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CBO redoes the math on the ACA

Posted by John McDonough  July 24, 2012 06:03 PM

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Today, the Congressional Budget Office released an anticipated report on the fiscal realities of the Affordable Care Act in light of the June 28 U.S. Supreme Court (SCOTUS) decision on various aspects of the law. If you have never read a CBO report, here's your chance! The CBO, set up in 1975, is Congress' non-partisan budget analyst, staffed by professional economists and public policy analysts. Though its work can miss the mark, that is because of the inherent difficulty in estimating costs and benefits in a dynamic health care and fiscal environment.

You may recall that SCOTUS, while upholding the constitutionality of the "individual mandate," also decided that the mandated expansion in Medicaid eligibility for everyone with household incomes at less that 138% of the federal poverty line (FPL) must be an option, and not a mandate, for state governments. Since then, a number of Republican Governors (think Jindal of Louisiana, Perry of Texas, Scott of Florida) have announced they will not expand Medicaid.

So key questions for the CBO to consider:

1. How many uninsured persons will get covered instead of the prior estimate of 33 million (17 million through Medicaid and 16 million through state exchanges?

2. How many of the folks who would have gotten on Medicaid will be able to get covered through their state's new health insurance exchange? (Folks between 100 and 138%FPL will be eligible to get exchange coverage -- and not those between 0-100%FPL.)

3. What will these mean for the cost impacts of the ACA? Will the cost of the law increase because of the folks getting more expensive coverage through Exchanges?

The envelope, please...

1. CBO estimates that, by 2022, six million fewer will get covered through Medicaid, though the actual drop in the number of uninsured will be only three million. Meaning, instead of 33 million Americans getting coverage through the ACA, the number will be 30 million. And instead of 27 million uninsured Americans, we will have 30 million.

2. The reason the net drop is only 3 million is because 3 million would-be Medicaid eligibles with incomes between 100-138%FPL will instead enroll in their state's health insurance exchange.

3. Newly enrolling someone in Medicaid costs about $6,000 on average, and about $9,000 on average through an exchange, CBO now estimates. So the cost per person will rise, but the net impact on the federal budget will be $84 billion in budget savings over ten years.

So what does this mean?

It means that the fiscal impact of the SCOTUS ruling will not be dramatic, and the human impact will be serious for the 3 million who otherwise would have been insured. Republican economist and political activist Douglas Holtz Eaken, who issued a report suggesting the SCOTUS ruling would blow up the ACA's finances, is the outlier.

Right now, any Republican governor who says he or she will expand Medicaid as allowed by the ACA, is undermining the Republican Party's anti-ACA political message. Hence the strong statements of opposition. More telling will be their statements after the November 6 elections when we see the new political landscape for 2013-14.

If the ACA survives and moves to full implementation, these Republicans Governors are going to face a serious level  of opposition on their home turf from their medical, civil rights, and other communities demanding answers for why Texas, for example, where one out of every three adults has no health insurance, is refusing to accept massive federal assistance to reduce that life endangering disparity. This will become a serious political issue, and it could put those governors in real political danger -- just as the 2013 and 2014 gubernatorial election cycle comes around.

Finally, CBO updates its federal budget projection on the ACA as a whole. Its current estimate: between 2013 and 2022, repealing the ACA would cause federal budget deficits to increase by $109 billion.

Bottom line: ACA still will save lives and save money.

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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About the author

John E. McDonough is a professor of practice at the Harvard School of Public Health. He is the author of the book “Inside National Health Reform”, published in 2011 by More »


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