WASHINGTON - The Patient Protection and Affordable Care Act will cost the U.S. about $104 billion less than previously estimated over the next decade, thanks largely to a reduction on health-insurance subsidies, according to a new report released Monday.
The Congressional Budget Office said it reduced its estimate of the cost of the program because it anticipates the government will provide less in subsidies that help people pay premiums for plans under the law.
The government will pay $17 billion this year, a $3 billion decrease from its February estimate, the agency said. The aid, available to people earning less than four times the poverty level, or about $95,000 for a family of four, will cost about $1 trillion through 2024, the agency said in its report, a reduction of about $200 billion since February.
The agency said the 8 percent reduction results largely from tighter cost controls by insurance companies offering plans on health-care exchanges. Generally speaking, the plans offered on the exchanges pay health-care providers less and have tighter management of patients’ treatment options, and that means lower premiums and taxpayer subsidies.
Medicaid adds almost $800 billion in costs over the decade. Overall, however, the health-care law reduces the deficit because of tax increases, penalties paid by people and businesses that forgo insurance, and curbs on Medicare.
All told, combining a host of factors, the Congressional Budget Office finds that the net cost of the Affordable Care Act’s coverage provisions will tally $1.4 trillion instead of more than $1.5trillion. The factors are complex, but they include higher excise-tax revenue from so-called Cadillac health plans and lower general tax revenue because more people than expected receive tax-free compensation in the form of employer-sponsored health insurance.
The report also predicts that premiums won’t skyrocket next year as some fear. Insurance companies are no longer allowed to reject people for pre-existing health conditions. But the budget office does say that premiums will rise moderately from an average of $3,800 in 2014 to an average of $3,900 for 2015, which would be good news for the Obama administration if the projections pan out.
The average exchange subsidy will rise from $4,410 this year to $7,170 in 2024, the agency says, helping drive the percentage of nonelderly people covered by health insurance to 92 percent of the population legally residing in the country.
Premiums have come in lower than the budget office projected a few years back. The agency also says that people signing up next year will be younger and healthier than those who enrolled this year. The agency says premiums should increase by about 6 percent per year after 2016.
Overall, the report is positive news for the White House and its Democratic allies on Capitol Hill, who are under assault politically after the health-care law’s troubled rollout and as it remains unpopular with many voters. The budget office’s predictions of the number of people covered by the law haven’t changed much, and it is holding firm to predictions that 6 million will get coverage through health-insurances exchanges this year. The White House has boasted that 7.5 million people have signed up, although some people will have coverage for only part of the year and not all of the enrollees have paid their premiums.
The budget office also issued projections that 12 million more nonelderly people would have insurance in 2014 than would have otherwise, rising to 26 million in 2017. The budget office, making projections along with the Joint Committee on Taxation, said the number of uninsured people would drop from 42 million in 2014 to 30 million in 2017.
“Today’s CBO update shows once again that the Affordable Care Act will help reduce our deficits while offering more Americans access to quality, affordable health care,” said Sen. Patty Murray, D-Wash., and the head of the Senate Budget Committee. “We need to keep building on this progress rather than turning backthe clock on the millions of people who have now signed up for coverage.”
The Congressional Budget Office said it expects fewer Americans and employers topay fines to the government for not carrying insurance or offering it to their workers, a loss of revenue that somewhat offsets the reduction in the cost of subsidies.
Penalty payments for violating the law’s requirement that people carry insurance, known as the individual mandate, will total $46 billion in the next decade from an estimate of $52 billion in February. Revenue expected to be collected from employers that refuse to offer insurance totals $139 billion over a decade compared with $151 billion forecast in February.
Many people who refuse to buy insurance this year will be able to avoid paying fines because of a series of exceptions the Obama administration has created. The same is true for businesses, which aren’t required to cover any of their workers next year unless they employ 100 people or more.
The new estimates of the health-care law are contributing to a slightly improved overall deficit picture. The budget office said in a separate report on Monday that federal budget deficits over the coming 10 years will be $286 billion less than estimated in February. This year’s deficit would dip to $492 billion from the $514 billion figure cited two months ago.
The law, White House spokesman Jay Carney said, is “making historic progress in slowing health-care-cost growth and improving our nation’s fiscal outlook by lowering deficits.”
Deficits will rise sharply after next year, the budget office said. Cuts to discretionary spending on programs such as military defense and national parks will be more than offset by a rise in health care and Social Security costs, as the baby-boomer generation ages into retirement, as well as higher interest payments on the national debt.
The Congressional Budget Office is a nonpartisan congressional agency that does research and cost estimates for lawmakers.
Information for this article was contributed by Andrew Taylor of The Associated Press; by Alex Wayne, Derek Wallbank and Roger Runningen of Bloomberg News; and by Annie Lowrey of The New York Times.
Front Section, Pages 1 on 04/15/2014