The CBO's other bombshell: the Affordable Care Act isn't imploding

Beyond its eye-popping findings on higher premiums and large-scale coverage loss, the Congressional Budget Office’s official score of the American Health Care Act also quietly demolishes the central publicly stated rationale for repealing the Affordable Care Act. The key passage is a somewhat jargon-full sentence on the second page of the report that says, “In CBO and JCT’s assessment, however, the nongroup market would probably be stable in most areas under either current law or the legislation.”

Since this is a score of a proposed bill, the rest of the discussion naturally focuses on the “legislation” side of the ledger. But the assessment that markets will stabilize under current law is critical. President Trump’s central argument for repeal and replace is that the Affordable Care Act is “imploding,” so some kind of radical change is necessary.

Paul Ryan also frequently claims that the Affordable Care Act is currently in a “death spiral.”

This matters because you can’t beat something with nothing. If it’s really true that the ACA is doomed to collapse, then even a bad replacement looks pretty good. But the CBO is saying that it isn’t doomed to collapse. That the instability in the marketplaces we saw in 2016 is a one-time adjustment and the markets will stabilize soon even without policy change. Which means that if the law manages to survive, in a year or so, the Trump administration will likely be able to claim they fixed it.

CBO says the Affordable Care Act will stabilize

Over the past year, the Affordable Care Act’s marketplaces for individual health insurance purchases have been rocked by a series of bad stories. A lot of insurers have raised premiums, and a lot of insurers have decided to stop participating in the program, which encourages those that remain to raise premiums. The higher premiums mean that for a certain number of more affluent and relatively healthy consumers, it makes financial sense to simply pay the penalty rather than purchase insurance. Removing relatively health consumers from the marketplace, in turn, encourages higher premiums.

If that cycle were to simply continue unabated, the law really might implode. But CBO says that’s not what’s happening:

Under current law, most subsidized enrollees purchasing health insurance coverage in the nongroup market are largely insulated from increases in premiums because their out-of-pocket payments for premiums are based on a percentage of their income; the government pays the difference. The subsidies to purchase coverage combined with the penalties paid by uninsured people stemming from the individual mandate are anticipated to cause sufficient demand for insurance by people with low health care expenditures for the market to be stable.

Translating from wonk-ese, the subsidies offered to lower-income people under ACA are scaled both to income and to the local price of health insurance. Which means that for heavily subsidized customers, the higher premiums don’t drive people out of the marketplace. And there are enough young and healthy people who qualify for generous subsidies to ensure a stable long-term risk pool.

The ACA’s most enthusiastic proponents had higher aspirations for the marketplaces than that. But the point is that this is still a stable and workable outcome. There is no implosion that people need rescuing from.

The “implosion” argument completely dodges Medicaid

AHCA is really two bills in one. One piece of the legislation changes how these insurance marketplaces work, allegedly to avoid the implosion that the CBO says isn’t happening.

But the other, arguably more important, piece of the legislation is an enormous tax cut that’s financed by long-term cuts to Medicaid.

This tax cut sets the table for House Republicans’ plan for a massive reform of the overall tax code, so it’s integral to their overall legislative agenda. And because the Medicaid cuts have more and more bite over time, they ensure there is long-term deficit reduction in a legislation package that includes big permanent tax cuts.

The merits of paying for a tax cut for millionaires by cutting millions of poor families off from Medicaid coverage are something reasonable people can disagree about, but one thing is perfectly clear: The alleged “implosion” of the ACA’s nongroup marketplaces is totally irrelevant to this debate. Republicans are trying to smuggle a massive policy change through the door without really discussing it on the merits, probably because they think most people don’t agree with them about the relative merits of tax cuts versus providing health care to the poor, elderly, and disabled.

Trump can fix Obamacare ... by doing nothing

An intriguing subplot to the 2017 health reform debate is that while it’s pretty clear Ryan, Health and Human Services Secretary Tom Price, Office of Management and Budget Director Mick Mulvaney, and other key players understand the gap between reality and their rhetoric, it’s not really clear that the president does. Ryan, Price, and Mulvaney, after all, are all long-term, dedicated budget cutters who favor not just Obamacare repeal but also big cuts to Social Security and Medicare.

Trump seems to take a different view of the welfare state. And it’s at least possible that he is one of the marks of the implosion con rather than one of the perpetrators. That Ryan and his allies, in other words, have convinced Trump that the ACA needs drastic overhaul, and thus that it makes sense for the president to expend political capital on this rather than his signature issues of deporting immigrants and bombing the shit out of ISIS.

Were the fact that this isn’t true to be made clear to him, it might change his thinking.

The CBO’s message is, essentially, that if Trump simply sticks with the status quo, the wave of huge premium hikes and insurer dropouts will end. Since his administration will undoubtedly have tinkered with the relevant regulations in the interim, Trump will then be able to claim that he “fixed” Obamacare — arguably even made it Great Again — with those administrative moves.

Of course, the status quo still wouldn't be perfect in Trump's eyes — or in anyone else's — but that's the way health reform has inevitably gone in American politics. Obama didn't think Obamacare was perfect, and neither did the vast majority of Democratic Party legislators who voted for it. Over time, Republicans could make various modifications to the law — and even find bipartisan support for some of them. But the notion of "implosion" has given the campaign for a massive rewrite a sense of urgency that, according to the CBO, is basically unwarranted.