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Affordable Care Act Costs Projected to Decline

The cost estimates include spending for subsidies provided through health insurance exchanges and an increase in spending for Medicaid.

New estimates from the Congressional Budget Office and the Joint Committee on Taxation show that coverage provisions under the Affordable Care Act will result in lower net costs to the federal government, according to an April 2014 report from the agencies.

The agencies currently project a net cost of $36 billion for 2014, $5 billion less than the previous projection for the year; and $1,383 billion for the 2015-2024 period, $104 billion less than the previous projections.

The estimates of the net costs for 2014 stem almost entirely from spending for subsidies that are to be provided through health insurance exchanges and from an increase in spending for Medicaid, according to the CBO.

The projected 2015-2024 net costs consist of:

  • Gross costs of $1,839 billion for subsidies and related spending for insurance obtained through the exchanges, Medicaid, the Children’s Health Insurance Program, and tax credits for small employers ($165 billion less than the previous projection); and;
  • A partial offset of $456 billion in receipts from penalty payments, additional revenues resulting from the excise tax on high-premium insurance plans, and the effects on income and payroll tax revenues and associated outlays arising from projected changes in employer coverage ($61 billion less than the previous projection).

Those estimates address only the insurance coverage provisions of the Affordable Care Act and do not constitute all of the act’s budgetary effects. Considering all of the provisions—including the coverage provisions—the CBO and JCT’s most recent comprehensive estimates from July 2012 show that the Affordable Care Act’s overall effect would be to reduce federal deficits.

The CBO and JCT have updated their baseline estimates of the budgetary effects of the Affordable Care Act’s insurance coverage provisions many times since that legislation was enacted in March 2010.

A year-by-year comparison shows that CBO and JCT’s estimates of the net budgetary impact of the Affordable Care Act’s insurance coverage provisions have decreased, on balance, over the past four years.

The decline is due to changes in the law, revisions to the CBO’s economic projections, judicial decisions, administrative actions, new data, numerous improvements in CBO and JCT’s modeling, and lower projected healthcare costs for both the federal government and the private sector.

 
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