Another Day, Another CBO Score

Another Day, Another CBO Score
CBO-HealthReformOn March 9, the Congressional Budget Office released a revised “score” of the healthcare reform law, projecting what it will cost the federal government over the next 10 years, among other things. The new score, or cost, of the bill was revised down to $1.207 trillion, or approximately $142 billion less than the CBO projection released back in January. That earlier forecast also lowered the projected cost of the legislation, as the CBO has consistently done since the passage of the law.  CBO logo-

The reason CBO cites for its repeated lowering of the cost of the law is lower-than-anticipated growth in health spending. However, since much of the slowdown in healthcare spending is directly attributed to national economic performance, the CBO noted the recent slowdown in costs may reverse, but “such a bounce back seems less likely in light of the further slowing of spending growth observed in the most recent data.”

While the Obama Administration has heralded the new budget forecast as good news for consumers and the law, the report isn’t completely rosy. The CBO predicts that the average premium for the second-lowest-cost silver plans offered via exchanges (which is the standard on which subsidy amounts are based) will go up by 8.5% annually between 2016 and 2018. CBO believes costs will rise during this time period due to the phasing out of the law’s market-stabilizing “Three R” risk-adjustment, risk corridor and reinsurance provisions, as well as the pressure to limit narrow network plans. However, the CBO projects that exchange coverage premiums will stabilize by 2018 and that premium costs will climb by just 5.6% annually beginning in 2019.

In addition to predicting higher premiums than expected for the next two years, the forecast also reduced the projected number of individuals who will obtain coverage due to the health reform law in the year ahead to 11 million. The projection stood at 12 million in January and 13 million this time last year. They have also reduced the number of people who will drop employer-sponsored coverage for exchange-based subsidized coverage by 1 million to 2 million and, overall, the CBO expects the number of individuals who will gain coverage due to the health reform law to be 24-25 million over the next decade, which is also lower than its prediction of 27 million earlier this year. It is very important to note that none of these predictions take into account the potential impact of a ruling for the plaintiffs in the King. V. Burwell case, which could overturn the flow of subsidies to eligible individuals covered via the federally facilitated marketplace.

While the new CBO score seemed to many (including your Washington Update authors) to come a bit out of the blue given that we just got the annual 2015 estimate in January, apparently the CBO decided it needed to review and revise quite a few of its initial budget estimates from January for big-ticket items.

The CBO also reserved the right to change its forecast at any time, based on future economic and market occurrences. “Projections of spending by private health insurers are highly uncertain, especially because the causes of the pronounced slowdown in spending in the past several years are not well understood,” the agency said. “Projections of growth in premiums for private health insurance offered through the exchanges are even more uncertain because the exchanges are so new.”

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