OACT Analysis of Health Reform Legislation

1. OACT Analysis ofHealth Reform Legislation November 8, 2017

2. 2017 Reform Legislation • Major Legislative Proposals • American Health Care Act of 2017 (AHCA) • Better Care Reconciliation Act of 2017 (BCRA) • Graham-Cassidy • Programs Affected • Medicaid • Employer • Medicare • Individual

3. Medicaid

4. AHCA Medicaid Provisions • Repeal of Medicaid Expansion • Per Enrollee Allotments and Block Grants • Other Key Provisions

5. Repeal of Medicaid Expansion • AHCA would turn expansion adult group into a closed group starting in 2020 • Only those continuously enrolled remain in group (federal matching rate remains at 90%) • Other individuals who would have otherwise been eligible are optional eligibility group for state (and only receive regular federal matching rate) • Baseline: 55% of people in expansion states • Assume all expansion states keep expansion closed group • For expansion states and those no longer in expansion group, assume that: • States keep eligibility at 138% FPL: 10% • States drop eligibility to 100% FPL: 30% • States drop eligibility to 50% FPL: 60% • Ultimately about 50% lose eligibility • Assume remaining enrollees in closed expansion group are in poorer health, higher costs

6. Repeal of Medicaid Expansion • Enrollment • Baseline: 14 million enrollees by 2026 • AHCA: • 2 million enrollees in expansion closed group by 2026 • 12 million enrollees lose coverage in expansion group • Of 12 million losing coverage, about 6 million are covered through optional eligibility groups by states; remaining 6 million mostly uninsured, some choose private coverage • Expenditures • Baseline: $655 billion in federal expenditures for 2020-2026 • AHCA: Federal expenditures decrease by $275 billion for 2020-2026 (including costs of those no longer in expansion group)

7. Per Enrollee Allotments and Block Grants • States currently receive federal matching funds as percent of total expenditures with no limit • AHCA would introduce per enrollee allotments and block grants starting in 2020, and states would have to choose one or the other • Per enrollee allotments • Calculate base per enrollee costs by state and by eligibility group • Trend forward by medical CPI (M-CPI) for adults and children, by M-CPI + 1% for aged and persons with disabilities • Each year, state allotment would be equal to enrollment multiplied by per enrollee costs for each group and totaled • Block grants • Calculate base per enrollee costs in same way as per enrollee caps • State could put adults or children and adults in block grant • Block grant calculated as enrollment multiplied by per enrollee costs in first year, then total amount is trended forward by CPI (no provision for enrollment)

8. Per Enrollee Allotments and Block Grants • Assumptions • All states would choose per enrollee allotments – per enrollee caps grow faster because M-CPI grows faster than CPI, and per enrollee caps account for enrollment growth • Expenditures • Federal expenditures decrease by $65 billion from 2020-2026, but reduction is growing over time (from less than $1 billion in 2020 to $19 billion in 2026) • Per enrollee allotments estimated to grow about 0.5% slower per year on average than projected per enrollee costs in baseline • Enrollment • No changes to enrollment

9. Other Key Medicaid Provisions • Ends some presumptive eligibility programs • Ends retroactive eligibility • More frequent eligibility redeterminations • Provides state option to put work requirements on adults • Eliminates DSH cuts made by ACA • Extra funding to states that did not expand Medicaid

10. AHCA Medicaid Impacts • Expenditures • Federal expenditures decrease $383 billion from 2017-2026 • Repeal of Medicaid expansion: $275 billion • Per capita allotments: $65 billion • All other provisions: $43 billion • Total expenditures decrease $415 billion • State expenditures decrease $32 billion • Enrollment • 8 million fewer enrollees by 2026 • 6 million net decrease due to repeal of Medicaid expansion • 2 million net decrease from all other provisions

11. BCRA Medicaid Provisions • Medicaid expansion • Keeps Medicaid expansion, but with following changes: • Optional eligibility group and states can choose any income limit up to 138% FPL • Higher Federal matching rate decreases from 90% down to regular matching rate by 2024 • Consideration of Marketplace changes on state decisions to keep or drop expansion • Per enrollee allotments • Establishes per enrollee allotments, but changes in base calculation and update factors • Starting in 2025, caps only increase by CPI for all groups (down from M-CPI or M-CPI + 1%) • Other changes from AHCA • Block grants • DSH • IMDs • Federal matching rate for American Indians expenditures

12. BCRA Medicaid Impacts • Expenditures • Federal expenditures decrease $492 billion from 2017-2026 • Repeal of Medicaid expansion: $346 billion • Per capita allotments: $119 billion • All other provisions: $28 billion • Total expenditures decrease $609 billion • State expenditures decrease $117 billion • Enrollment • 9 million fewer enrollees by 2026 • 7 million net decrease due to repeal of Medicaid expansion • 2 million net decrease from all other provisions

13. Graham-Cassidy Medicaid Provisions • Medicaid expansion • Ends Medicaid expansion in 2020 • Options for states to continue coverage • Per enrollee caps • Same as BCRA • Other changes from BCRA • DSH

14. Expansion • Per enrollee caps and block grants • Any other key changes

15. Employer Market& Medicare

16. Employer Market & Medicare • Employer Market • Repeal of the Employer Mandate • Repeal of the Individual Mandate • Medicare • Repeal of the HI Tax on high-income earners • Repeal of the health insurance tax • Repeal of the tax on Rx • Impact on DSH payments

17. Individual Market

19. Key Findings for AHCA • Number of uninsured estimated to be 4 million higher in 2018 and 13 million higher in 2026 • Medicaid (-8 million), ESI (-3 million), Individual (-1 million) • Federal expenditures reduced $330 billion (not counting tax provisions) • Medicaid expansion (-$270 billion) • Other Medicaid (-$110 billion) • Individual market (-$200 billion) • Stability fund ($140 billion) • Medicare ($120 billion)

20. Note: A portion of the increase in the gross and net premiums in 2023 and 2024 is due to the assumed depletion of the $15 billion in funding for maternity and mental health benefits and because the $8 billion in funding for those with pre-existing conditions ends in 2023.

21. *Includes selection effects, impacts of changing age mix of enrollees, impacts of individuals previously covered by employer-sponsored insurance or Medicaid, elimination of the health insurance tax, and any interaction effects between the other factors.

22. Note: Enrollment changes in employer-sponsored insurance and non-expansion Medicaid not included.

26. Key Findings for BCRA • Number of uninsured estimated to be 4 million higher in 2018 and 9 million higher in 2026 • Medicaid (-9 million), ESI (-3 million), Individual (+3 million) • Federal expenditures reduced $230 billion (not counting tax provisions) • Medicaid expansion (-$350 billion) • Other Medicaid (-$140 billion) • Individual market ($0) • Stability fund ($230 billion) • Medicare ($40 billion)

28. Average Monthly Spending for Individually Purchased Insurance, 2026