CBO Lowers Cost Projection for ACA Coverage Expansion Provisions

Expanded health coverage for U.S. residents under the Affordable Care Act will cost the federal government about $571 billion from 2015 to 2019, down from the $710 billion the Congressional Budget Office in 2010 predicted it would cost over the same time period, according to a CBO report released Monday, the New York Times reports.

CBO Director Douglas Elmendorf said the lower cost projections are the result of many factors, including the overall "slowdown in the growth of health care costs" and estimated lower premiums that will be subsidized by the federal government.

In addition, projections for Medicaid spending per beneficiary in states that did expand the program were lower than expected. The report predicted that the federal government would spend $920 billion from 2016 to 2025 on Medicaid and Children's Health Insurance Program because of the ACA. Specifically, the report predicted that starting in 2015, "roughly 70% of the people who will receive Medicaid coverage because of the [ACA] will be newly eligible for the program." The federal government will pay between 90% and 100% of the costs for such beneficiaries, as opposed to an average of 57% for other individuals in the program (Pear, New York Times, 1/26).

Still, the report noted that those savings were offset by higher than anticipated enrollment in Medicaid and CHIP overall, which will cost the federal government about $60 billion more through 2024 than it had previously anticipated (Demko, Modern Healthcare, 1/26). Further, CBO estimated in the report that as many as 16 million people will gain coverage through Medicaid and CHIP in the next decade (Ferris, The Hill, 1/26).

Exchange Enrollment Revisions and Costs

Further, CBO in the new report projected that about one million fewer U.S. residents would enroll in exchange coverage in 2015 than it did in a similar report it released last April. CBO also revised its enrollment numbers for 2016 to 21 million U.S. residents, down from the 24 million it predicted in its April 2014 analysis. The lower enrollment numbers mean the federal government's coverage costs will be about $39 billion less through 2024 than CBO projected in April (Modern Healthcare, 1/26).

Still, the report noted that the share of the U.S. population under age 65 who will remain uninsured by 2017 will drop to 8% (Lauter, "Politics Now," Los Angeles Times, 1/26). In addition, the report stated that officials "still [expect] enrollment to grow rapidly over the next two years in response to increased outreach by state health agencies and others and to increased awareness of the individual mandate" (Baker, National Journal, 1/26).

According to the report, the ACA's coverage provisions will reduce the number of uninsured U.S. residents by 27 million people by 2025, with about 31 million individuals remaining uninsured (New York Times, 1/26).

According to CBO:

• 60% of the remaining uninsured individuals will opt not to enroll in private or public coverage;
• 30% will be undocumented immigrants; and
• 10% will fall into a coverage gap in states that did not expand their Medicaid programs under the ACA ("Politics Now," Los Angeles Times, 1/26).

According to CBO, a majority of those uninsured residents will be exempt from penalties under the ACA's individual mandate (The Hill, 1/26).

The report estimated that federal subsidies to help U.S. residents purchase coverage through the exchanges would cost almost $1.1 trillion from 2016 to 2025, including:

• $909 billion in tax credits for qualifying individuals who purchase exchange coverage; and
• $147 billion to help reduce low-income individuals' deductibles and other out-of-pocket health care costs.

According to the report, CBO expects the number of U.S. residents enrolled in exchange coverage to reach 12 million in 2015 and 25 million in 2017, with about 75% of those individuals qualifying for subsidies. Elmendorf said that the subsidies will average an estimated $5,000 per qualifying enrollee from 2016 through 2018 and increase to nearly $8,000 in 2025 (New York Times, 1/26).

However, the report also noted that the number of individuals who chose to enroll in bronze-level health plans through the ACA's exchanges was higher than anticipated, which also helped to reduce the ACA's costs. Specifically, 15% of subsidy-eligible exchange enrollees chose bronze-level plans during the ACA's first open enrollment period, meaning three million individuals selected plans that do not qualify for subsidies (Modern Healthcare, 1/26).

Meanwhile, the report noted that about 10 million fewer U.S. residents would have employer-sponsored health plans over the next 10 years (The Hill, 1/26).

New Revenues and Total Costs

CBO also noted that an excise tax on high-premium coverage under the ACA, which is scheduled to take effect in 2018, will bring in about $149 billion in new revenue for the federal government during its first eight years. Overall, new revenues and penalty payments under the law will bring in approximately $643 billion, according to the report (New York Times, 1/26). The revenue gains are about $97 billion higher than CBO had projected in April, according to CQ Roll Call (Young, CQ Roll Call, 1/26). Those revenues will help to offset the projected nearly $2 trillion total cost of the ACA's coverage provisions over the next decade (New York Times, 1/26).