CBO Score: The Good, The Bad and The Ugly

ImageThe Congressional Budget Office (CBO) issued its much anticipated updated “score” of PPACA on Tuesday, July 24, as well as, a new cost estimate for repealing the legislation. Bottom line, the CBO’s projections of how much the law will cost the federal government over the next 10 years as a result of the Supreme Court’s ruling in NFIB v. Sebelius contained both good news and bad news for health reform supporters. It also contained the ugly news that the price of individual health insurance coverage is about to go up even more for everyone. 

On one hand, supporters of the law must be pleased that the CBO found that completely repealing PPACA would increase the federal deficit by $109 billion between the years 2013 and 2022. Also, the office determined that as a result of the Supreme Court’s ruling on Medicaid, the coverage provisions will be $1.168 trillion over the next 10 years, which is $84 billion less than what had been projected in March prior to the Court’s ruling.

On the other hand, people who like the new law can’t be happy that part of the reason why the law is now much less expensive is that it will provide coverage to far fewer people. The CBO clearly stated “fewer people will be covered by the Medicaid program, more people will obtain health insurance through the newly established exchanges, and more people will be uninsured. The magnitude of those changes varies from year to year.”  While the CBO couldn’t predict the number of people who would no longer have access to coverage exactly, their best guess was about 3-4 million additional individuals remaining uninsured. 

The CBO didn’t attempt to predict which states would or would not expand their Medicaid programs. However, they did take a stab at guessing how many people would live in states that will either completely or partially expand their programs, as well as guess how many will live in places that do not grow their programs at all.   The CBO concluded that about one-third of the potential newly eligible Medicaid population will reside in states that will fully expand coverage under the law’s parameters (i.e., up to 138 percent of poverty). These individuals will be enrolled in Medicaid, as they would have been prior to the Supreme Court ruling.

The CBO also indicated about half of the population who could be newly eligible for Medicaid will live in states that will only partially expand their Medicaid programs (i.e., raising the eligibility level for populations higher than exists currently, but not up to 138 percent of poverty). This is an interesting assumption, because many policy wonks, including your Washington update author, didn’t feel that the Supreme Court ruling was clear on what happens in states that choose to only partially expand their programs and the Obama administration hasn’t been particularly forthcoming about its views as to whether or not the expansion is an all or nothing proposition for the states.   The CBO concluded that 1/6 of the population that was intended to be covered by Medicaid by the health reform law lives in states that will not expand their Medicaid program at all over the next 10 years. In total, the CBO assumes that about 6 million fewer people will be enrolled in Medicaid under the law due to the ruling. They feel that between 2-3 million of these people will receive via exchanges instead, meaning that 3-4 million will remain uninsured.

Finally, the CBO included the following paragraph on page 15 of its analysis of the Court ruling, which we find to be particularly disturbing, given that this is the “Affordable Care Act”:

“The additional enrollees [i.e., those previously projected to enroll in Medicaid, but who will now receive Exchange subsidies in light of the Court’s ruling] are likely to spend more on health care, on average, than those previously expected to purchase insurance through the exchanges because people with lower income generally have somewhat poorer health.  As a result, CBO and JCT now estimate that the premiums for health insurance offered through the exchanges, along with premiums in the individual market, will be 2 percent higher than those estimated in March 2012.”

This increase comes in addition to the $2,100 per family premium increase the CBO previously predicted back in 2009.


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