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A First Look at the CMS Estimate of the AHCA

Jun 13, 2017 | Health Care

The Chief Actuary of the Centers for Medicare and Medicaid Services (CMS) released its score of the House-passed American Health Care Act (AHCA) today. We'll be reviewing an analyzing this report in the coming days, but below we have taken a preliminary look at CMS's budgetary score and how it compares to that of Congressional Budget Office (CBO).

A few important caveats to our analysis below, which result in CBO and CMS not being fully apples-to-apples, are:

  1. CBO does its scores on a fiscal year basis while CMS uses calendar years.
  2. Each agency uses a different baseline for their analysis for starting assumptions. Perhaps most importantly for this estimate, the CBO baseline assumes that under current law (the Affordable Care Act) more states will expand Medicaid over the next decade, while CMS assumes no further expansion. As a result, CBO estimates higher initial Medicaid costs (and presumably coverage) than CMS, and thus there is more potential for savings (and coverage loss).
  3. CMS only estimates some provisions, and in particular it does not estimate most of the tax components of the AHCA.

To address the fact that some parts of AHCA are excluded from the CMS score, the below table includes a column called "Imputed CMS Score," which uses the CMS score of a provision where available and CBO or CRFB scores where a CMS score is not available. This imputed score is very rough, as there is no reason to think CMS's score of these provisions would be identical to CBO's.

Provision 2017-2026 Cost / Savings(-)
CMS Actuary CBO Imputed CMS Score*
End Mandate Penalties N/A $210 billion $210 billion
Repeal ACA Premium and Cost-Sharing Subsidies in 2020 -$501 billion -$665 billion -$507 billion^
Reduce ACA Medicaid Match to Base Medicaid Rate for “Expansion”
Beneficiaries, Establish Per-Capita Caps, & Institute Optional Work Requirements*
-$368 billion -$834 billion -$368 billion
Other Medicaid Reductions -$42 billion -$26 billion -$42 billion
Other Reductions N/A -$21 billion -$21 billion
Coverage Interactions N/A -$23 billion -$70 billion
Subtotal, Reduce Spending and Tax Subsidies N/A -$1.57 trillion -$1.01 trillion
Establish Flat Age-Adjusted Health Care Tax Credits in 2020 $300 billion $375 billion $300 billion
Establish Patient and State Stability Fund $135 billion $117 billion $135 billion
Repeal Disproportionate Share Hospital Payment Cuts
(Medicare & Medicaid)
$92 billion $74 billion $92 billion
Expand Health Savings Accounts N/A $19 billion $19 billion
Reduce the Medical Expense Deduction Floor from 7.5% to 5.8% N/A $90 billion $90 billion
Other Costs $11 billion $11 billion $11 billion
Subtotal, Increase Spending and Tax Subsidies N/A $687 billion $647 billion
Repeal ACA Medicare Hospital Insurance 0.9% Surtax (starting in 2023) $65 billion $59 billion $65 billion
Repeal ACA 3.8% Net Investment Income Tax (NIIT) N/A $172 billion $172 billion
Repeal ACA Health Insurer Tax N/A $145 billion $145 billion
Delay ACA “Cadillac Tax” Start Date to 2026 N/A $66 billion $66 billion
Repeal Most Other ACA Tax Increases N/A $112 billion $112 billion
Subtotal, Repeal ACA Taxes N/A $553 billion $560 billion
Total Deficit Impact N/A -$119 billion $409 billion

*Relies on CMS estimates for available policies and CBO or CRFB estimates where no CMS estimate exists. ^This includes $6 billion of savings from repealing the Small-Employer Tax Credits, which CMS did not include.

As the above table shows, CMS's overall estimate of the AHCA suggests higher costs and lower savings. This is mainly driven by lower Medicaid savings, which may very well be the result of the baseline issue mentioned above. Also of importance, CMS estimates less coverage loss than CBO; again, this may be in part related to the baseline from which coverage changes are measured.

We will continue to analyze the CMS score in more detail over the coming days.

See all of our health analysis here.

Update (6/13/17): this table has been updated to include repeal of the Small-Employer Tax Credits, which was omitted in the original publication.