The Supreme Court’s decision upholding the Affordable Care Act but giving states the right to opt out of the law’s Medicaid expansion will save the federal government an additional $84 billion over the next decade, the Congressional Budget Office estimated Tuesday.
The report said the increased cost of subsidizing people sent to the state-based insurance exchanges because they can’t get expanded Medicaid coverage will be more than offset by the decrease in federal subsidies that will no longer be sent to states that opt out of expanding Medicaid coverage.
CBO assumed that some states would opt out of expanding Medicaid and others would delay coverage, leading to about 6 million fewer people qualifying for the program. The original CBO projection estimated about half of the 32 million people would get coverage under the law would get it through an expanded Medicaid. At the same time, only about 3 million more people would opt for subsidized coverage in the exchanges.
Bottom line: CBO estimated about 3 million fewer people will get insurance coverage under the ACA due to the Supreme Court’s mixed decision, which upheld the insurance mandate as a tax but gave states the right to forego expanding Medicaid. But virtually all of those people without insurance who previously would have had it will be people living below the poverty line who now fall into what amounts to a “donut hole” in the reform law.
“Only a portion (roughly one-third) of the people who will not be eligible for Medicaid as a result of the Court’s decision will be eligible for subsidies through the exchanges,” the joint analysis by CBO and the Joint Committee on Taxation said. “In addition, those who become eligible for subsidies will have to pay a portion of the exchange premium themselves, which will affect their decisions about whether to enroll in the exchanges.”
Every person who might have been eligible for Medicaid and opts not to purchase subsidized insurance through the exchanges will save the government $6,000 a year from the ACA’s original cost. Those who enroll for subsidies will cost the government about $9,000 on average. While that’s an increased of $3,000 per newly insured person, the fewer number of insured led to the lower overall costs for the legislation.
CBO now projects “Obamacare” will cost taxpayers $1.17 trillion between 2012 and 2022, down from $1.25 trillion before the Supreme Court made its decision.
An advocacy group run by former CBO chief Douglas Holtz-Eakin, who now advises the Romney campaign, projected that health care reform’s costs will rise sharply for the federal government due to the Supreme Court decision. In a report released Monday, he claimed that costs would rise $72 to $80 billion between 2014 and 2021 just for the six states that have already publicly stated they will opt out of the Medicaid expansion.