In the wake of the United States Supreme Court decision regarding the Affordable Care Act (ACA) on June 28, 2012, the Congressional Budget Office and the Joint Committee on Taxation have abridged their estimates of the budgetary effects of the health insurance coverage provisions.
The Court’s decision delegated the option for Medicaid expansion to the states, therein prompting the CBO and the JCT to re-evaluate their estimations. Their report, released July 24 on the CBO website, articulates how the new numbers were derived and how they diverged from the previous assessments.
The organizations now estimate that the insurance coverage provisions presented in ACA legislation will have a net cost of $1,168 billion spanning from 2012-2022 for a net reduction of $84 billion. Projections in the recanted March reports casted the net cost at $1,252 billion. The CBO and JCT attributed this change as such: “The projected net savings to the federal government resulting from the Supreme Court’s decision arise because the reductions in spending from lower Medicaid enrollment are expected to more than offset the increase in costs from greater participation in the newly established exchanges.”
Regarding how states will respond to the SCOTUS ruling on Medicaid expansion, the CBO and the JCT altered their estimates based on the fact that the provision was not made mandatory.
“Under that law as enacted but prior to the Court’s ruling, the Medicaid expansion appeared to be mandatory for states that wanted to continue receiving federal matching funds for any part of their Medicaid program,” the CBO noted. “Hence, CBO and JCT’s previous estimates reflected the expectation that every state would expand eligibility for coverage under its Medicaid program as specified in the ACA. As a result of the Court’s decision, CBO and JCT now anticipate that some states will not expand their programs at all or will not expand coverage to the full extent authorized by the ACA. CBO and JCT also expect that some states will eventually undertake expansions but will not do so by 2014 as specified in the ACA.”
Insurance coverage stands to change in light of the SCOTUS decision in that fewer people are expected to be covered by the Medicaid program the organizations hypothesize. More people will obtain heath insurance by way of the new exchanges and more people will be uninsured, the committee proposed, and the magnitude of these alterations will be sure to vary from year to year.
Lastly, the organizations referenced how the projected Medicaid and CHIP savings arising from the SCOTUS ruling are greater than the additional costs of the subsidies provided through the exchange. The organizations now approximate that federal spending during the period between 2012-2022 will be $289 billion less than what was assumed before. Other costs of tax credits and subsidies for the purchase of health insurance via exchanges will rise to $210 billion in the newer appraisal. Transformations in the budget account for the other $5 billion.
Provided were these factors to further explain the aforementioned results:
- Only a portion of the people who will not be eligible for Medicaid as a result of the Court’s decision will be eligible for subsidies through the exchanges. According to CBO and JCT’s estimates, roughly two-thirds of the people previously estimated to become eligible for Medicaid as a result of the ACA will have income too low to qualify for exchange subsidies, and roughly one-third will have income high enough to be eligible for exchange subsidies. In addition, those who become eligible for subsidies will have to pay a portion of the exchange premium themselves, which will affect their decisions about whether to enroll in the exchanges.
- For the average person who does not enroll in Medicaid as a result of the Court’s decision and becomes uninsured, federal spending will decline by roughly an estimated $6,000 in 2022.
- For the average person who does not enroll in Medicaid as a result of the Court’s decision and enrolls in an exchange instead, estimated federal spending will rise by roughly $3,000 in 2022 — the difference between estimated additional exchange subsidies of about $9,000 and estimated Medicaid savings of roughly $6,000.
- With about 6 million fewer people being covered by Medicaid but only about 3 million more people receiving subsidies through the exchanges and about 3 million more people being uninsured -- and because the average savings for each person who becomes uninsured are greater than the average additional costs for each person who receives exchange subsidies -- the projected decrease in total federal spending on Medicaid is larger than the anticipated increase in total exchange subsidies.
The previous March reports were the CBO’s Updated Budget Projections: Fiscal Years 2012 to 2022 and the Updated Estimates for the Insurance Coverage Provisions of the Affordable Care Act.