CBO lowers projection for ACA implementation cost again

The Congressional Budget Office (CBO) has lowered its projection for the cost of implementing the Affordable Care Act (ACA) yet again.

In a report released Monday, the CBO pegged the cost of health insurance subsidies, Medicaid and Children's Health Insurance Program (CHIP) outlays and small-employer tax credits at $648 billion for 2015 to 2019. Subtract from that the $142 billion in payments to the government due to the individual mandate, employee mandate and Cadillac tax, and the cost of ACA implementation over that five-year span comes out to $506 billion, the report said.

The latest figure represents a drop of nearly 30 percent from the CBO's initial projection of $710 billion for 2015 to 2019 when the ACA became law in 2010. The projected cost of implementing the ACA until 2025 has also decreased to $1.21 trillion from the CBO's estimate of $1.35 trillion in January.

The report included three key reasons for the lower estimate.

  • Private insurers selling policies on the state and federal insurance exchanges charged lower premiums than expected. Competition helped keep a lid on ACA plan premiums during the most recent open enrollment period, FierceHealthPayer previously reported.
  • A projected decrease of 2 million in the expected number of Medicaid and CHIP enrollees by 2025, as a result of fewer individuals losing employer-based insurance.
  • The historic low rate of healthcare spending growth. The CBO wasn't sure if the recession or another set of factors caused the growth rate to slow, but the office did say that slow growth in healthcare spending is likely here to stay.

In January, the CBO reported that the slowdown in healthcare spending growth, combined with the decrease in the number of uninsured Americans, would help trim $175 billion from the federal budget deficit by 2024.

Monday's report included several revisions from the January report. The CBO now expects the government to spend $849 billion in insurance exchange subsidies from 2016 to 2025, which is 20 percent lower than its January estimate, and $847 billion on Medicaid and CHIP, which is 8 percent lower than January's figure. On the other hand, lower premiums mean less revenue collected as a result of the Cadillac tax. 

For more:
- here's the CBO report (.pdf)

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