OACT Analysis of Health Reform Legislation November 8, 2017

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

Medicaid

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

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

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)

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)

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

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

AHCA Medicaid Impacts Expenditures Enrollment 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

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

BCRA Medicaid Impacts Expenditures Enrollment 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

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

Per enrollee caps and block grants Any other key changes Medicaid Comparison Current Law (ACA) AHCA BCRA Graham-Cassidy Medicaid Expansion 138% FPL; state option; higher federal matching rate (90% from 2020 on) Closed group starting in 2020 with 90% federal matching rate; state option to cover up to 138% FPL at regular matching rate State option to cover up to 138% FPL with matching rate decreasing to regular matching rate by 2024 Expansion ends in 2020; could be covered using state grants Medicaid Funding Federal matching on expenditures, no limit Per enrollee caps or block grants for most expenditures starting in 2020 Same as BCRA Per Enrollee Allotments - Caps by state and eligibility group; grow at M-CPI (children and adults) or M-CPI + 1% (aged and disabled) Caps by state and eligibility group; grow at M-CPI (children and adults) or M-CPI + 1% (aged and disabled) through 2024; grow by CPI starting in 2025 Block Grants Grants for adults or children and adults; grow at CPI with no provision for enrollment Grants for all groups; grow at CPI with provision for enrollment Other Key Medicaid Changes Eligibility changes; restores DSH cuts; extra funds to non-expansion states Same as AHCA with: changes to DSH provision; use of IMDs; higher matching rates for American Indians Same as BCRA with changes to DSH provision Expansion Per enrollee caps and block grants Any other key changes

Employer Market & Medicare

Employer Market & Medicare 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

Individual Market

Individual Market Comparison Current Law (ACA) AHCA BCRA G-C Subsidy Eligible 100-400% FPL Up to $75,000 Up to 350% FPL N/A Premium Subsidy Income-Based Age-Based Age & Income None Cost-sharing Subsidy 100-250% FPL High-Risk Pool $135 Billion $226 Billion $1 Trillion Age Rating 3:1 5:1 Subsidy Base 70% AV 58% AV Essential Health Benefits / Community Rating Required Can be waived State Decision off-Marketplace State Decision

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)

Estimated Effects of the American Health Care Act of 2017, on individually-Purchased Insurance Premium Rates and Cost-Sharing Amounts Calendar Year Monthly Amounts 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Gross Premium   Current Law $530 $559 $587 $618 $652 $687 $723 $761 $801 Proposed Law 467 497 490 515 542 576 627 661 695 Change −64 −62 −97 −103 −110 −95 −100 −106 Pct Change -12% -11% -16% -17% -13% Net Premium $239 $251 $264 $278 $293 $309 $325 $342 $360 246 259 237 252 269 294 335 357 380 7 8 −27 −26 −24 −15 10 15 19 3% -10% -9% -8% -5% 4% 5% Out-of-Pocket Costs $146 $158 $166 $175 $185 $196 $206 $217 $229 159 172 271 284 298 317 343 361 13 14 105 109 113 121 137 144 151 9% 63% 62% 61% 66% 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.

Decomposition of Factors Impacting Individually-Purchased Insurance Gross and Net Premiums and Cost-Sharing 2020 2026   Gross Premium Net Premium Cost Sharing Current Law $587 $264 $166 $801 $360 $229 % change due to: Elimination of the Cost-Sharing Subsidy — 28% 27% Premium Subsidies based on Age instead of Income 38% 47% Patient and State Stability Fund -6% -26% -5% -24% State Option to Waive EHB and Community Rating -12% -4% -9% Actuarial Value -11% 32% Other* 5% 14% 3% 7% 16% Total -16% -10% 63% -13% 66% Proposed Law $490 $237 $271 $695 $380 *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.

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

Individual Market Comparison Current Law (ACA) AHCA BCRA G-C Subsidy Eligible 100-400% FPL Up to $75,000 Up to 350% FPL N/A Premium Subsidy Income-Based Age-Based Age & Income None Cost-sharing Subsidy 100-250% FPL High-Risk Pool $135 Billion $226 Billion $1 Trillion Age Rating 3:1 5:1 Subsidy Base 70% AV 58% AV Essential Health Benefits / Community Rating Required Can be waived State Decision off-Marketplace State Decision

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)

Estimated Effects of the Better Care Reconciliation Act of 2017, on individually-Purchased Insurance Premium Rates and Cost-Sharing Amounts Calendar Year Monthly Amounts 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Gross premium   Current law $530 $559 $587 $618 $652 $687 $723 $761 $801 Proposed law 467 497 545 574 606 637 668 703 741 Change −64 −62 −42 −44 −46 −50 −55 −58 −60 Pct change −12% −11% −7% −8% Net premium $239 $251 $264 $278 $293 $309 $325 $342 $360 240 253 217 220 232 242 250 263 278 2 −47 −61 −67 −75 −79 −82 Pct Change 1% −18% −21% −22% −23% Cost-sharing amounts $161 $167 $176 $185 $194 $204 $214 $225 $236 168 174 146 145 175 192 209 225 $241 7 8 −29 −40 −19 −12 −5 −0 5 5% −17% −10% −6% −2% −0% 2% Off-Exchange premium $292 $305 $320 $337 $355 $374 $393 Off-Exchange cost sharing $280 $307 $323 $340 $358 $377

