Estimates for the Insurance Coverage Provisions of the
Affordable Care Act Updated for the Recent Supreme Court Decision
July 24,
2012 - CBO
On June 28, 2012, the Supreme Court issued a decision that essentially made
the expansion of the Medicaid program under the Affordable Care Act (ACA) a
state option. CBO and the staff of the Joint Committee on Taxation (JCT) have
updated their estimates of the budgetary effects of the health insurance
coverage provisions of the ACA to take into account the Supreme Court decision.
This report describes those new estimates, how they were derived, and how they
differ from the previous ones. The figures do not include the budgetary impact
of other provisions of the ACA.
CBO and JCTfs previous estimate of the effects on insurance coverage of the
ACA, before the Courtfs decision, were reflected in the projections contained in
CBOfs Updated Budget Projections: Fiscal Years
2012 to 2022 (March 2012) and further described in Updated Estimates for the Insurance Coverage
Provisions of the Affordable Care Act (March 2012).
What Is the Net Budgetary Impact of the Coverage Provisions Taking Into
Account the Supreme Courtfs Decision?
CBO and JCT now estimate that the insurance coverage provisions of the ACA
will have a net cost of $1,168 billion over the 2012–2022 period—compared with
$1,252 billion projected in March 2012 for that 11-year period—for a net
reduction of $84 billion. (Those figures do not include the budgetary impact of
other provisions of the ACA, which in the aggregate reduce budget deficits.)
The projected net savings to the federal government resulting from the
Supreme Courtfs 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.
How Will States Respond to the Supreme Courtfs Decision Regarding the
Medicaid Expansion?
The Supreme Courtfs decision has the effect of allowing states to choose
whether or not to expand eligibility for coverage under their Medicaid program
pursuant to the ACA. Under that law as enacted but prior to the Courtfs 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. Hence, CBO and JCTfs 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 Courtfs 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.
How Does Insurance Coverage Change After the Supreme Courtfs Decision?
CBO and JCT now estimate that fewer people will be covered by the Medicaid
program, more people will obtain health insurance through the newly established
exchanges, and more people will be uninsured. The magnitude of those changes
varies from year to year.
In 2022, for example, Medicaid and the Childrenfs Health Insurance Program
(CHIP) are expected to cover about 6 million fewer people than previously
estimated, about 3 million more people will be enrolled in exchanges, and about
3 million more people will be uninsured. Although the estimates discussed here
are dominated by the movements of people losing eligibility for Medicaid, other
smaller shifts in coverage are expected to occur as well. (The changes in
coverage reflect the net effect of all estimated changes stemming from the
Courtfs decision, not just the movements of people who lose eligibility for
Medicaid. For example, relative to prior estimates, not all of the increases in
enrollment in exchanges and in the uninsured are among people who would have
been newly eligible for Medicaid.)
Why are the Projected Medicaid and CHIP Savings Stemming from the Supreme
Courtfs Decision Greater than the Projected Additional Costs of Subsidies
Provided through the Exchanges?
Federal spending over the 2012–2022 period for Medicaid and CHIP is now
projected to be $289 billion less than previously expected, whereas the
estimated costs of tax credits and other subsidies for the purchase of health
insurance through the exchanges (and related spending) have risen by $210
billion. Small changes in other components of the budget estimates account for
the remaining $5 billion of the difference.
The key factors leading to that result are as follows:
- Only a portion of the people who will not be eligible for Medicaid as a
result of the Courtfs decision will be eligible for subsidies through the
exchanges. According to CBO and JCTfs 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
Courtfs 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
Courtfs 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.