CARE Act: The Implications of Repealing and Replacing the ACA

How would the proposed Patient Choice, Affordability, Responsibility, and Empowerment (CARE) Act—which seeks to repeal and replace the Affordable Care Act (ACA)—affect enrollment, premiums, federal spending, and out-of-pocket costs now that an estimated 20 million Americans have become newly insured, and approximately 24 million people have gained access to subsidized and free care through tax credits and Medicaid expansion? Christine Eibner, PhD, and Sarah Nowack, PhD, of the Rand Corporation, analyzed the effects of the CARE Act for a report published by The Commonwealth Fund, “Evaluating the CARE Act: Implications of a Proposal to Repeal and Replace the Affordable Care Act.” The report examined the proposed act’s effect on insurance enrollment, premiums, federal spending, and out-of-pocket costs relative to current law.

The CARE Act, offered by Senators Richard Burr (R-NC), Orrin Hatch (R-UT), and Representative Fred Upton (R-MI), would eliminate the ACA’s individual and employer mandates, loosen regulations on insurers, roll back funding for Medicaid expansion, eliminate taxes and fees, and offer tax credits to low-income individuals to help them purchase insurance. The congressmen and other ACA opponents believe the ACA should be replaced because it goes too far in imposing requirements on individuals, businesses, and health insurers.

The individual mandate and the employer mandate are particular targets of ACA opponents, who believe that the law’s regulations restricting insurers’ ability to charge higher premiums to older and sicker adults may lead to unnecessarily high premiums for younger and healthier people, and will increase federal spending. The proposed CARE Act would incentivize people to obtain health insurance by imposing a “continuous coverage” provision that would allow insurers to charge higher premiums or deny coverage to people who have not remained continuously enrolled.

The report’s authors used the RAND COMPARE microsimulation model, an analytic tool that uses economic theory and data to estimate the effects of health policy changes. COMPARE creates a representation of the US population using data from the Survey of Income and Program Participation, the Medical Expenditure Panel Survey, and the Kaiser Family Foundation/Health Research and Educational Trust Annual Survey of Employer Benefits. In the model, simulated people and businesses make decisions about whether to enroll in health insurance or offer coverage by weighing costs and benefits of available options that take into account tax credits and other inducements.

The Commonwealth Fund report concluded that in 2018 the CARE Act would reduce federal spending but increase the deficit by $17 billion relative to current law. It would also increase the number of uninsured people by 9 million and leave low-income people and older adults with substantially higher costs for health insurance and medical care.

“Policymakers seeking to adopt the CARE Act, or to pursue a similar repeal-and-replace policy, may need to maintain some of the ACA’s revenue-generating provisions, adopt alternative revenue-generating provisions, or reduce the generosity of tax credits to achieve budge neutrality,” the authors concluded.