(This story was updated at 6 p.m. ET.)
Over the next decade, the Affordable Care Act's insurance provisions will cost the federal government $136 billion more than expected, according to the latest report from the Congressional Budget Office.
However, those coverage measures, including subsidized individual coverage and expanded Medicaid, are still running at a lower cost than expected compared with initial estimates in March 2010, when the law went into effect. Most of the recently identified higher costs come from the ACA's Medicaid expansion, in which states continue to enroll more low-income people than originally predicted.
Between 2016 and 2025, the federal government will spend $1.34 trillion on the ACA's primary health coverage provisions. That mostly includes subsidies for the marketplaces and Medicaid expansion, and is partially offset by revenue-generating measures such as penalties tied to the individual and employer mandates. That total is up from the CBO's projection last March of $1.2 trillion but nearly identical to the $1.35 trillion estimate made in January 2015. The shift underscores how difficult it is for economists to predict the costs of a healthcare law that has evolved every year.
The CBO, a legislative law-scoring body, also released updated figures on federal healthcare programs, showing that spending on Medicare, Medicaid, the ACA's exchanges and the Children's Health Insurance Program will total $15.56 trillion over the next decade, down slightly from its January estimate of $15.61 trillion.
Notably, the agency lowered the country's revenue projections by $67 billion over the next decade, and the ACA's risk-adjustment program was a major factor. Risk adjustment transfers money from health insurers that had low-cost, healthier enrollees to plans that enrolled higher-cost, sicker people. Analysts said fewer plans are included in the risk-adjustment program than it had anticipated.
The Obama administration has hailed the successes of the ACA, which just hit its six-year anniversary, mostly through the millions of people who have received some sort of health insurance and the fact that people cannot be denied coverage based on their medical history. The exchanges also receive a lot of the attention, and scrutiny, but the CBO's report shows that Medicaid has been a leading force in reducing the nation's uninsured rate.
Thirty-one states and the District of Columbia have expanded Medicaid eligibility, and by 2026, the CBO expects 80% of people who fit those criteria will live in states that have expanded Medicaid. The federal government pays for the entire cost of the expansion through this year. By 2020, the government will cover 90%.
The expected costs of Medicaid expansion during the next 10 years will fall just short of $1 trillion, according to the CBO. That compares with $803 billion spent on premium and cost-sharing subsidies in the ACA's exchanges, the Basic Health Program and other exchange-related provisions.
Elaborating on January's update, the CBO said it expects that 12 million people will be enrolled in the marketplaces by the end of 2016, and that figure will not exceed 19 million in any year over the next decade. That's partially because the agency believes many of the current marketplace enrollees are low-income and live in states that may expand Medicaid eligibility, prompting them to switch.
The design of marketplace policies may also change in the near term, as the CBO expects there could be some consumer blowback to the high-deductible, narrow-network exchange plans.
In an effort to keep premium prices down, many insurers selling policies on the exchanges have instituted high upfront costs and designed their plans to have limited networks of doctors and hospitals. The CBO said premiums could “rise more rapidly” between 2017 and 2021 because insurers may “decide to increase provider payment rates or broaden their networks…and to raise their premiums accordingly.”
The CBO also released numbers on the entire U.S. health insurance market for people younger than 65. The group said 155 million people will have employer-based coverage throughout 2016, while 68 million will have Medicaid plans. Approximately 22 million Americans will sign up in the individual market, and that includes about 9 million people who enroll off the exchanges, many of whom earn too much to qualify for subsidies and directly buy plans from insurers.
Although the CBO expects most people will continue to receive insurance through their jobs over the next decade, there could be some migration to the public exchanges as the new markets stabilize.
“More employers are expected to respond to the availability of coverage through the marketplaces by declining to offer insurance to their employees,” the CBO said. “As employers change their insurance offerings, some of their employees are expected to enroll in coverage through the marketplaces.”
Employers have changed their benefits partially because of the ACA's so-called “Cadillac” tax. The CBO found that the excise tax on high-cost employer plans would generate $79 billion of revenue from 2020 through 2026, and that includes an estimated increase in taxable income as employers shift money from health benefits to salaries. Employers, unions and lobbyists pressured Congress last year to repeal the tax, which was supposed to go into effect in 2018. Congress decided to delay the Cadillac tax by two years.
CBO Director Keith Hall asked Congress this week for a slightly bigger budget next year, similar to his plea from last year. Some of the new funding would go toward hiring three new analysts who would spend their time analyzing healthcare trends and the budgetary impacts of modifying or replacing the ACA. The CBO also intends to spend more time on “dynamic analysis” of economic policies.