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CBO Provides First Snapshot of Coverage Expansion Costs

By John Reichard, CQ HealthBeat Editor

October 10, 2014 -- The cost of expanding insurance coverage under the health law in fiscal 2014 was far lower than budget experts predicted when Congress passed the overhaul four years ago, according to figures released this week by the Congressional Budget Office (CBO).

The preliminary numbers capture the expenses for the fiscal year during which the main coverage expansion provisions of the law kicked in.

The Treasury paid out $13 billion in subsidies to help lower-income Americans pay premiums for plans sold on insurances exchanges and in some cases, cover their out-of-pocket costs. By comparison, CBO projections in March 2010 pegged the cost of the subsidies at $19 billion for the fiscal year that ended Sept. 30.

The other way Americans gained coverage under the law was through expansion of Medicaid. Fiscal 2014 federal outlays for the program grew $36 billion, according to CBO's budget review, which was released Oct. 8.

CBO did not specify how much of that amount went to cover Americans who joined the program because of expanded eligibility criteria. But based on past trends, it appears that about half of the amount was for that purpose.

CBO originally projected that federal Medicaid spending would total between $320 billion and $335 billion in fiscal 2014. Its latest numbers show the tally to be $302 billion.

The original estimate assumed all states would expand their Medicaid programs. But after the Supreme Court ruled in June 2012 that states could opt out without jeopardizing their existing funding for the program, only about half have done so.

Critics of the law including former CBO Director Douglas Holtz-Eakin have warned that the costs of the subsidies and of expanding Medicaid will endanger the nation's long term financial health. Employers in growing numbers may drop coverage and send their workers to exchanges to buy subsidized coverage, he has warned.

The CBO report also included estimates of overall Medicaid and Medicare spending in fiscal 2014. Medicaid spending grew 13.6 percent and Medicare spending a more modest 2.7 percent. The Medicare total was $509 billion, about $100 billion less than CBO thought it would be in 2010.

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