The shrinking cost of Obamacare
The projected costs of Obamacare are dropping.
That's the conclusion of the nonpartisan Congressional Budget Office, which forecasts that the federal health program will cost $142 billion, or 11 percent, less over the next decade than it had earlier projected. The agency cited two primary reasons for the lower-than-expected cost: a slower rise in health care premiums, and fewer than expected enrollees.
Spending by private health insurers rose less in 2013 than in previous years, which the agency said was far below its own estimates. That, in turn, is leading to smaller increases in premiums, while slightly fewer people are expected to sign up via the exchanges than the CBO had earlier forecast.
Given that critics have targeted the health care overhaul as unaffordable, the projection of lower spending could be seen as a positive for the law.
Still, the projected reduction in spending only makes a slight dent in the overall cost, with the total outlay now pegged at $1.21 trillion over the next decade. That's down from the CBO's January estimate of $1.35 billion in costs.
While that's good news for Obamacare supporters, the law, also known as the Affordable Care Act, still facs several challenges. One significant threat is a case now being heard by the Supreme Court, King v. Burwell, which presents a challenge to the tax credits offered to consumers in 34 states who bought health insurance through federally run exchanges.
The decision isn't expected until this summer, but if the court opts to throw out the subsidies that make many Obamacare plans affordable for families, it could leave millions of households on the hook for paying full monthly premiums. About 87 percent of those who have signed up for coverage under the ACA are receiving a subsidy.
As for the projection for lower spending, the CBO said it lowered its projection for health insurance premium hikes over the next decade, noting that the health care insurance industry has entered a slower phase in spending increases. The period between 2006 and 2013 saw spending increases of 1.8 percent per year, compared with increases of 5 percent annually from 1998 to 2005.
Still, the CBO noted that forecasts for spending by private health insurers "are highly uncertain" and that the reasons for the slowdown "are not well understood."
Addressing why fewer people are expected to sign up for Obamacare over the next decade. the report notes that more people already had existing health insurance when the exchanges set up under the program opened than had previously been anticipated. Fewer companies also canceled insurance for their employees than had been earlier projected.
The CBO also expects fewer people to sign up for coverage through Medicaid. That appears to be because more people enrolled in Medicaid before the ACA rolled out than the agency had forecast. Overall, that led the agency to project that "somewhat fewer people" will buy coverage through the exchanges and Medicaid.