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CBO Lowers Cost of Health Reform Coverage by $50 Billion; Fox & Friends Report Otherwise

March 15, 2012

The Congressional Budget Office projected today that insurance coverage provisions of the Affordable Care Act will cost about $50 billion less than expected during the 2012-2021 period.

The agency also projected that 2 million fewer Americans will be insured; from 32 million to 30 million. (That leaves a significant 27 million of us without insurance—whether by choice or because cost is still a barrier to coverage is the topic of later post.) And by 2016, the CBO estimates that 4 million fewer people will be getting health insurance coverage at work. According to the report; “Fewer people are now expected to obtain health insurance coverage from their employer or in insurance exchanges; more are now expected to obtain coverage from Medicaid or CHIP or from nongroup or other sources. More are expected to be uninsured.”

Now keep in mind that the CBO has released such projections in March 2010 and March 2011 and the numbers move around a bit each time. Calculation methods change, new legislative tweaks add or subtract revenue and each year we get a better idea of how well the economy is recovering (or not).

It’s also important to note that the CBO states that the net costs of the ACA’s insurance coverage provisions “do not include the effects of the many other provisions of the law, including some that will cause significant reductions in Medicare spending relative to that under prior law and others that will generate added tax revenues relative those under prior law.” These include provisions that encourage the formation of accountable care organizations, cost bundling and other care delivery and payment reforms whose savings are impossible to calculate yet. Savings from stepped-up efforts to crack down on Medicare fraud were also not considered.

So where are the cost savings coming from in this year’s projection? A variety of sources, but mostly due to the fact that the economy hasn’t recovered as quickly or robustly as expected. That means unemployment will be higher and incomes will be lower than were projected last year so more people will qualify for Medicaid or CHIP instead of qualifying for subsidies to buy insurance on the exchanges. Also, the weaker recovery is keeping insurance premiums and health care costs from rising as quickly as expected.

And what about the decrease by 4 million in the number of Americans the CBO projects will receive health coverage through their employers? If you were a reader of Fox Nation you’d have seen this headline: “CBO: Obamacare Will Force 4 Million to Lose Their Health Plans.”

In actuality, some of those people will be unemployed and receiving coverage under Medicaid. A small number of companies may decide that it just isn’t worth it to provide workers with coverage when they can buy it cheaper on the exchanges. But Fox and the other conservative media are, as usual, not matching headlines to the facts. Studies from CBO, Rand and the Urban Institute have found that there will be no mass exodus of employers from the insurance market—employer-sponsored coverage will be left “largely intact.”

Other conservative outlets ran versions of this headline: “Obamacare’s Gross Costs Double to $1.76 Trillion, CBO Projects.” In fact, that $1.76 billion figure refers to the gross cost of the ACA without the $.4 billion in projected revenues and savings, and on top of that, adds in gross costs for 2022 that the CBO felt were too soft to even include.

This is the kind of misinformation and hyperbole that keeps so many Americans in the dark about the real costs and benefits associated with health reform.

The fact is that the new CBO report is an update without any real surprises. This is probably because very little has changed in a year. None of the large-scale insurance coverage provisions have been implemented, state health insurance exchanges have not proceeded beyond the planning stage (if at all) and much hinges on the Supreme Court’s decision about the individual mandate. I’m holding out for next year’s report.


From → ACA, Health care

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