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Lower cost projections for Affordable Care Act mean good news for states too

Posted By Adam Searing On April 14, 2014 @ 4:22 pm In Uncategorized | Comments Disabled

Screen Shot 2014-04-14 at 4.17.51 PM [1]The Congressional Budget Office (CBO) released the fourth year report on projections of the cost of the Affordable Care Act [2].  The news is good and consistent with the trend over the previous four years: CBO now projects $104 billion less in costs under the Act than it did last year.  The reduction in costs is due to a variety of factors but two big ones stand out.  First, plans being offered under the health exchanges have significantly lower premiums that were originally anticipated, largely a result of narrower networks of providers and tighter management of health care in the plans – a trade-off that has resulted in big savings.  Second, all health costs – both in government programs like Medicare and Medicaid and in the private sector – are projected to grow  more slowly than just last year.  The CBO points out that this is becoming a trend:

A notable influence is the substantial downward revision to projected health care costs both for the federal government and for the private sector. For example, since early 2010, CBO and JCT have revised downward their projections of insurance premiums for policies purchased through the exchanges in 2016 by roughly 15 percent, and CBO has revised downward its projection of total Medicaid spending per beneficiary in 2016 by roughly half that percentage.

Coming on top of the over seven million enrollment numbers through the exchanges, the similar estimates of people gaining employer-based coverage by RAND, and now even lower cost projections for the ACA, this is really good news.  The Affordable Care Act appears not only to be working, but working extremely well so far.  Also, don’t forget these cost estimates by the CBO are made in the context of the fact that the ACA will reduce the federal budget deficit overall because of all the other budgetary provisions in the law.  As the CBO report states:

Considering all of the provisions—including the coverage provisions— CBO and JCT estimated in July 2012 (their most recent comprehensive estimate) that the ACA’s overall effect would be to reduce federal deficits.

One thing  missing in this analysis is the implications for state Medicaid programs. This isn’t surprising.  It’s not the job of the CBO to analyze state budgets, but sharply declining cost increase projections for the federal government’s share of Medicaid costs also necessarily mean declining state Medicaid cost increase projections.  Given the disarray at the NC Department of Health and Human Services these days, it is hard to get any sort of reliable projections out of the agency.  However, the trend of reducing health care costs across the board will mean a better budgetary picture for North Carolina’s Medicaid program.

Of course, if the NC DHHS  finds itself unable to accurately project Medicaid costs or if our Governor and state legislators deliberately underestimate Medicaid costs, you’ll be sure to hear loud voices complaining to anyone who will listen about how “Obamacare and the skyrocketing cost of Medicaid” mean we can’t do X (give teachers a raise, keep tax breaks for poor people, buy textbooks for our students – take your pick).  However, know that the overall trend for health costs in this country is for significantly less cost growth.  And that fact is good news regardless of any political distortion of the day.


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[1] Image: http://pulse.ncpolicywatch.org/wp-content/uploads/2014/04/Screen-Shot-2014-04-14-at-4.17.51-PM.png

[2] released the fourth year report on projections of the cost of the Affordable Care Act: http://www.cbo.gov/sites/default/files/cbofiles/attachments/45231-ACA_Estimates.pdf

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