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CBO Releases Updated ACA Score

Tuesday, the Congressional Budget Office released their updated score of the ACA post the Supreme Court ruling.  Substantively, the only reason or need for an update is the Court’s tweak concerning Medicaid expansion; allowing states to opt-out of expansion.  See my post from earlier this week for a bit more information on the Court’s ruling and Medicaid expansion .

To the substance of the report: The CBO’s estimate is vanilla in a world today that is full of different flavors.  In short, the report takes a middle-of-the-road approach in estimating the ramifications of state decisions to opt-in or out of Medicaid expansion. One could literally read this conclusion weeks ago as the charge of the CBO is tight and constrained to interpreting only what is “known” at the time of their work/estimating.  As the Court’s decision creates an uncertain policy framework where certainty can only occur over time and is in the hands of state governments, the CBO can’t know enough point-in-time to craft a fully formed estimate.  The estimate thus concludes with virtual “minimal impact” compared to previous estimates.

  • The revised 11 year projection (2012 to 2022) is for a total insurance coverage outlay of  $1.168 billion compared to the March estimate of $1.252 billion; a net savings of $84 billion.  This element is separate from all other ACA costs/outlays.
  • The change in outlays is attributable to a shift in the assumption of insured private enrollees (exchange participants) versus those covered by Medicaid, tallied against those forecasted as uninsured (a three million forecasted increase over previous estimates).  The breakdown assumes some states, though unknown how many, will not participate in expansion and thus, a segment of the the population eligible for private subsidized insurance plans through an exchange will purchase coverage therein, others will opt for uninsured or fall in the gap between Medicaid coverage qualified (expanded federal poverty limit) under ACA provisions but reside in a state where expansion hasn’t occurred.  The CBO assumes this total be 6 million; 3 million go a private route and 3 million end-up uninsured.
  • The projected decrease in federal spending for individuals that do not enroll and thus become uninsured is $6,000.
  • The net difference between a person participating in Medicaid versus accessing coverage through an exchange is projected at $3,000 higher – Federal subsidy for private insurance at $9.000 versus a Medicaid cost of $6,000.

Today, little political fodder is available for either party as a result of this latest estimate.  The President and Democrats can’t claim too much victory here as any slight upward deviation in the number of state opting out of expansion and more important, certain states with disproportionately higher levels of current uinsureds and potential Medicaid eligibles shifts the numbers dramatically and negatively.  Additionally, on the heels of the Volcker report, Medicaid is a known travesty for states and touting expansion based on the CBO report as a “good thing” fiscally doesn’t quite ring true in the big picture.

Republicans are likewise stuck on this issue as it doesn’t refute any prior estimates or add any new substantive economic data to the debate.  Republicans will continue to push for repeal via November elections; the only remaining feasible option on their end for altering the trajectory of the ACA.  Taking on the CBO projections is not a political win for either party and Republicans know this; especially in an election year.  Besides, the economics are too complex for most voters, leaving the sole play an emotional and ideological issue/debate.


July 26, 2012 Posted by | Policy and Politics - Federal | , , , , , , | Leave a comment

CBO Score on Post-Court ACA Implications Due Today

Later today, the Congressional Budget Office is set to release an updated “score” of the Affordable Care Act (PPACA) incorporating the decision of the Supreme Court.  The fundamental reason for the update is the Court’s decision to invalidate a provision within the Act that would have penalized states via reduced federal Medicaid funding should one or more opt to not participate in Medicaid expansion.  As I have written over the past week or so, this revised score from the CBO should be fascinating, especially when spun politically by both parties.

In advance of today’s release (earlier estimates had the release pegged for yesterday), Douglas Holz-Eakin and his group the American Action Forum (Holz-Eakin is a former CBO head) provided their score of the ACA and the Medicaid expansion opt-in, opt-out scenario.  Per their estimates, if six states decided to opt-out of expansion, the associated cost increase is between $72 and $80 billion between 2014 and 2021.  If all states opted out (won’t happen), the associated cost increase over the same time frame is between $562 and $627 billion.

The reason for the cost increase estimate lies on the cost difference between newly eligible participants via expansion not being cared for within the state Medicaid system and thus using federal subsidies to buy insurance through the exchanges, at commercial insurance pricing. There is a cost difference between the two with Medicaid grant funding to a state lower (even at the Act’s full funding level) than federal subsidy through the exchange.  Holz-Eakin estimates that in the six state opt-out scenario, 4.4 million individuals will not participate in Medicaid and 3.2 million (people over 100 percent of the Federal Poverty Level)  will thus purchase subsidized insurance through the Exchange.

I’ll provide additional updates once I receive and review, the revised CBO score.

July 24, 2012 Posted by | Uncategorized | , , , , , | Leave a comment

An Omission from Friday

Every once in a while, I make a mistake (rare I think but others when asked, would convey a different sentiment).  This gaff is really an omission; a missed thought from Friday’s post on “What’s Trending”.  In reviewing my notes (the mess that they can be), I noticed I forgot to include a “watch” tip for Monday, July 23.  This is the day that the CBO is set to release its findings on the costs (go forward implementation) associated with the Supreme Court’s ruling on the PPACA.

What I’ll be looking for up to the release and after, are the following issues.

  • This is political stuff on steroids as the election battle heats up, deficit talks are imperative given the looming automatic cuts ($1.2 trillion) and the “fiscal cliff” created by the lapse point of current tax cuts.  What the CBO opines on the financial impact of the PPACA post Court ruling will fuel one side’s argument “pro law” or the other’s, “pro repeal”.  While the CBO is hardly accurate with their estimates, their veil of political impartiality gives them a certain amount of credibility for argument’s sake.
  • Medicaid is now equivalent to a two-ton gorilla in the debate and the various governors are all taking sides (albeit cautiously in some cases); pro-expansion or anti-expansion.  I’m not sure that the CBO numbers will change too many positions but I’ll read with interest the conclusions.  The developing rub is the costs that the states will bear for expansion.  Some estimates suggest that, given current funding requirements under the law, the costs will be minimal to the states – a less than 3% increase in Medicaid costs.  Others state that even a 3% growth on top of an existing Medicaid deficit is too onerous.  Their argument is bolstered by the “double tax and fund” argument of having their state taxpayers pay more to underwrite the federal funding promises.  In short, many are convinced that the federal funding promises are shallow or hollow without additional tax revenues to cover the outlays.
  • The trick for the CBO is how to estimate who plays and who does not.  The Court left states and opt-out clause and thus, CBO estimates can vary widely on the cost outlay if a multitude of states choose to opt-out of expansion and let the Feds fund private insurance contracts or subsidies for the newly eligible Medicaid participants.  The unknown is the cost of insurance as opposed to the subsidy paid to the state under Medicaid.  Some early estimates of a scenario such as this suggest the Government could spend as much as $100 billion more per year.

On a final note, providers have yet to fully weigh in.  I am tracking physician and hospital reactions but both groups are in a bit of a wait-and-see posture.  Hospitals in states that seem vehemently opposed to expansion tend to be the most concerned for fear of undercoverage and a continued burden of unfunded care.  Some in states with current high levels of uninsured and disproportionately high levels of poverty (the window area targeted by expansion) are likely the most cautious about what “next”.

July 16, 2012 Posted by | Uncategorized | , , , , , , | Leave a comment