Washington, DC…At the request of the Chairman of the Senate Budget Committee, the Congressional Budget Office and the staff of the Joint Committee on Taxation (JCT) have analyzed the direct spending and revenue effects of legislation sponsored by Senators Graham, Cassidy, Heller, and Johnson that would replace certain federal subsidies for health care with block grants to states. Specifically, the agencies analyzed H.R. 1628, an amendment in the nature of a substitute [LYN17744], posted on September 25, 2017, on Senator Cassidy’s website.

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In the short time available, rather than provide the point estimates that are typical in such analyses, the agencies have been able to assess only whether any reductions in the deficit stemming from the legislation as a whole (and from its two titles individually) would exceed certain thresholds and to qualitatively assess its effects on health insurance coverage and market stability.

Over the 2017–2026 period, CBO and JCT estimate, the legislation would reduce the on-budget deficit by at least $133 billion, the projected savings from the House-passed reconciliation bill. (The effects on the deficit were estimated relative to CBO’s March 2016 baseline, as has been done for all legislation related to the 2017 budget resolution.) Those savings would occur mainly because, under the legislation, outlays from new block grants between 2020 and 2026 would be smaller than the reduction in net federal subsidies for health insurance. Funding would shift away from states that expanded eligibility for Medicaid under the Affordable Care Act (ACA) and toward states that did not.

The number of people with comprehensive health insurance that covers high-cost medical events would be reduced by millions compared with the baseline projections for each year during the decade, CBO and JCT estimate. That number could vary widely depending on how states implemented the legislation, although the direction of the effect is clear. The reduction in the number of insured people relative to the number under current law would result from three main causes. First, enrollment in Medicaid would be substantially lower because of large reductions in federal funding for that program. Second, enrollment in nongroup coverage would be lower because of reductions in subsidies for it. Third, enrollment in all types of health insurance would be lower because penalties for not having insurance would be repealed. Those losses in coverage would be partly offset by enrollment in new programs established by states using the block grants and by somewhat higher enrollment in employment-based insurance. Many of the new programs would probably cover people with characteristics similar to those of people made eligible for Medicaid by the ACA.

The decrease in the number of insured people would be particularly large starting in 2020, when the legislation would make major changes to federal funding for Medicaid and the nongroup market. CBO and JCT expect that market disruptions and other implementation problems would accompany the transition to the block grants created by the legislation—despite the availability of funding specifically designated to assist with that transition—given the short time for planning and making changes between now and then.

CBO and JCT would need at least several weeks to provide point estimates of the effects on the deficit, health insurance coverage, and premiums. During that time, the agencies would gather and analyze more information about states’ potential uses of the block grants and the extent to which states might modify rules governing the nongroup market.