The insurance coverage provisions of the Patient Protection and Affordable Care Act are expected to cost roughly $100 billion less over the next decade than previously projected, according to the latest analysis from the Congressional Budget Office. The nonpartisan agency now expects that the federal government will spend $1.35 trillion through 2024, primarily on expanding Medicaid and subsidizing insurance policies purchased through the state and federal exchanges.
The reduction is even steeper when compared with projections made at the time of the law's passage. The CBO originally anticipated costs of just over $700 billion between 2015 and 2019, but that figure has now been reduced by 20%.
The drop-off is due in part to lower than expected exchange enrollments. The CBO now projects that 12 million Americans will purchase exchange policies in 2015, down 1 million from a projection released last April. In addition, the CBO now projects 21 million exchange enrollments in 2016, 3 million fewer than previously estimated. The enrollment numbers mean the government will spend about $39 billion less through 2024 compared with the April estimate.
The lower costs also stem from a higher than expected share of exchange customers enrolling in bronze plans, which are designed to cover 60% of medical costs. Those individuals are foregoing cost-sharing subsidies, which reduce out-of-pocket costs but are only available to customers who purchase a plan with an actuarial value of at least 70%.
The CBO noted that 15% of exchange customers who were eligible for subsidies, which are available to households with incomes up to 400% of the federal poverty threshold, opted for bronze plans during the first open-enrollment period. That means 3 million individuals annually will decline to take advantage of cost-sharing subsidies, thus saving the federal government money.
“Those data suggest that a significant number of people are selecting plans that minimize their monthly premium payments, even if the amounts they ultimately pay for healthcare (including out-of-pocket payments) exceed what they would pay under silver plans,” the CBO analysis noted.
Projected costs under the ACA were also reduced because of the overall slowdown in healthcare spending since passage of the federal healthcare law. The CBO indicated that the agency has reduced projected costs for both exchange subsidies and per-beneficiary Medicaid spending by 10% to 15% for 2016.
“Although views differ on how much of the slowdown is attributable to the recession and its aftermath and how much to other factors, the slower growth has been sufficiently broad and persistent to persuade the agencies to significantly lower their projections of federal health care spending,” the analysis noted.
Partially offsetting the reduction in anticipated costs is higher than projected enrollment in Medicaid and the Children's Health Insurance Program. Expenditures on those programs through 2024 are now expected to be roughly $60 billion higher than previously anticipated.
The CBO estimates that 8 million more Americans enrolled in those programs than would have without the existence of the Affordable Care Act. That figure is expected to reach at least 13 million by 2016. Federal outlays for Medicaid totaled just over $300 billion last year. That was 14% more than in 2013, reflecting the expansion of eligibility for individuals with incomes up to 138% of the federal poverty level, which just over half the states have enacted.
The CBO projects that 36 million non-elderly adults will lack insurance coverage in 2015—19 million fewer than if the Affordable Care Act had not been enacted. The number of uninsured is expected to stabilize between 29 million and 31 million by 2025.
Of the remaining uninsured, 30% are expected to be unauthorized immigrants who aren't eligible for exchange policies or Medicaid. In addition, roughly 40% will be individuals who opt to forego coverage even though they have access to coverage that's deemed affordable through work or the exchanges.
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