The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) have updated their estimate of the budgetary effects of H.R. 3762, the Restoring Americans’ Healthcare Freedom Reconciliation Act, as passed by the Senate on December 3, 2015. The update is based on the December 18, 2015, enactment of the Consolidated Appropriations Act, 2016, which contained several provisions that affected the CBO and JCT estimates for H.R. 3762 (CBO Reports, January 4, 2016).
The Consolidated Appropriations Act, 2016 (H.R. 2029), postpones the implementation of several taxes introduced by the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) including a delay of the medical device tax, a one-year moratorium on the health insurance tax, and a delay of the tax on certain employee health insurance premiums and health plan benefits along with changes to the deductibility of that excise tax. Consequently, over the 2016-2025 timeframe, the CBO now estimates that savings are $36 billion larger, without macroeconomic feedback, and $42 billion larger, with macroeconomic feedback. Macroeconomic feedback includes the performance, structure, behavior, and decision-making of the economy as a whole, rather than individual markets.
Original estimate. The CBO and JCT’s original estimate of the budgetary effects of H.R. 3762 found that enacting H.R. 3762 would decrease deficits by about $474 billion over the 2016–2025 timeframe. That estimate included two components: (1) excluding macroeconomic feedback effects, the act would have reduced deficits by about $282 billion; and (2) the changes in economic output and other macroeconomic variables that would result from enacting the legislation would have reduced deficits by about $193 billion.
According to the CBO and JCT estimate, the largest budgetary effects of H.R 3762 would stem from repealing:
- subsidies for health insurance coverage obtained through exchanges beginning in 2018 and, prior to that year, eliminating the limitation on the amount people would have to repay if the premium tax credit they receive during the year exceeds the allowed amount based on their actual income;
- the optional expansion of eligibility for Medicaid that was established in the ACA beginning in 2018;
- penalties associated with the requirements that most people obtain health insurance coverage and that large employers offer their employees health insurance coverage that meets specified standards, while keeping those requirements in place, beginning in 2016;
- the federal excise tax imposed on some health insurance plans with high premiums; and
- many of the provisions of the ACA that are estimated to increase federal revenues, including the Hospital Insurance payroll tax rate for high-income taxpayers, a surtax on those taxpayers’ net investment income, and annual fees on health insurers.
The CBO and JCT’s assessment of the effect of H.R. 3762 on long-term deficits and direct spending indicates that the legislation: (1) would not increase net direct spending in any of the four consecutive 10-year periods beginning in 2026; and (2) would increase on-budget deficits by at least $5 billion in at least one of the four consecutive 10-year periods beginning in 2026.
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