CBO Update Shows Lower Costs for the New Health Care Law

Yesterday, the Congressional Budget Office released updated cost estimates for some parts of the Affordable Care Act. In this update,  CBO projects that net spending on several parts of the health care law are about $50 billion less than it projected last year. That partly reflects CBO’s confirmation of a trend we’ve been following – slower growth in health insurance premiums. CBO said:

“By 2021, premiums are now estimated to be about 8 percent lower than CBO estimated in March 2011. That change reduces the estimated costs of the coverage provisions of the ACA.”

This suggests that taxpayers will save $50 billion more, on net, through 2021 and Americans will pay even less for private insurance than CBO previously projected – which is good news.

It is also important to be clear about what the CBO report does not say.

The CBO update does not provide new estimates of the entire cost of the Affordable Care Act. That’s because the new report looks at how much the government will spend on discrete elements of the new law, but not how much the government will save due to other parts of the law such as efforts to slow Medicare cost growth and reduce fraud. 

The last time the Congressional Budget Office looked at the whole law was when the House of Representatives tried to repeal the Affordable Care Act. And that report found that the Affordable Care Act reduces the deficit by over $100 billion in the next ten years and even more in the subsequent decade.  Here’s what CBO had to say then:

“CBO estimates that enacting H.R. 2 would increase federal deficits during the decade following the initial 10-year period . . . CBO anticipates that enacting H.R. 2 would probably continue to increase budget deficits relative to those under current law in subsequent decades.”

Today’s report also does not project major changes in the number of workers who will get coverage through their job. At the time of passage CBO projected a change of 3 million people; last year CBO projected 1 million; this year 4 million – out of the roughly 150 million people get insurance through their job today. Other respected independent analysts have concluded that the number of Americans who get their health insurance at work will not change in a significant way. Here are just two examples:

The Urban Institute: "Some have argued that the Patient Protection and Affordable Care Act would erode employer-sponsored insurance (ESI) by providing incentives for employers to stop offering coverage. Others have claimed that most businesses would face increased costs as a result of reform. A new study finds that overall ESI coverage under the ACA would not differ significantly from what coverage would be without reform."

Thomson Reuters Consulting:  “Few employers seem willing to wash their hand of [offering health benefits…Of our clients, none of them have alluded to dropping coverage…We’re not seeing 30 percent.  We’re not even seeing five percent.  We have not heard that from one client”
Again, the bottom line is clear: the Affordable Care Act will reduce our deficit, control health care costs, and make health care more affordable.

Again, the bottom line is clear: the Affordable Care Act will reduce our deficit, control health care costs, and make health care more affordable.