Medicaid: CBO releases preliminary estimates of House Budget reductions

The proposal would lead to $912 billion in cuts over 10 years, $715 billion from health provisions. The provisions would raise uninsured by 13.7 million, including 8.6 million from the new proposals

In a POLITICO story released last night they included a link to two memos from the CBO (dated at 10:29 p.m. on 5/11 the other at 10:34 p.m.) that have preliminary estimates of the effects of the cuts from the House Energy and Commerce Committee. These are described as preliminary, and they state that when they are able to estimate everything they this will “somewhat further increase both the estimated deficit reduction and coverage loss of the legislation.”

Here is my read of what CBO concludes:

• A total reduction of $912 billion over the 2025-34 period (10:29 pm memo):

  • $197 billion from Sections A-C (non-health provisions), over the 2025-34 period.

  • $715 billion from Section D, the health provisions, over the 2025-34 period.

• CBO estimates

  • “that these three actions would increase the number of people without health insurance by at least 13.7 million in 2034. Of that total effect, 5 million—stemming from the expiration of the expanded premium tax credits and half the estimated effect of the proposed marketplace rule—is already reflected in CBO’s baseline projections.” (10:34 pm memo)

    • The way to interpret this I think is that CBO was already estimating that the number of uninsured would rise at the end of the year when the premium tax credits expired as part of the ACA marketplaces. So the new proposed provisions add another 8.6 million to the increase in the uninsured, further than that previously estimated (rounding goign on here).

  • The breakdown of some of these provisions, though there are not a lot of details in these one-page memos are:

    • “Based on [their] analysis completed so far, CBO estimates that E&C’s reconciliation recommendations related to Medicaid as well as the marketplace provisions that extend beyond codifying the proposed rule would increase the number of people without health insurance by at least 7.7 million in 2034.” (That number reflects an estimate for the legislation of a total reduction of 8.6 million from the provisions, less 0.9 million for interactions with other provisions, which is included in the estimate above).

    • Important: “CBO continues to analyze several Medicaid provisions that could affect health insurance, and we have not yet estimated the interaction between the Medicaid provisions and the marketplace provisions of E&C’s reconciliation recommendations. We anticipate that doing so will somewhat further increase the estimated number of people without health insurance.”

    • CBO estimates that the “expiration of the expanded premium tax credits will increase the number of people without health insurance by 4.2 million in 2034 relative to an estimate of a permanent extension of those credits. That amount is reflected in CBO’s baseline projections because the expanded tax credits expire after this year under current law.” [Interpret this last comment to say that the increase is already baked into their baseline projections, since the current law is to already assume the tax credits expire]

    • CBO estimates “that finalizing the 2025 Marketplace Integrity and Affordability Rule as proposed will increase the number of people without health insurance by 1.8 million in 2034. Half of that increase is included in CBO’s baseline because the rule is currently proposed. The other half is included in our estimate of codifying the rule in Part 2 of Subtitle D of the Committee on Energy and Commerce’s reconciliation recommendations.”

  • Please note that the estimates DO NOT include effects of the following sections 41007, 44107, 44109, 44131, 44135, 44303 and complete estimates of interactions between provisions. The important sections affecting Medicaid include:

    • 44131, Sunsetting eligibility for increased FMAP for new expansion states.

      • This section sunsets the temporary five percent enhanced FMAP afforded to states under the American Rescue Plan Act that opt to expand Medicaid. This provision would apply prospectively, not affecting states currently receiving an enhanced federal match under this authority.

    • 44303, Delaying DSH reductions.

      • This section delays the Medicaid Disproportionate Share Hospital (DSH) reductions, currently $8 billion reductions per year that are set to take effect for fiscal years 2026 through 2028, to instead take effect for fiscal years 2029 through 2031. This section also extends funding for Tennessee’s DSH program, which is set to expire at the end of this fiscal year, through fiscal year 2028.

Bottom line then: the effects of the E&C changes will result in $912 billion in cuts over the 2025-34 period, $715 billion from Section D, the health provisions. The total impact on the number of uninsured of all the provisions is to “increase the number of people without health insurance by at least 13.7 million in 2034, including 5 million—stemming from the expiration of the expanded premium tax credits” All these estimates are preliminary and I expect they will increase.

CBO does not break down what are the most impactful provisions, in terms of effects on cuts to spending and to its impact on the uninsured, but I am expecting that the most important Medicaid provisions to look at are: work requirements, more frequent verifications, freeze in provider taxes at current levels, reducing FMAP for states that expand coverage to recent immigrants, sunsetting FMAP increase for new expansion states, increasing cost sharing for some Medicaid recipients (above 100% of FPL). I would then add to this the proposal to let the premium tax credits expire, which would impact a lot of those on the ACA marketplaces.

But all this is preliminary of course.