Workplace Issues

Budget Watchdogs See Further Drop in Obamacare Costs

The Affordable Care Act will eat up less of the federal government's budget than the Congressional Budget Office originally forecast.
Matthew HellerMarch 10, 2015
Budget Watchdogs See Further Drop in Obamacare Costs

In their latest forecast, federal budget watchdogs have sharply reduced the projected costs of the Affordable Care Act, reflecting slower-than-expected growth in health-care costs and lower-than-expected enrollment in coverage through federal exchanges.

The Congressional Budget Office and the Joint Committee on Taxation projected in a report released Monday that Obamacare will result in a net cost to the federal government of $1,207 billion over the 2016–2025 period—$142 billion (or 11%) less than they agencies estimated in January.

For 2015 to 2019, the projection is $506 billion, compared with the CBO’s forecast of $710 billion when the law was signed in March 2010.

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According to the CBO, the government will spend 20% less on subsidies provided to individuals who purchase health insurance through the federal health exchange, or around $209 billion in lower-than-projected costs over the coming 10 years.

“Monday’s report illustrates two dynamics at play. First, health-care costs are rising more slowly than previous forecasts assumed. And slightly fewer people than anticipated are signing up for health insurance through federal exchanges,” The Wall Street Journal explained.

Growth in private health insurance spending per enrollee over the 2006-2013 period averaged 1.8% per year, compared with an average rate of 5% per year during the 1998-2005 period, according to the report.

In the past, the WSJ noted, the CBO had assumed that the recent slowdown in health-care inflation was temporary and would quickly reverse. The latest projections assume that health-care inflation will rise more modestly, though the CBO warned that “projections of spending by private health insurers are highly uncertain.”

“In CBO and JCT’s view, the current projections reflect the middle of a wide distribution of possible outcomes,” the report says.

The Obama administration is now projecting that between 9 million and 9.9 million people will have health insurance through the Affordable Care Act by the end of this year — substantially lower than an earlier estimate.

The CBO also forecast Monday that taxes on so-called “Cadillac” high-premium insurance plans will bring in 41% less money, or $62 billion in reduced revenues.