Good news! The cost of Obamacare is less than we thought. Yesterday, the CBO released their comprehensive ten-year budget and economic outlook report. It’s 177 pages, and addresses all aspects of the federal budget and deficit, including Obamacare.
Back in 2010, the CBO predicted that the the ACA would cost the federal government $759 billion in the fiscal years 2014 to 2019. By 2013, that figured had been revised slightly downward, to $710 billion. And now, the projection for that same time period is down to $571 billion (see page 129), a 20% reduction.
The lower cost of Obamacare is mainly due to the fact that healthcare costs aren’t growing as fast as they were prior to the passage of the ACA, so health insurance premiums – which are always driven primarily by the cost of healthcare – don’t have to grow as fast either. And that means that the federal government will be paying less in subsidies over the next few years than they originally anticipated. The chart on page 109 of the CBO report illustrates this very well. In the line for “health insurance subsidies and related spending” there are consistently negative numbers stretching all the way out to 2024, showing how much lower the new projections are when compared with how much the CBO originally thought the government would have to spend. In addition to the slowed growth of healthcare spending, the CBO also attributes the lower cost projections to a downward revision in their estimate of how many people are going to sign up for coverage through the exchanges (most exchange enrollees get subsidies, so fewer enrollees means lower subsidy spending for the government). Last year, they were predicting about 24 million exchange enrollees by 2016, and that’s been reduced to 21 million in the new report.
And although the government is projected to spend about $60 billion more than originally anticipated for Medicaid expansion, the cost per enrollee is actually lower than they thought it would be – the reason for the higher total spending is because enrollment in Medicaid and CHIP has exceeded projections. Since the overall goal – well, one of them anyway – is reducing the uninsured rate, higher-than-anticipated Medicaid/CHIP enrollment is a good thing. Especially when the increased cost of that program is more than offset by the lower-than-anticipated subsidies that the government will be paying over the next few years.
And about that uninsured rate… Obamacare is succeeding at that too. The uninsured rate dropped to 12.9% in the fourth quarter of 2014 – the lowest it’s been since Gallup began tracking it in 2008, and dramatically lower than it was in 2013. And the CBO report notes that about 42 million people were uninsured in the US in 2014, which they estimate to be about 12 million fewer than it would have been without the ACA.
When this all shakes out, the CBO is predicting that a decade from now, there will be about 27 million fewer uninsured Americans than there would have been without the ACA. But there will still be about 31 million uninsured people in this country – a problem that is acknowledged by both sides of the political aisle. Of those 31 million people, about 9 million will be undocumented immigrants, and about 3 million will be in the coverage gap because their states haven’t expanded Medicaid. Colorado expanded Medicaid under the provisions of the ACA, and so far, 26 other states and DC have done the same. I like to think that by 2025 there won’t be too many states that still haven’t expanded Medicaid, but that might be wishful thinking, because according to the CBO there will still be 3 million people caught without any access to coverage at all in 2015. The rest of the uninsured population will be people who have access to Medicaid (about 5 or 6 million people) or to employer plans or individual plans (including exchange plans) but choose not to enroll for one reason or another.
All in all, this CBO report is good news for the cost of Obamacare and good news for our economy.