CBO predicts high savings, small drawbacks to healthcare reform fix

By Julian Pecquet - 07/25/11 10:34 AM ET

Budget scorekeepers said legislation to fix a "glitch" in the healthcare reform law would cause fewer than one million people to lose access to Medicaid while saving $13 billion over the next 10 years, greatly helping chances of passage.

Republicans in the House and Senate have introduced bills to count Social Security benefits when calculating eligibility for Medicaid and insurance subsidies under the law. The White House has also said it wants to change the law, which would cause some people to look richer and lose federal subsidies.

The glitch has become a powerful argument for Republicans to criticize the law because it allows middle-income early retirees between the ages of 62 and 65 to sign up for Medicaid, which is meant to be for the poor.

"Earlier this year Medicare's Chief Actuary, Richard Foster, noted that millions of early retirees would be eligible for Medicaid coverage because of a loophole in the recently passed health care law, which he said 'just doesn't make sense.' I completely agree," Sen. Mike Enzi (R-Wyo.) said in a statement when he introduced his bill last week. "My proposal would close this loophole and save $13 billion by ensuring that all income and eligibility for both Medicaid and insurance subsidies is counted under the new law."

Rep. Diane Black (R-Tenn.) has sponsored the House companion.

Advocates for people with disabilities have raised concerns that the proposal would affect some people who get Social Security disability payments but aren't yet eligible for Medicare because of a two-year waiting period.

The Congressional Budget Office's score blunts those concerns, however.

While the Medicare actuary had estimated that up to three million extra people could be eligible for Medicaid because of the glitch, CBO said fixing it would reduce Medicaid enrollment by "between 500,000 and one million people depending on the year." That would save the federal government $32.9 billion over the next 10 years.

About half a million of them would be eligible for subsidies to buy insurance on state health exchanges instead. And fewer than half a million people, the CBO said, would be covered by their employers or become uninsured.