Medicaid enrollment drives increased ACA costs

Government spending on insurance coverage provisions in the Affordable Care Act is expected to rise over the next decade thanks to an influx of individuals who are eligible for Medicaid coverage, according to a new report from the Congressional Budget Office (CBO).

Approximately 22 million U.S. residents are expected to have health coverage in 2016 because of the healthcare law, resulting in a net cost of $110 billion to the federal government this year. Although two-thirds of U.S. residents with health coverage will obtain insurance through employer-based plans, one-quarter will be enrolled in Medicaid or the Children's Health Insurance Program (CHIP).

The rise of Medicaid-eligible residents is one of the primary reasons the CBO estimated the net cost of ACA provisions will reach $1.4 trillion over the next decade, $136 billion more than last year's estimate. While Medicaid spending has risen in states that expanded eligibility in 2015, many states ultimately saved money because of a reduction in uncompensated care costs for hospitals.

The CBO predicts an additional 15 million people will be eligible for Medicaid over the next decade through the ACA's optional state expansion provision. The CBO expects that more states will expand Medicaid coverage and by 2026 "about 80 percent of the people who meet the new eligibility criteria will live in states that have expanded Medicaid coverage."

The report also estimates that about 12 million people will be insured through the government's health insurance marketplaces by the end of 2016--a small decrease from the 13 million it estimated several months ago. But the CBO expects that number to increase to between 18 million and 19 million people each year from 2018 to 2026, with 80 to 85 percent of those people receiving federal subsidies.

However, the CBO also noted that the cost of insuring residents over the next three years is 25 percent lower than what was previously estimated just before the law passed in 2010. A response by the Center for American Progress (CAP) emphasizes that statistic, concluding that the ACA has "dramatically exceeded expectations." Previous CBO reports have indicated a slowdown in health spending has led to $175 billion less in projected spending.

"While the ACA coverage expansion adds new costs, total spending for federal health programs is still less than what the CBO projected in January 2009 because of huge savings from Medicare," the organization stated.

To learn more:
- here's the CBO report
- read the CAP response

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