The Congressional Budget Office has just released its analysis of the GOP Healthcare Reform Bill, the American Health Care Act, designed to replace the Affordable Care Act. The Committee for a Responsible Federal Budget has summarized its main features as follows:
- The AHCA would reduce federal deficits by $337 billion over the next ten years.
- CBO estimates that there would be 24 million fewer Americans with health insurance under the AHCA as compared with the ACA by 2026, with 14 million fewer Medicaid beneficiaries (see the above chart). The decrease in individuals with employer coverage would result from dropping the employer mandate. The decrease in individual coverages would result from smaller subsidies under the AHCA.
I have previously summarized the AHCA pointing out its strengths and weaknesses:
- Strengths: discards mandates, fewer regulations, turns Medicaid into block grant program to states.
- Weakness: huge discrepancy between lavish tax treatment of employer-paid care (no upper limit on tax exemption) and much stingier tax credits for individuals
The U.S. now spends 18% of GDP on healthcare, both public and private, almost twice as much as any other developed country. Such high costs are a big drain on government revenue as well as a drag on economic growth. The AHCA should take a much bigger step towards controlling the cost of healthcare. Block granting Medicaid to the states, and giving the states more flexibility in implementation, definitely helps, but it is not enough.
But basic fairness as well as fiscal responsibility requires a major cutback in the tax exemption for employer provided care. This is essentially a subsidy to employees. It should have no greater value than the refundable tax credit provided to individuals who purchase health insurance on their own.
Conclusion. A free market healthcare system allows more individual choice and delivers more medical innovation. But our current system is too expensive to be sustainable for much longer. Either the GOP fixes this problem or a single-payer system will be the inevitable result.
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