State Option for Medicaid Expansion: First the Ruling; Now the Price Tag

The Congressional Budget Office, the official price fixer for Congress, has found that “Federal spending under the health care law is likely to be $84 billion lower over the next 11 years than previously projected now that states can opt out of the law’s Medicaid expansion.”
See the report at the CBO website here – http://www.cbo.gov/publication/43472 .

Here’s the brief, from the CBO –

What Is the Net Budgetary Impact of the Coverage Provisions Taking Into Account the Supreme Court’s Decision?

CBO and JCT now estimate that the insurance coverage provisions of the ACA will have a net cost of $1,168 billion over the 2012–2022 period—compared with $1,252 billion projected in March 2012 for that 11-year period—for a net reduction of $84 billion. (Those figures do not include the budgetary impact of other provisions of the ACA, which in the aggregate reduce budget deficits.)

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.

How Will States Respond to the Supreme Court’s Decision Regarding the Medicaid Expansion?

The Supreme Court’s decision has the effect of allowing states to choose whether or not to expand eligibility for coverage under their Medicaid program pursuant to the ACA. Under that law as enacted but prior to the Court’s ruling, the Medicaid expansion appeared to be mandatory for states that wanted to continue receiving federal matching funds for any part of their Medicaid program. Hence, CBO and JCT’s previous estimates reflected the expectation that every state would expand eligibility for coverage under its Medicaid program as specified in the ACA. As a result of the Court’s decision, CBO and JCT now anticipate that some states will not expand their programs at all or will not expand coverage to the full extent authorized by the ACA. CBO and JCT also expect that some states will eventually undertake expansions but will not do so by 2014 as specified in the ACA.

How Does Insurance Coverage Change After the Supreme Court’s Decision?

CBO and JCT now estimate that fewer people will be covered by the Medicaid program, more people will obtain health insurance through the newly established exchanges, and more people will be uninsured. The magnitude of those changes varies from year to year.

In 2022, for example, Medicaid and the Children’s Health Insurance Program (CHIP) are expected to cover about 6 million fewer people than previously estimated, about 3 million more people will be enrolled in exchanges, and about 3 million more people will be uninsured. Although the estimates discussed here are dominated by the movements of people losing eligibility for Medicaid, other smaller shifts in coverage are expected to occur as well. (The changes in coverage reflect the net effect of all estimated changes stemming from the Court’s decision, not just the movements of people who lose eligibility for Medicaid. For example, relative to prior estimates, not all of the increases in enrollment in exchanges and in the uninsured are among people who would have been newly eligible for Medicaid.)

NAHAM News has previously reported on the Supreme Court’s ruling that states may opt out of the Affordable Care Act’s Medicaid expansion.

Find a KHN report on the new option for states here –
http://www.kaiserhealthnews.org/Stories/2012/July/02/state-costs-Medicaid-expansion.aspx .

Kaiser Health News reports “CBO Reports On Impact Of Medicaid Ruling, Health Law Repeal Effort”.

See that article, by Julie Appleby (July 24, 2012) here – http://capsules.kaiserhealthnews.org/index.php/2012/07/cbo-reports-on-impact-of-medicaid-ruling-health-law-repeal-effort/.

The CBO estimated that –

• 6 million fewer low-income Americans will gain coverage through Medicaid and the Children’s Health Insurance Program by 2022 now that the Supreme Court has ruled that the law went too far in trying to force all states to expand Medicaid eligibility.

• About 3 million of them are likely to remain uninsured, while another 3 million will purchase coverage through new marketplaces called exchanges. Those buying coverage would receive subsidies to help cover the cost.

• Although the subsidies are more expensive per person than Medicaid, the cost to the federal government would fall because only about half of those losing Medicaid eligibility would be eligible to obtain subsidized private coverage.

KHN reminds us that the in the court case, states argued successfully that the federal law was overly coercive because it would have withdrawn all Medicaid funding from states that did not expand eligibility for Medicaid, a joint federal-state program.

The CBO did not try to predict which states would decide not to expand Medicaid. Instead, it used an estimate of the share of the population that might be affected, ran it through various scenarios, and settled on a middle ground.

Because “states will face different costs and benefits from expanding their Medicaid programs and will have different preferences about whether or to what degree to do so,” the analysis should not be considered a “definitive interpretation” of how the federal low will be implemented, the report cautioned.

Also, as a reminder for those following this issue –

The federal law sought to expand eligibility to all Americans earning up to 133 percent of the federal poverty line, more than $14,800 for individuals and about $25,400 for a family of three.

Many states do not currently cover adults without dependent children, no matter how low their income.

In another, separate report, CBO has estimated that repeal of the health care law as proposed in a bill passed July 11 by the Republican-controlled House would add $109 billion to the federal deficit between 2013 and 2022.

Find that report here - http://www.cbo.gov/publication/43471 .

Here’s the brief –

“What Would be the Effect of Repealing the ACA on Discretionary Spending? In addition to those effects on direct spending and revenues, by CBO’s estimates, repeal of the ACA would reduce the need for appropriations to the Internal Revenue Service by between $5 billion and $10 billion over 10 years. Repealing the ACA would also reduce the need for appropriations to the Department of Health and Human Services by between $5 billion and $10 billion over 10 years, CBO estimates. Such savings might be reflected in reductions in total discretionary spending, or they might free up room for additional spending for other purposes under the caps on discretionary appropriations that were established by the Budget Control Act of 2011. H.R. 6079 would also repeal a number of authorizations for appropriations, which, if left in place, might or might not result in additional appropriations.”