Repealing individual mandate penalty will cause spike in uninsured: CMS

The Trump administration is projecting that nearly 8 million people will voluntarily lose insurance in the next eight years as a result of the repeal of the Affordable Care Act's financial penalty for not having health insurance. In all, 37.7 million people will be uninsured by 2026, up from the estimated 30 million in 2018, according to an analysis CMS actuaries released Wednesday.

"These estimates assume that some younger and healthier people will choose to be uninsured, particularly those with comparatively higher incomes who would not qualify for premium subsidies in the marketplaces," Gigi Cuckler, senior economist in the office of the actuary at the CMS said at a news briefing.

The findings appear in the agency's annual National Health Expenditure report.

Less healthy people in the marketplace will mean higher premiums for those that remain, though many will be protected by the ACA's tax credits, according to Yevgeniy Feyman, a Republican analyst. A silver lining is that the estimate is notably lower than what Congressional Budget Office had previously projected, Feyman said.

The CBO had estimated 13 million additional people would be uninsured by 2026. It's unclear why the CMS and CBO disagree. Cuckler said she could only speak to the estimates of her agency, and not others.

Others disagreed that elimination of the penalty would lead to a rise in those without coverage. "The mandate was pretty weak and had enormous exemptions, so I expect its repeal will have little effect on the number insured," said Christopher Pope, senior fellow at the conservative Manhattan Institute. The loss of healthy, young people on the exchanges—those that were considered integral to a more balanced risk pool—are likely to have a significant impact on the stability of those exchanges, however.

Agency officials also revealed that the CMS expects to be repaid billions of dollars it paid to managed Medicaid plans that covered adults newly eligible under Medicaid expansion. States and the federal government offered risk-mitigation payments to protect plans from large losses.

In 2017, insurance companies returned some of these payments because the expansion population ended up being healthier than predicted. Medicaid expenditures are projected to have grown more slowly in 2017, at 2.9%, after increasing 3.9% in 2016.

"The experience has demonstrated that the losses have been much smaller," said John Poisal, a deputy director in CMS's office of the actuary.

Overall, payments for coverage in 2014 and 2015 for the newly eligible population are estimated to be $82 billion.

The exact amount of money returned by plans is still being calculated, according to agency officials. The agency previously estimated that $8.7 billion in payments related to risk mitigation would be returned.

Meanwhile, Medicare spending growth is projected to have to hit 5% in 2017, up from 3.6% in 2016. That's mostly the result of higher cost per beneficiary spending as overall healthcare costs grow. The next few years will also bring higher costs as MACRA begins to offer bonuses to physicians that improve care and keep costs down.

Medicare spending is on track to hit $873 billion by 2020, up from $705 billion in 2017.

Finally, spending growth for private health insurance grew 5.6% in 2017, compared to 5.1% in 2016. That's the result of an increase in spending on non-medical expenses such as administrative costs, taxes, net gains or losses to reserves, and profits, according to the analysis.

Overall, national health spending is projected to grow 5.5% in 2017 up from 5.3% in 2016.