The Latest on the Affordable Care Act

Although it may be difficult to get an updated comprehensive score of the Affordable Care Act from CBO, CBO has updated its estimate of the coverage provisions of the Affordable Care Act with each new baseline. This baseline is no exception.

The gross cost of the coverage expansions from Medicaid, the new health insurance exchange subsidies, and tax credits for small business coverage stands at $1.8 trillion over ten years. The net cost of the coverage provisions -- which includes the related mandate penalties, excise tax on high-cost health plans, and related effects on spending and (mostly) revenue -- stands at $1.36 trillion. Compared to the previous estimate in February 2013, the net cost of the coverage provisions is about $35 billion higher despite the gross cost of coverage expansion being $80 billion lower.

Cost of Coverage Provisions (2014-2023 in billions)
  May 2013 February 2013
Medicaid and CHIP Expansion $710 $638
Exchange Subsidies $1,075 $1,216
Small Business Tax Credits $14 $26
Gross Cost $1,798 $1,879
Individual Mandate Penalties -$45 -$52
Employer Mandate Penalties -$145 -$150
High-Cost Insurance Excise Tax -$80 -$137
Secondary Effects of Coverage Provisions -$171 -$211
Net Cost $1,363 $1,329

Source: CBO

An accompanying CBO blog post details the reasons why these projections have changed since February. Medicaid outlays are up and exchange subsidies are down because CBO projects that more people will be in states that expand Medicaid, taking people with incomes between 100 and 133 percent of the poverty line out of the exchanges. The net effect reduces the cost of these two expansions by $70 billion. The cost of small business credits for offering insurance coverage is $10 billion lower due to businesses being slower than anticipated in using those credits.

The reduction in the gross cost of coverage, though, is exceeded by the reductions in the savings from related provisions. Individual mandate penalties are down due to recently proposed regulations that expand exemptions from the mandate. Employer mandate penalties are down due to an increased number of people projected to receive coverage through their employer. Relatedly, secondary budgetary effects -- which mainly reflect new revenue from people shifting their compensation from non-taxable health insurance to taxable income due to their health insurance plan not having as much value or their not receiving employer coverage -- also produce fewer savings because of the increase in employment-based health coverage. Finally, the revenue from the excise tax is down because of slower-than-anticipated premium growth, which results in fewer health plans being subject to the tax.

Earlier this week, CBO also responded to a request from House Budget Committee Chairman Paul Ryan CBO for an updated score of legislation to repeal the Affordable Care Act, which the House is expected to pass today. CBO said it was unable to do a cost estimate at the moment given the other things they are currently working on.  However, they explain the estimate would likely be similar to the one released last July, which found that repeal would increase the deficit by $109 billion from 2013-2022. They noted that the net cost of coverage provisions were $30 billion higher in the 2014-2022 period than they were estimated to be last July and said that the other parts of the legislation (net savings) had likely increased by a similar amount, thus keeping the overall budget impact at a similar magnitude.