Federal spending under the health care law is likely to be $84 billion lower over the next 11 years than previously projected now that states can opt out of the law’s Medicaid expansion, according to a Congressional Budget Office analysis released Tuesday.
The CBO estimated that 6 million fewer low-income Americans will gain coverage through Medicaid and the Children’s Health Insurance Program by 2022 now that the Supreme Court has ruled that the law went too far in trying to force all states to expand Medicaid eligibility. About 3 million of them are likely to remain uninsured, while another 3 million will purchase coverage through new marketplaces called exchanges, CBO said. Those buying coverage would receive subsidies to help cover the cost.
Although the subsidies are more expensive per person than Medicaid, the cost to the federal government would fall because only about half of those losing Medicaid eligibility would be eligible to obtain subsidized private coverage, the CBO says.
In the court case, states argued successfully that the federal law was overly coercive because it would have withdrawn all Medicaid funding from states that did not expand eligibility for Medicaid, a joint federal-state program.
The CBO did not try to predict which states would decide not to expand Medicaid. Instead, it used an estimate of the share of the population that might be affected, ran it through various scenarios, and settled on a middle ground.
Because “states will face different costs and benefits from expanding their Medicaid programs and will have different preferences about whether or to what degree to do so,” the analysis should not be considered a “definitive interpretation” of how the federal low will be implemented, the report cautioned.
The federal law sought to expand eligibility to all Americans earning up to 133 percent of the federal poverty line, more than $14,800 for individuals and about $25,400 for a family of three. Many states do not currently cover adults without dependent children, no matter how low their income.
Debate in recent weeks among experts had differed over the effect the court’s ruling would have on federal spending. The conservative American Action Forum ran its own estimates, calculating the cost of the federal health law could rise between $72 billion to $80 billion between 2014 and 2021. Forum President Douglas Holtz-Eakin, a former director of the CBO and an economic adviser to former presidential candidate John McCain, says he stands by his estimate. “We did a state-by-state analysis,” based on six states whose leaders have indicated they will not expand Medicaid. The CBO estimate did not specifically consider which states might participate, leading to a “tremendous amount of uncertainty,” he says.
In a separate report also released Tuesday, CBO estimated that repeal of the health care law as proposed in a bill passed July 11 by the Republican-controlled House would add $109 billion to the federal deficit between 2013 and 2022.