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The Heritage Foundation
July 24, 2012
Earlier today, the Congressional Budget Office (CBO) released an updated cost estimate for Obamacare that showed that the law will cost less over 10 years than last predicted—because fewer people will be covered.
Now, although Obamacare spends more than $1 trillion, CBO predicts it will leave 30 million Americans uninsured, falling far short of what was promised.
The reason for the changes to the law’s cost projection is the recent Supreme Court ruling. Though the Court allowed Obamacare’s individual mandate to stand as a tax, it deemed a separate provision—the Medicaid expansion—to be unconstitutional. As a result, states can choose not to expand their Medicaid programs and are no longer at risk of losing all their federal Medicaid dollars if they don’t. As Heritage health policy expert Nina Owcharenko explains, “If the Administration’s attempt to centralize health care decision making in Washington was unworkable, its unconstitutional imposition on the states has made its problems even worse.”
As a result of the Court’s decision, the outlook for the law has changed. Here are the main takeaways from the CBO’s latest report:
Obamacare will cost less… The new CBO scoring shows that the net cost of Obamacare will be $84 billion less over the next 10 years than predicted in its last analysis in March 2012. Spending on the Medicaid and the Children’s Health Insurance Program expansion will fall by $289 billion, while increased spending on the exchanges to cover some of those who will no longer qualify for Medicaid will cost $210 billion. The law will now add $1.17 trillion in new government spending over 10 years—paid for by massive tax hikes on all Americans and robbing money from the Medicare program.
…Because more people will be uninsured. Obamacare will cost less because it will insure fewer people. While the Medicaid expansion extended to all individuals below 138 percent of the federal poverty line, the exchange subsidies are only available to those earning between 100 percent and 400 percent of the federal poverty level, which means only a portion of would-be new Medicaid enrollees will qualify for subsidies. In 2022, this will add 3 million more to the number of Americans who will still be uninsured under Obamacare.
Obamacare falls far short of its promise for universal coverage. Since day one, it’s been clear that Obamacare will not achieve universal coverage, and every time CBO revisits the law, the numbers show just that. In March 2010, when the law passed, CBO predicted that there would be 22 million people still without insurance in 2019. In March 2012, the estimate increased to 27 million in 2022. Now, the number has once again increased—to 30 million. So Obamacare leaves just as many people uninsured as it covers.
Massive uncertainty underlies CBO’s estimate. According to CBO, “what states will be able to do and what they will decide to do are both highly uncertain. As a result…[the] estimates reflect an assessment of the probabilities of different outcomes…in the middle of the distribution of possible outcomes.” As CBO points out, states’ decisions to expand or not expand Medicaid hinge on a number of factors, including their budget outlooks. States that decide to expand would face “a large extra cost.”
Over the last two years, Obamacare has shown itself to be a law muddled with unintended consequences, unworkable provisions, and costly, ineffective new programs. Today’s report from CBO shows that Americans can expect this trend to continue, driving home once again that the health law will not achieve what it promised and needs to be repealed.
The AP via Town Hall
July 24, 2012
Budget Office: Obama’s Health Law Reduces Deficit
WASHINGTON (AP) — President Barack Obama’s health care overhaul will shrink rather than increase the nation’s huge federal deficits over the next decade, Congress’ nonpartisan budget scorekeepers said Tuesday, supporting Obama’s contention in a major election-year dispute with Republicans.
About 3 million fewer uninsured people will gain health coverage because of last month’s Supreme Court ruling granting states more leeway, and that will cut the federal costs by $84 billion, the Congressional Budget Office said in the biggest changes from earlier estimates.
Republicans have insisted that “Obamacare” will actually raise deficits — by “trillions,” according to presidential candidate Mitt Romney. But that’s not so, the budget office said.
The office gave no updated estimate for total deficit reductions from the law, approved by Congress and signed by Obama in 2010. But it did estimate that Republican legislation to repeal the overhaul — passed recently by the House — would itself boost the deficit by $109 billion from 2013 to 2022.
“Repealing the (health care law) will lead to an increase in budget deficits over the coming decade, though a smaller one than previously reported,” budget office director Douglas Elmendorf said in a letter to House Speaker John Boehner, R-Ohio.
The law’s mix of spending cuts and tax increases would more than offset new spending to cover uninsured people, Elmendorf explained.
Tuesday’s budget projections were the first since the Supreme Court upheld most of the law last month but gave states the option of rejecting a planned expansion of Medicaid for their low-income residents. As a consequence, the budget office said the law will cover fewer uninsured people.
Thirty million uninsured people will be covered by 2022, or about 3 million fewer than projected this spring before the court ruling, the report said.
As a result, taxpayers will save about $84 billion from 2012 to 2022. That brings the total cost of expanding coverage down to $1.2 trillion, from about $1.3 trillion in the previous estimate.
The Congressional Budget Office has consistently projected that Obama’s overhaul will reduce the deficit, although previous estimates aren’t strictly comparable with Tuesday’s report because of changes in the law and other factors.
At the time it was approved in 2010, CBO estimated the law would reduce the deficit by $143 billion from 2010 to 2019. And CBO estimated that last year’s Republican repeal legislation would increase deficits by $210 billion from 2010 to 2021.
That may sound like a lot of money, but it’s actually a hair-thin margin at a time when federal deficits are expected to average around $1 trillion a year for the foreseeable future.
When the law is fully in effect, 92 percent of citizens and legal residents are estimated to have coverage, as compared to 81 percent now.
Democrats hailed Tuesday’s estimates as vindication for the president. “This confirms what we’ve been saying all along: the Affordable Care Act saves lots of money,” said Senate Majority Leader Harry Reid, D-Nev.
Actually, the government will spend more. It just won’t go onto the national credit card because the health care law will be paid for with a combination of spending cuts and tax increases.
GOP leaders sought to shift attention from claims about the deficit and focused instead on the additional spending. “What we know from today’s CBO report … is that the new health care law is dramatically increasing health care spending and costs,” said Senate Republican leader Mitch McConnell of Kentucky.
Republicans said they remain unswervingly committed to repealing what they dismiss as “Obamacare.” When combined with other budget-cutting measures, GOP leaders say that repeal will ultimately reduce deficits. Romney says if elected he will begin to dismantle the law his first day in office.
Medicaid has been one big question hanging over the future of Obama’s law since the Supreme Court ruled.
Some GOP-led states, such as Texas and Florida, say they will not go forward with the expansion. Others are uncommitted, awaiting the voters’ verdict on Obama in November.
Although the federal government would bear all of the initial cost of that expansion, many states would have to open their Medicaid programs to low-income childless adults for the first time.
CBO analysts did not try to predict which specific states would jump in and which would turn down the Medicaid expansion. Instead, they assumed that many states would eventually cut deals with the federal government to expand their programs to some degree.
As a result, the budget office estimates that more than 80 percent of the low-income uninsured people eligible under the law live in states that partially or fully expand their programs.
The big coverage expansion under the law doesn’t start until 2014, with middle-class uninsured people signing up for subsidized private plans and more low-income people picked up through Medicaid.
Associated Press writer Laurie Kellman contributed to this report.