Gov’t Spending on ACA To Be Billions Less Than Originally Expected

Industry analysts project that the federal government will spend billions of dollars less than expected on the Affordable Care Act in the next few years because of certain provisions in the law, lower-than-expected spending on Medicare and Medicaid and lower premiums for private health plans, the New York Times reports.

According to the Times, some analysts suggest that the costs for expanding Medicaid and providing subsidies for private coverage under the ACA will be lower than anticipated.

In addition, recent Congressional Budget Office estimates suggest that Medicare spending in 2020 will be about $137 billion lower than projected in 2010. CBO also estimated that Medicaid spending will be 16% lower, while premiums for private coverage will be about 9% lower (Lowrey, New York Times, 12/2).

Last month, the White House Council of Economic Advisers released a report showing that the health care spending growth rate was 1.3% between 2010 and 2013, the lowest three-year growth margin since the metric was first calculated in 1965. The White House attributed the low growth rate -- which it based on previously released CMS data -- in large part to changes under the ACA.

Specifically, the CEA report said that ACA provisions that lower Medicare overpayments for the elderly to private insurers and medical providers have helped curb health care costs. In addition, the report noted that ACA reforms have decreased hospitals' readmission rates (California Healthline, 11/21).

Meanwhile, some analysts suggest that another possible reason for the slowdown in spending growth might be the botched rollout of the ACA, which has prevented some individuals from enrolling in coverage because of frustration or the technical issues facing HealthCare.gov. In addition, some states' decisions to opt out of the Medicaid expansion could save the government $45 billion in 2016, according to an Urban Institute prediction.

Some economists have pointed to the economic downturn in 2008 and the resulting "sluggish" economy for the slow growth in health spending. The Kaiser Family Foundation also cited the weakened economy for as much as 75% of the slowdown in spending growth.

According to the Times, some economists expect the rate of spending growth to remain low. However, others have suggested that CBO's estimates might be underestimating the long-term effects of the slowdown. Still, some economists note that such spending growth will last only if private companies develop and retain incentives to keep spending low (New York Times, 12/2).