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CBO: PPACA Ruling to Cut Spending by $84 Billion

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The recent Supreme Court ruling on the Patient Protection and Affordable Care Act of 2010 (PPACA) could reduce total PPACA insurance coverage provision spending by 6.7%, to a total of $1.2 trillion from 2012 to 2022.

The court ruling should cut PPACA insurance provision implementation costs by about $84 billion, officials at the Congressional Budget Office (CBO) say in a commentary summarizing PPACA ruling impact estimates made by analysts at the CBO and the congressional Joint Committee on Taxation (JCT).

The CBO is a congressional research unit that analyzes budget issues.

The JCT is a congressional research unit that looks at tax issues.

PPACA opponents continue to fight the law in Congress, at the state level, and in the federal courts.

The Supreme Court ruled June 28 only that Congress has the authority to impose taxes on individuals who fail to own a minimum level of health insurance and to use offers of additional Medicaid funding to encourage states to expand Medicaid program eligibility. 

The court ruled Congress did not have the authority to take away existing Medicaid funding to prod states to expand Medicaid eligibility.

The court has not yet ruled on other challenges to the validity of PPACA.

The CBO and JCT analysts looked only at the budget effects of PPACA health insurance provisions, such as the Medicaid expansion provisions, the tax on individuals who fail to meet PPACA health insurance coverage requirements, and provisions that would create new health insurance exchanges, or Web-based health insurance supermarkets.

The analysts say the court ruling would reduce the PPACA-related spending included in the analysis to $1.168 billion over the 11-year 2012-2022 period, from a level of $1.252 projected before the court issued the ruling.

“The projected net savings to the federal government resulting from the Supreme Court’s 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,” CBO officials say in their summary of the analysts’ findings.

The provisions in the Supreme Court ruling, including a ruling provision that limits the ability of the federal government to use Medicaid aid to promote Medicaid expansion, could reduce the number of people covered by Medicaid and the Children’s Health Insurance Program (CHIP) in 2022 to 43 million, from 49 million, officials say.

The ruling could increase the number of people who get commercial coverage through the exchanges to 25 million, from 22 million, and it could increase the number of people who are uninsured to 30 million, from 27 million, officials say.

The number of enrollees in employer-sponsored plans could drop to 157 million, from 160 million.

The CBO and JCT analysts assumed when they came up with their forecasts that, because of a quirk in the PPACA subsidy eligibility rules, some people who will not get Medicaid coverage because of the Supreme Court ruling will have incomes below the tax credit subsidy cut-off, officials say.

“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,” officials say.

In the analyst, the CBO and JCT analysts assume that the government will spend an extra $9,000 for each additional individual who gets coverage through a PPACA exchange in 2022.

“The extra exchange costs per person are larger than the decrease in Medicaid costs per person primarily because, in CBO’s and JCT’s estimation, private health insurance plans in the exchanges will pay providers at higher rates than Medicaid pays and will have higher administrative costs than Medicaid, although there are other, partially offsetting, factors as well,” officials say.


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