July 24, 2012
Today, CBO released an updated estimate of the President’s health care takeover law in light of the recent Supreme Court decision. The following are highlights of CBO’s report.
- The gross cost of the bill is $1.683 trillion over the 2012–2022 period, as opposed to $1.762 trillion as estimated in March. The reduced cost is a result of fewer individuals being covered under expanded eligibility programs for Medicaid and CHIP. However, the bill’s costs still total roughly $1.7 trillion over the next ten years—nearly double the original estimate of $940 billion.
- The cost of the bill is lower because CBO expects fewer states to participate in the legislation’s Medicaid expansion, which is now optional following the Court’s decision. Thus, the Federal spending over the 2012–2022 period for Medicaid and CHIP is now projected to be $289 billion less than previously expected. However, the number of people participating in the bill’s exchanges is projected to increase and the cost of subsidies will subsequently increase by $210 billion. The difference ($79 billion), and small changes in other components of the bill, account for the lower cost.
- CBO estimates that 3 million more people will be uninsured compared to the March analysis. According to CBO, “With about 6 million fewer people being covered by Medicaid but only about 3 million more people receiving subsidies through the exchanges and about 3 million more people being uninsured, and because the average savings for each person who becomes uninsured are greater than the average additional costs for each person who receives exchange subsidies, the projected decrease in total federal spending on Medicaid is larger than the anticipated increase in total exchange subsidies.”
- According to CBO, about two-thirds of individuals who will no longer be covered by a mandatory Medicaid expansion will have income too low to qualify for exchange subsidies.
- CBO now estimates that health insurance premiums—both for plans offered through the exchanges and premiums in the individual market—will be 2 percent higher than those estimated in March 2012. Given an average premium on the individual market of $15,200 per year, this would result in an additional $304 a year per family—in addition to the $2,100 increase in an average family’s premium previously predicted by CBO and in stark contrast to President Obama’s promise that premiums would go down by $2,500 under his law.
- The new “tax” on individuals who do not purchase health insurance will impose $55 billion in tax increases on Americans over the next ten years, according to CBO. However, regarding the Supreme Court’s decision labeling the “penalty” a “tax,” CBO and JCT did not calculate the effect this change would have on consumers’ decisions of whether to purchase insurance. As Jim Capretta of American Enterprise Institute pointed out, failing to reconsider the behavioral economics implications could overstate the number of Americans who would now obtain coverage under the law.
- CBO estimates that the law’s employer mandate penalties will impose $117 billion in tax increases on job creators over the 2012–2022 period.
For additional information, contact:
The House Republican Conference Policy Office