H.R. 1628, the Better Care Reconciliation Act of 2017: An Amendment in the Nature of a Substitute [ERN17500], as Posted on the Website of the Senate Committee on the Budget on July 20, 2017

CBO and the staff of the Joint Committee on Taxation (JCT) have prepared an estimate of the direct spending and revenue effects of the version of H.R. 1628, the Better Care Reconciliation Act, posted today on the Senate Budget Committee’s website.

By the agencies’ estimates, this legislation would lower the federal budget deficit by reducing spending for Medicaid and subsidies for nongroup health insurance. Those effects would be partially offset by the effects of provisions not directly related to health insurance coverage (mainly reductions in taxes), the repeal of penalties on employers that do not offer insurance and on people who do not purchase insurance, and spending to reduce premiums and for other purposes.

Compared with the June 26 cost estimate for a previous version of the legislation, this cost estimate shows savings over the next 10 years that are larger—as well as estimated effects on health insurance coverage and on premiums for health insurance that are similar. The current version of the legislation would result in greater deficit reduction mostly because it would retain certain taxes that the previous version of the legislation would have eliminated. The description of the legislation and of CBO and JCT’s methodology and results that appeared in the agencies’ previous estimate largely applies to this one as well.

Effects on the Federal Budget

CBO and JCT estimate that enacting this legislation would reduce federal deficits by $420 billion over the 2017–2026 period (see figure below). That reduction is the net result of a $903 billion decrease in direct spending partly offset by a $483 billion decrease in revenues.

The largest savings would come from a reduction in total federal spending for Medicaid resulting both from provisions affecting health insurance coverage and from other provisions. By 2026, spending for that program would be reduced by 26 percent. About three-quarters of that reduction would result from scaling back the expansion of eligibility enacted in the Affordable Care Act (ACA). In 2026, for people who are made newly eligible under the ACA (certain adults under the age of 65 whose income is less than or equal to 138 percent of the federal poverty level [FPL]), Medicaid spending would be reduced by 87 percent, from $134 billion to $17 billion—mainly because the penalty associated with the individual mandate would be repealed and the enhanced federal matching rate for spending on that group would be phased out. As a result of the reduced matching rate, some states would roll back their expansion of eligibility and others that would have expanded eligibility under current law would choose not to do so. All other federal spending on Medicaid in that year would be reduced by 9 percent, from $490 billion to $447 billion.

CBO and JCT have considered the budgetary effects of the legislation in two broad categories—those stemming from provisions related to insurance coverage and those resulting from other types of provisions. The agencies estimate that the provisions dealing with health insurance coverage would reduce deficits, on net, by $784 billion. The noncoverage provisions would increase deficits by $364 billion, mostly by reducing revenues.

Pay-as-you-go procedures apply because enacting this legislation would affect direct spending and revenues. CBO and JCT estimate that enacting this legislation would not increase net direct spending or on-budget deficits in any of the four consecutive 10-year periods beginning in 2027. CBO has not completed an estimate of the potential impact of this legislation on discretionary spending, which would be subject to future appropriation action.

Effects on Health Insurance Coverage

According to CBO and JCT’s estimates, in 2018, 15 million more people would be uninsured under this legislation than under current law. The increase in the number of uninsured people relative to the number under current law would reach 19 million in 2020 and 22 million in 2026. In 2026, an estimated 82 percent of all U.S. residents under age 65 would be insured, compared with 90 percent under current law.