CBO: Lower costs, fewer covered after court ruling on Obama health law

Last month’s Supreme Court ruling that states can refuse to expand Medicaid under President Obama’s health care law means 3 million fewer people will have health coverage — but will end up saving the federal government $84 billion because it will no longer have to pay for them, according to the latest estimate Tuesday from Congress’ official scorekeeper.

With a handful of states already declining to expand their Medicaid programs, some analysts had expected the court’s ruling to balloon the cost of the law as more people got pushed into health exchanges, which are more expensive than Medicaid coverage.

But the Congressional Budget Office said it expects 6 million fewer people to be covered by Medicaid and the Children’s Health Insurance Program, and only 3 million of them will be eligible for coverage through the law’s subsidized health exchanges.

The cost of the higher exchange payments will be more than offset by the fewer people insured over the next decade, CBO said.

President Obama’s aides pointed to another finding — that repealing the law, as Republicans want to do, would actually increase the deficit by $109 billion between now and 2022.

“This report affirms that repealing the health care law would deny tax credits for millions of middle class families and result in higher deficits and fewer Americans with insurance,” Deputy Chief of Staff Nancy-Ann DeParle wrote on the White House blog.

The justices upheld most of the Affordable Care Act last month but ruled that states won’t lose all their Medicaid funding if they don’t participate in a massive expansion of the program. Republican governors in five states have vowed to opt out so far and others are still considering.

The CBO warned that recalculating the cost to the government is a tricky task without knowing each state’s participation plan. The agency reached its calculation by averaging together various scenarios — instead of relying on state-by-state predictions — but warned against putting too much faith in its conclusion.

By refusing to participate in the Medicaid expansion, states will dramatically change the insurance landscape Democrats envisioned when they passed the law.

Residents who aren’t eligible for Medicaid at current levels but remain below the poverty line will be left without affordable health coverage — resulting in savings for the government — while those making between 100 percent and 133 percent of the poverty line will be eligible for tax credits on the exchanges, becoming more expensive for the government than if they had enrolled in Medicaid.

Washington has been anticipating the cost recalculation since the Supreme Court ruling, as the price of Mr. Obama’s biggest domestic achievement remains a charged topic amid tensions over deficit spending by the federal government.

American Action Forum President and former CBO Director Doug Holtz-Eakin, who served under President George W. Bush, said he wasn’t surprised by the CBO’s conclusion, even though his group has predicted that the law could cost $72 billion to $80 billion more through 2021.

“They really don’t have a good feel for what the future is,” he said. “It’s a partial analysis and not a full one and it’s pretty uncertain.”