CBO Report Lowers Cost Projection for ACA by $104B

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The Affordable Care Act will cost about $1.4 trillion over the next decade, or about $104 billion less than previously projected, according to a revised estimate from the Congressional Budget Office and the Joint Committee on Taxation, the Washington Post's "Wonkblog" reports.

The revisions are largely because of less government spending on the subsidies to help individuals purchase coverage through the health insurance exchanges, according to the report. The report noted that lower-than-expected premiums are responsible for the reduced cost of the subsidies (Millman, "Wonkblog," Washington Post, 4/14).

The report also stated the government would pay less in subsidies because of President Obama's administrative fix that allowed people to keep health plans that otherwise would have been canceled for not meeting the ACA's minimum coverage standards, Reuters reports (Lawder/Morgan, Reuters, 4/14).

In addition, the report noted a slowdown in the growth of health care costs as another reason for the revision (Lowrey, New York Times, 4/14).

Specifically, the report stated that the ACA's coverage provisions will likely cost $5 billion less than the $41 billion the agencies had previously projected ("Wonkblog," Washington Post, 4/14). Further, the report said the government will spend about $3 billion less in 2014 and $164 billion less over the next 10 years on subsidies (New York Times, 4/14). According to the report, the average subsidy paid to individuals in 2015 will be $4,250, down from a previous estimate of $5,330. In 2024, the average subsidy paid will be $7,170, compared with the previously estimated $8,370 (Radnofsky, Wall Street Journal, 4/14).

Lower Premium Costs

According to the report, the lower-than-expected premiums resulted from exchange plans that "appear to have, in general, lower payment rates for providers, narrower networks of providers and tighter management of their subscribers' use of health care than employment-based plans." However, the report states that CBO and JCT expect exchange coverage to become more like employer-sponsored plans in the future as exchange enrollment increases.

The report also projected that premium costs will increase slightly in 2015, from a benchmark of $3,800 in 2014 to $3,900. The increase will grow larger in later years but likely will cost 15% less than what the agencies had previously projected, according to the estimates.

Gov't Will Receive Less From ACA Penalties

Meanwhile, the report noted that the federal government will bring in about $61 billion less from penalties paid under the ACA than the agencies had previously projected, "Wonkblog" reports ("Wonkblog," Washington Post, 4/14).

The revision comes as both individuals and businesses are expected to pay less in penalties under the law than previously expected. According to the report, individuals will pay around $46 billion in penalties over the next 10 years, while businesses will pay about $139 billion (New York Times, 4/14).

CBO Enrollment Projections Remain at 6M

According to "Wonkblog," CBO did not revise its earlier projection that six million people would enroll in health insurance under the ACA, despite the Obama administration's reports that nearly 7.5 million people have enrolled in exchange coverage so far.

CBO said it did not update its estimate because it is based on the average number of people the agency expects to have coverage during the year, as opposed to including those who have coverage for a few months ("Wonkblog," Washington Post, 4/14).

Overall, the agencies projected that an additional 12 million nonelderly adults will have insurance coverage in 2014 under the law than would have otherwise. The report stated that number will rise to 26 million in 2017. Altogether, the report estimated that the number of uninsured U.S. residents will decline to 30 million in 2017, down from 42 million in 2014 (New York Times, 4/14).

Further, the agencies expect that 25 million people will purchase coverage under the ACA in 2017, which will remain constant through 2024. Previous projections said enrollment would peak in 2018 and then decrease in the early 2020s to 24 million (Wall Street Journal, 4/14).

CBO Reduces Deficit Projection

In related news, CBO in a separate report estimated that the federal deficit for the current fiscal year will be nearly $23 billion less than it had previously estimated, likely coming to $492 billion, the New York Times reports.

The revision is partly because of lower health care costs than the agency had anticipated (New York Times, 4/14). In addition, the agency projected that Medicare spending will be $98 billion lower over the next decade because of lower prescription drug and hospital insurance costs. Further, CBO predicted a $29 billion reduction in Medicaid spending (Reuters, 4/14).

However, CBO said the spending slowdown would be short lived because of an aging population eventually incurring higher health costs (New York Times, 4/14). According to the AP/U-T  San Diego, CBO projected that the federal deficit will reach the $1 trillion range by 2022 (Taylor, AP/U-T San Diego, 4/14).


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