The law’s coverage is now expected to cost $1.2 trillion over 11 years. Health law now cheaper, covers fewer

President Barack Obama’s health care law just got cheaper — to the tune of $84 billion over 11 years, according to the Congressional Budget Office.

That's because the Supreme Court’s June ruling on the law allowed states to opt out of a costly Medicaid expansion, and in a new report released Tuesday, CBO anticipates that some of them will do just that. As a result, about 3 million more people will remain uninsured, Capitol Hill’s official bean counters said.


Several GOP governors, including those from mega-states Texas and Florida, have said they won’t participate in the expansion.

Overall, the new estimate pegs the costs of the law’s health insurance coverage provisions at $1.2 trillion over 11 years, a figure that is more than offset by new taxes and Medicare cuts. CBO also projected that the House GOP’s effort to repeal the law would add $109 billion to the nation’s debt over 10 years, a number that is far below the $210 billion estimated last year.

The two reports underscored the delicate politics of health care for both parties. It’s hard for Democrats to get excited about states declining to cover as many people, and Republicans can’t be thrilled that the law's overall cost is going down.

Still, the Obama administration did its best to get some bragging rights out of the report. In a White House blog post, deputy chief of staff Nancy-Ann DeParle said the report “projects that most governors will choose to expand their Medicaid programs” and “affirms that repealing the health care law would deny tax credits for millions of middle-class families and result in higher deficits and fewer Americans with insurance.”

The news also set off a predictable back-and-forth between Democrats, who cited it as further evidence that the law would more than pay for itself, and Republicans, who argued that its true costs are still unknown.

“[T]he Affordable Care Act is controlling the growth of health care costs and contributing to deficit reduction,” House Minority Whip Steny Hoyer (D-Md.) said. Senate Finance Committee Chairman Max Baucus (D-Mont.), one of the main authors of the law, cited the costs of repealing the law — not the costs of the law itself.

And his GOP counterpart — Sen. Orrin Hatch (R-Utah), the ranking Republican on the Finance Committee — said simply that the report “exposed the president’s partisan health law for what it is: a massive expansion of government paid for with over a trillion dollars in tax increases, while increasing costs on the backs of middle-class families, job creators and states during the worst economic downturn in a generation.”

Some conservative analysts had warned that the law would get more expensive, because the people who don’t get Medicaid coverage in those states could just get costlier subsidies to get private coverage under the law.

But that’s not how the budget office saw it. The report estimated that 6 million fewer people would be covered by Medicaid or the Children’s Health Insurance Program, but only 3 million of them would get the more expensive coverage through the law’s new health insurance exchanges. The rest would just be uninsured.

“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,” CBO wrote.

Since no one knows for sure how many states will expand Medicaid and how many won’t, the budget office didn’t even try to guess. Instead, it just gamed out different scenarios and came up with estimates that were, in the analysts’ view, “in the middle of the distribution of possible outcomes.”

That’s not as bad as some Democrats had feared. Most of the 16 million or so folks newly eligible for Medicaid would still enroll under that scenario.

But the report could make it easier politically for governors to justify turning down federal money to expand their Medicaid programs — in part because CBO expects that will happen. The new “score” reflects CBO’s determination that “some states will not expand their programs at all or will not expand coverage to the full extent authorized” by the law.

“CBO and [the Joint Tax Committee] 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,” CBO wrote. “In 2022, for example, Medicaid and the Children’s Health Insurance Program 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.”

Overall, CBO projects that the law’s Medicaid and children’s health insurance program provisions will cost $289 billion less than had been anticipated before the court’s ruling. But $210 billion of those savings will be eaten up by people who lost out on Medicaid jumping into the law’s new health exchanges, which will offer private insurance that will be heavily subsidized by the federal government.

“Small changes in other components of the budget estimates account for the remaining $5 billion of the difference,” CBO wrote.

One interesting number buried deep within the CBO reports: $741 billion. That’s how much the government would save from cutting subsidies for supplemental Medicare insurance, according to the new estimates. But that’s a jump from the original estimate of $500 billion over 10 years.

What that proves, according to Douglas Holtz-Eakin, a former CBO chief who now runs the conservative American Action Forum, is that the agency is acknowledging what Republicans have said all along — that the scorekeeping for the law was always unrealistic.

“From my point of view, I don’t believe these cuts are or will be real,” he said. “They are just paper.”

Because those spending cuts help pay for benefits in the law, that would lead to smaller savings — or a bigger cost — to taxpayers over time, Holtz-Eakin said.

“What that 741 means is that the unreality of the bill is getting bigger every day,” he said.

This article first appeared on POLITICO Pro at 3:07 p.m. on July 24, 2012.