Average Monthly Spending for Individually Purchased Insurance, 2026

Individual Market Comparison Current Law (ACA) AHCA BCRA G-C Subsidy Eligible 100-400% FPL Up to $75,000 Up to 350% FPL N/A Premium Subsidy Income-Based Age-Based Age & Income None Cost-sharing Subsidy 100-250% FPL High-Risk Pool $135 Billion $226 Billion $1 Trillion Age Rating 3:1 5:1 Subsidy Base 70% AV 58% AV Essential Health Benefits / Community Rating Required Can be waived State Decision off-Marketplace State Decision

(Amounts in millions of dollars) Estimated State Funding Amounts under Current Law compared to Graham-Cassidy (Amounts in millions of dollars) Calendar Year 2020 Calender Year 2026 State Current Law Proposed Change % Change   Total 150,426 148,800 (1,626) -1% 211,647 193,200 (18,447) -9% Alabama 879 1,028 149 17% 1,230 3,589 2,360 192% Alaska 443 703 260 59% 622 388 (234) -38% Arizona 3,541 3,361 (180) -5% 5,008 4,573 (436) Arkansas 2,185 2,075 (111) 3,074 2,387 (687) -22% California 32,478 30,831 (1,647) 45,663 24,933 (20,730) -45% Colorado 2,473 2,347 (125) 3,477 2,658 (819) -24% Connecticut 2,114 2,007 (107) 2,973 1,428 (1,545) -52% Delaware 619 588 (31) 875 459 (416) -48% District of Columbia 487 462 (25) 686 353 (333) -49% Florida 7,980 8,327 347 4% 11,168 13,905 2,737 25% Georgia 2,234 2,493 258 12% 3,127 6,873 3,746 120% Hawaii 711 675 (36) 1,002 550 (452) Idaho 422 461 38 9% 591 1,105 514 87% Illinois 5,208 4,944 (264) 7,325 6,980 (345) Indiana 2,857 2,712 (145) 4,022 3,943 (80) -2% Iowa 1,157 1,098 (59) 1,627 1,632 5 0% Kansas 350 421 71 20% 490 1,637 1,147 234% Kentucky 3,362 3,191 (170) 4,731 3,167 (1,564) -33% Louisiana 4,172 3,960 (211) 5,865 3,473 (2,391) -41% Maine 409 433 24 6% 572 823 251 44% Maryland 3,341 3,172 (169) 4,700 2,303 (2,397) -51% Massachusetts 2,913 2,923 10 4,120 2,909 (1,212) -29% Michigan 5,335 5,065 (270) 7,503 6,113 (1,390) -19% Minnesota 2,622 2,489 (133) 3,707 2,511 (1,197) -32% Mississippi 404 521 116 29% 566 2,530 1,964 347% Missouri 1,282 1,414 132 10% 1,794 3,635 1,841 103% Montana 762 1,177 415 55% 1,070 624 (446) -42% Nebraska 390 426 36 546 1,037 491 90% Nevada 1,589 1,508 (81) 1,824 (409) -18% New Hampshire 608 577 855 460 (394) -46% New Jersey 4,624 4,390 6,499 3,931 (2,568) -40% New Mexico 1,825 1,732 (93) 2,568 1,745 (823) New York 14,690 13,946 (745) 20,877 11,704 (9,173) -44% North Carolina 3,494 3,694 200 4,888 6,973 2,085 43% North Dakota 425 645 219 52% 598 331 (267) Ohio 5,568 (297) 8,255 6,759 (1,496) Oklahoma 642 752 110 898 2,641 1,743 194% Oregon 3,358 3,188 4,724 2,426 (2,298) Pennsylvania 6,768 6,425 (343) 9,518 6,628 (2,890) -30% Rhode Island 486 683 562 (121) South Carolina 1,049 1,176 126 1,468 3,322 1,853 126% South Dakota 128 489 361 282% 179 470 291 162% Tennessee 1,104 1,294 189 1,545 4,539 2,994 Texas 4,336 5,134 798 18% 6,067 18,818 12,751 210% Utah 524 578 54 733 1,492 759 Vermont 378 359 (19) 534 278 (256) Virginia 1,625 121 7% 2,273 3,757 1,484 65% Washington 3,241 3,077 (164) 4,560 3,535 (1,025) West Virginia 1,206 1,145 (61) 1,696 1,303 (393) -23% Wisconsin 1,159 1,259 100 1,621 2,935 1,314 81% Wyoming 170 356 186 109% 238 248 These estimates reflect the following assumptions for the Graham-Cassidy state-by-state allocations: 1)      The allotments to states do not reflect any net effects for the population risk, coverage value, or state specific population adjustments. It is possible that the application of these adjustments could shift states in or out of the various categories. 2)      $6.8 billion of the $10 billion reserved funds from section 4(C) are assumed to be allocated in 2020 and the remaining $3.2 billion are assumed to be allocated in 2026. 3)      The $6 billion in 2020 and $5 billion in 2021 contingency fund for low-density and non-expansion states are included in the allotments. 4)      The total allotment by year in billions of dollars is $149 in 2020, $151 in 2021, $157 in 2022, $168 in 2023, $179 in 2024, $190 in 2025, and $193 in 2026. 5)      The allocations by state in 2026 are based on their share of the population with incomes between 50% and 138% of the Federal Poverty Level. 6)      The current law projections are based on our estimates of the 2018 Mid-session review budget. 7)      The 2020 estimates reflect our current law projections reduced proportionately to the allotment level.  It is possible that the method specified in the law for determining the 2020 allotments could lead to some differences from our approach but not in a way that we think is significant for this evaluation. 8)      The estimate does not include any effects of the short term stability funding.