CBO: Obamacare Costs Will Be Lower Than Projected

Monday, 14 Apr 2014 09:50 PM

By Cathy Burke

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Obamacare's costs to the federal government are shrinking, the Congressional Budget Office reports.

Congress' nonpartisan spending analysts estimated Monday that the feds will spend about $165 billion less over the next decade on subsidizing health-insurance plans for lower earners than the office projected two months ago, the Wall Street Journal reports.

Total spending on those subsidies is projected at $1.032 trillion between 2015 and 2024.

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The savings come about mostly because insurance companies have redesigned plans on the government-run exchanges to shave costs, narrowing networks of doctors and lowering reimbursement rates, The Journal noted.

The lower spending projections on Obamacare also will help shrink federal budget deficits, Business Insider reports.

The CBO said the federal government will now run a deficit of $492 billion in fiscal year 2014, almost a 33 percent decrease from fiscal 2013.

Through both the federal and state insurance exchanges and the expansion of Medicaid under the law, the CBO estimates that more than 12 million people now have insurance who wouldn't otherwise have been covered, Business Insider reports.

The CBO still sees premiums rising over the next decade, but not as high as previously thought, the Journal said.

The CBO didn't offer specific projections for rates. But it did translate how lower-than-expected premiums would cut tax subsidies for plans, saying the average size of a federal subsidy for each qualified enrollee in 2015 will be $4,250 rather than $5,330. In 2024, that will be $7,170 instead of $8,370.

White House spokesman Jay Carney said the report "demonstrates the Affordable Care Act is working," the Journal reports.

Others were more cautious.

"It's hard to say whether the 2014 rates anticipated the current age and health mix of enrollees," analyst Richard Evans, of SSR Health, told the Journal. "Our guess is that the premiums will be too low for the issuers to earn a sustainable margin."

Some Republican lawmakers pointed out that the CBO didn't say premiums would decrease.

"'Lower than expected' is still not the same as 'lower,'" said Don Stewart, deputy chief of staff for Senate Minority Leader Mitch McConnell. "Costs and premiums are still going up."

The office also said it expected that penalties paid by individuals who chose to forgo health insurance and larger employers who didn't offer it to all of their workers would be lower than previously thought.

The CBO estimates that in all, the federal government will collect $46 billion in fines from people through 2024, down from $52 billion, and $139 billion from employers, down from $151 billion.

Meanwhile, McClatchy News Service reported that deeper in the CBO’s report, details show why Obamacare is such a hard sell.

For example, it reported, the CBO thinks the benchmark premium, derived from the second-lowest-cost plan offered on health exchanges, will rise slightly next year and then by about 6 percent a year from 2016 to 2024 – a rise that opponents are sure to seize on.

Backers, however, are likely to respond that the rise in the benchmark premium is still 15 percent below a comparable estimate made by the agency in November 2009.

That's where it's hardest to assess Obamacare's effectiveness, the McClatchy report noted: many of Obamacare's benefits involve tradeoff costs.

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