CBO: Obama's health law to cost less, cover fewer people than first thought

President Obama's healthcare reform law coverage provisons will cost less but cover fewer people than first thought, the nonpartisan Congressional Budget Office said Tuesday.

The revised estimate of the law's coverage provisions shows about 2 million fewer people gaining coverage by 2016, reducing the number of uninsured Americans by 30 million instead of the 32 million projected a year ago. That would leave about 27 million people uninsured in 2016, two years after the law's insurance exchanges go online.

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Four million Americans can expect to lose their employer-provided healthcare by 2016, according to the revised figures, far more than the 1 million people estimated last year. And 1 million to 2 million fewer people will gain access to the law's subsidized exchanges than first thought, while an extra 1 million are expected to qualify for Medicaid and the Children's Health Insurance Provision (CHIP).

CBO faults a slower than anticipated recovery for the soft numbers, along with technical changes to CBO's estimating procedures and legislative changes adopted over the past year. In particular, Congress passed bipartisan legislation to make it harder for people with Social Security income to qualify for federal health benefits.

"Fewer people are now expected to obtain health insurance coverage from their employer or in insurance exchanges; more are now expected to obtain coverage from Medicaid or CHIP or from nongroup or other sources," CBO said. "More are expected to be uninsured."



The revised figures are more positive when it comes to the federal deficit.


The law's coverage provisions are now expected to cost $1.083 trillion over the next 10 years, $50 billion less than the $1.131 trillion projected last year. That's due in part to slower growth in healthcare spending resulting in an 8 percent drop in premiums, as well as taxes and penalties paid by employers and their workers as struggling businesses cut down on employer-sponsored coverage.

While the coverage provisions still add to the deficit, the law in its entirety cuts the deficit because of unrelated provisions, including $500 billion in cuts to Medicare spending.

"Revising down the number of workers projected to receive insurance coverage through an employer relative to the previous estimates, by between 3 million and 4 million in most years, leads to an increase in estimated revenues because a larger share of total compensation will take the form of taxable wages and salaries and a smaller share will be in the form of nontaxable health benefits," CBO explains. "In addition, that revision increases the estimated number of employers who will be required to pay penalties. Finally, penalties collected from individuals who do not have health insurance are projected to increase because the number of individuals who will remain uninsured is now estimated to be higher than was estimated in March 2011."

The combined effects of the revised estimates over the 2012–2021 period add up to: 

■ An increase of $168 billion in projected outlays for Medicaid and CHIP;

■ A decrease of $97 billion in projected costs for exchange subsidies and related spending;

■ A decrease of $20 billion in the cost of tax credits for small employers; and

■ An additional $99 billion in net deficit reductions from penalty payments, the excise tax on high-premium insurance plans, and other effects on tax revenues and outlay, with most of those effects reflecting changes in revenues.