President Trump’s budget proposal estimates increased healthcare spending, despite the GOP’s efforts to dismantle the ACA.
President Donald Trump released his preliminary 2018 federal budget last month, providing insight into his administration’s priorities going into the future. While the repeal and replacement of the Affordable Care Act (ACA) has been championed by the administration and GOP, the budget calls for increases in ACA spending in the next fiscal year.
As detailed in ThinkAdvisor.com, Trump’s budget projects a 2018 hike in ACA premium tax credits to $32 billion, up from $30 billion this year and $28 billion in 2016. Meanwhile, funding for the law’s cost-sharing reduction subsidy program would be boosted to $6.3 billion — a rise from the current $5.8 billion and the $5 billion earmarked in 2016. The fact that increases to subsidies for low-income ACA enrollees has been proposed is somewhat surprising, as President Trump has mulled whether to pull those funds as way to bring Democrats to the bargaining table on healthcare reform.
Under the Trump proposal, the ACA’s risk-adjustment program is also in line for a funding hike from $4.7 billion to $6.9 billion next year. This program’s aim is to shift funds from individual and small-group health plans with low-risk enrollees to plans with high-risk participants, thereby encouraging insurers to provide coverage for riskier policyholders.
Those projections, however, assume the ACA continues as the country’s healthcare legislation. If the law is overturned, the budget proposal estimates a savings of $250 billion over 10 years, primarily due to the abolition of premium tax credits and subsidies.
Some ACA Cuts Proposed
President Trump’s budget proposal singles out some portions of the ACA for reductions. It requests cuts to the ACA’s public exchange network; specifically, dollars for the program’s administration would drop from $24 million this year to $17 million. In addition, a planned phase-out of exchange start-up support funding would result in a drop in total exchange system financing from $287 million to $59 million.
The administration’s budget plan also projects a $2 million cut in funding for the ACA’s health insurance rate review program, from $28 million in 2017 to $26 million next year. Under this ACA provision, Health and Human Services and states evaluate any proposed rate increases by insurers of 10% or more in the individual and small-group marketplace.
Another component of the budget proposal addresses funding for the Employee Benefits Security Administration, the Department of Labor agency charged with overseeing enforcement of health laws regarding privacy and mental health parity, as well as supervision of other workplace-related benefits such as retirement programs. As outlined in President Trump’s budget, EBSA would receive a 1.6% cash step-up to $192 million next year.
What Happens Now
As proposed, overall federal spending would accelerate by about 0.8% to $4.1 trillion, while revenues paid to the government are estimated to climb by 5.6% to $3.7 trillion. Trump’s budget further projects a 27% reduction in the deficit to $440 billion. Yet this budget proposal is just that — a proposal. There are sure to be changes as congressional legislators deliberate over specific items.
At the same time, the Senate is still set to debate and vote on the GOP’s ACA replacement bill, the American Health Care Act (AHCA), which narrowly passed the House last month. Meanwhile, the fate of ACA enrollees remains unknown, as the Congressional Budget Office estimates that 23 million will be left without coverage by 2026.
If the ACA is repealed and replaced, the budget will reflect that and a new healthcare landscape will be shaped by the AHCA. But the budget proposal also accounts for a potential continuation of the ACA, most notably, an increase in funding for subsidies. Again, until both debates come to a resolution, agents should advise clients to maintain healthcare coverage.