July 24, 2012: The Congressional Budget Office said Tuesday that the Supreme Court decision on President Obama’s health care overhaul would probably lead to an increase in the number of uninsured and a modest reduction in the cost to the federal government when compared with estimates before the court ruling.
Of the 33 million people who had been expected to gain coverage under the law, 3 million fewer are now predicted to get insurance, the budget office said in assessing the likely effects of the court decision.
The court said, in effect, that a large expansion of Medicaid envisioned under the 2010 law was a state option, not a requirement.
While it is not yet clear how many states will ultimately opt out of the expansion, the budget office said it now predicted that six million fewer people would be insured by Medicaid, the federal-state program for low-income people. Half of them, it said, will probably gain private insurance coverage through health insurance exchanges to be established in all states.
On balance, the budget office said, in 2022, “about three million more people will be uninsured” than under its previous estimates. It now says that 30 million people will be uninsured in 2022, against its estimate of 27 million before the Supreme Court decision.
The report estimates that 53 million people are now uninsured and that 60 million would be uninsured in 2022 if the law was repealed, as Republicans in Congress have proposed.
With the expected changes as a result of the court decision, the budget office said the law would cost $84 billion less than it had previously predicted.
“The insurance coverage provisions of the Affordable Care Act will have a net cost of $1,168 billion over the 2012-2022 period — compared with $1,252 billion projected in March 2012 for that 11-year period — for a net reduction of $84 billion,” or about 7 percent, the budget office said.
In addition, the budget office said that repealing the health care law would add $109 billion to federal budget deficits over the next 10 years.
Specifically, it said, repeal of the law would reduce spending by $890 billion and reduce revenues by $1 trillion in the years 2013 to 2022.
The latest estimate from the nonpartisan budget office establishes a new political and fiscal reality against which future health care proposals will be measured. It also provides grist for election-year debates in campaigns for the White House and Congress.
The federal government will subsidize coverage for most people buying insurance through the exchanges, and the per-person cost to the government will be higher than if they were in Medicaid, in part because private insurers typically pay higher rates to doctors and hospitals, the report said.
“For the average person who does not enroll in Medicaid as a result of the court’s decision and becomes uninsured, federal spending will decline by roughly an estimated $6,000 in 2022,” said Douglas W. Elmendorf, director of the Congressional Budget Office.
Moreover, Mr. Elmendorf said, “for the average person who does not enroll in Medicaid as a result of the court’s decision and enrolls in an exchange instead, estimated federal spending will rise by roughly $3,000 in 2022 — the difference between estimated additional exchange subsidies of about $9,000 and estimated Medicaid savings of roughly $6,000.”
In March, before the Supreme Court decision, the budget office predicted that 17 million more people would enroll in Medicaid because of the 2010 law. In its new report, the agency does not try to determine which states will expand their Medicaid programs.
Rather, it makes a general forecast of state behavior. It estimates that one-third of “the potential newly eligible population” is in states that will fully expand Medicaid, while half is in states that will partly expand eligibility, and the remainder is in states that will not expand Medicaid at all in the next decade.
The budget office said “many states will try to work out arrangements” for partial or gradual expansion of Medicaid. Whether the Obama administration will allow such arrangements is unknown, it said.
In its report, the budget office said the court decision “will probably lead to a gap in access to coverage” as some people can obtain neither Medicaid nor insurance subsidies. This, in turn, will reduce “the strength of the social norm” for people to have insurance, it said.
In addition, it said, premiums charged for private insurance will be 2 percent higher than previously estimated because the additional subscribers will have lower average incomes, will be in “somewhat poorer health” and will need more care than previously expected.
The report says the insurance coverage provisions of the new law will cost the government $1.7 trillion from 2012 to 2022. That includes $642 billion for Medicaid, $1 trillion for subsidies and $23 billion of tax credits to help small employers buy insurance.
But, it said, the expense will be more than offset by revenues from new taxes, penalties and fees and by savings squeezed from Medicare and other government programs.
From 2014 to 2022, the report says, the federal government will collect $55 billion in tax penalties from individuals and families who go without insurance and $117 billion from employers who provide no coverage or inadequate coverage to employees.
The budget office reaffirmed its conclusion that the spending and revenue provisions of the health care law, taken together, would reduce future budget deficits. Savings in Medicare alone are expected to total roughly $700 billion in the coming decade.
Democrats have repeatedly cited the law’s deficit-reducing potential when Republicans attack it as a costly new entitlement.
Republicans say the projected savings in Medicare may be impossible to achieve because, under the law, Medicare payments to health care providers will fall further and further behind the providers’ costs.
Representative Tom Price of Georgia, chairman of the House Republican Policy Committee, said the law was unaffordable, and he pointed to the $1.7 trillion price tag mentioned by the budget office.
But Representative Allyson Y. Schwartz, Democrat of Pennsylvania, said the law was a good deal that would “save $109 billion over the next decade, while increasing access to health care for millions of Americans.”
Source: The John & Rusty Report via Word & Brown