Evaluating the Patient Choice, Affordability, Responsibility, and Empowerment (CARE) Act

We evaluate the Patient Choice, Accountability, Responsibility, and Empowerment (CARE) Act, a proposal to  repeal-and-replace the Affordable Care Act (ACA) offered by Senator Richard Burr (R-NC), Senator Orrin Hatch (R-UT), and Representative Fred Upton (R-MI). Like many repeal-and-replace proposals, the CARE Act eliminates the ACA’s individual and employer mandates, allows insurers to charge older adults up to 5 times as much as younger adults, rolls back funding for Medicaid expansion, and provides premium-support tax credits for low-income individuals to purchase insurance. The CARE Act also allows states flexibility to implement additional reforms, such as high risk pools and autoenrollment.

Our analysis compares the CARE Act to the ACA along several dimensions, including the number of people insured, individual market premiums, costs to the federal government, and consumer out-of-pocket spending. We conduct our analysis using the COMPARE microsimulation model, a tool that uses economic theory and data to estimate how health insurance policy changes will affect insurance enrollment, premiums, and health care spending. Individuals and firms in COMPARE make choices about whether to enroll in (or offer) coverage by weighing the cost and benefits of alternative options. The model has been used extensively to estimate the effects of health reform.

We estimate that the CARE Act would reduce the federal deficit by $8 billion in 2018 relative to current law. The primary drivers of deficit reduction include elimination of funding for Medicaid expansion and cost-sharing subsidies for low-income enrollees in the individual insurance market. The CARE Act also introduces medical malpractice reforms, which reduce federal outlays for Medicare and Medicaid under the assumption that spending on defensive medicine and malpractice premiums would fall.

Simultaneously, the CARE Act reduces health insurance enrollment by 9 million people. About half of the reduction in insurance is driven by decreases in enrollment among adults ages 50 to 64, who lose eligibility for Medicaid and face higher premiums on the individual market due to changes in rating regulations. Older adults and individuals with incomes below 138 percent of the federal poverty level (FPL) who remain insured  experience higher out-of-pocket health spending under the CARE Act relative to the ACA.

In sensitivity analyses, we consider how implementation of the CARE Act’s high risk pools, autoenrollment provisions, and tax credits might affect estimated results. These analyses support the finding that the CARE Act would reduce both the federal deficit and the number of people insured relative to the ACA. In two cases where the CARE Act insures as many people as the ACA, costs for the CARE Act rise substantially.

These results suggest that finding a repeal-and-replace approach that insures the same number of people as the ACA while simultaneously reducing the federal deficit will be difficult.  However, alternative reforms such as the CARE Act could reduce federal spending, if society is willing to enact a reform that insures fewer people. Whether this trade-off is worthwhile is a value judgment, and different stakeholders are likely to have varying opinions about whether such a change is desirable.