320?!
Harjes: $321 billion cumulative decrease over 10 years in the federal budget deficit.
Campbell: Correct. So, the BCRA, there's multiple goals here. If the goal is, let's get rid of the taxes that were created under Obamacare, the penalties, the fees, let's try to reduce the budget impact that Obamacare will have over the course of the next 10 years, it's certainly doing that. It remains to be seen whether or not from the perspective of an American who consumes insurance products and healthcare services whether or not this plan will be better, worse, or the same. You have people like the Kaiser Family Foundation coming out and saying premiums are going to go up pretty substantially for most people. Then, you have the CBO saying that premiums could drop up to 30%, but that's because people will be forced to buy high-deductible plans to cover far less healthcare. So, you have a lot of different competing variables. As the joke is, healthcare's complex, who knew?
Harjes: Yeah, this bill alone is hundreds and hundreds of pages.