CBO: Cost of ObamaCare subsidies climbs by 11 percent

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Health insurance subsidies are expected to cost the federal government about $660 billion in 2016, according to the Congressional Budget Office (CBO).

Much of the $136 billion in extra health spending stems from “significantly higher” enrollment in Medicaid, the federal health program for low-income people, according to the CBO’s latest annual report on healthcare spending. The estimates do not include spending on people over the age of 65.

The CBO figures also show an 11 percent increase in the cost of ObamaCare subsidies.

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The cost is also going up by about $28 billion because of Congress's recent legislation that postponed what's called the "Cadillac tax," on high-cost insurance plans. That bill also made the tax deductible to employers, further decreasing the amount of money the Affordable Care Act pulls in.

The CBO is bumping up its expectations for Medicaid enrollment while lowering projections for overall marketplace enrollment. The budget office now estimates that 24 million people have gained coverage under ObamaCare, about 1 million fewer than its previous year’s estimate.

That translates to about $46 billion less spending on subsidies for people enrolled in ObamaCare's federal marketplace plans.  

The budget office expects about 19 million people to be enrolled on marketplace plans by 2018 — a figure that is likely to stay flat over the next decade. The vast majority of those customers will receive federal subsidies, between 14 million and 16 million people.

Overall, the cost of healthcare subsidies is expected to grow about 5.4 percent annually as more people enroll in Medicaid. Over 10 years, the total cost of health subsidies is expected to rise to $1.1 trillion.

A small amount of those subsidies are offset — a total of about 5 percent — by taxes and penalties from health insurers, employers and people who lack insurance.

People enrolled in Medicaid or the Children’s Health Insurance Program (CHIP) receive about 40 percent of the federal dollars spent on insurance subsidies, according to the CBO.

Another 40 percent of the federal money on subsidies is related to people with employer coverage whose healthcare dollars are tax-exempt. The cost of those benefits is expected to be about $3.6 trillion over 10 years.  

Employer coverage is expected to remain the most common choice of health insurance for people under age 65. The percent of people enrolled in employer plans is expected to dip to about 54 percent from 57 percent over the next decade, though remaining higher than projected by critics of the law.

The total cost of the healthcare law is still less than expected when Congress first approved it in 2010. Since its passage, the estimated price tag for ObamaCare has declined by about 25 percent, or $157 billion.

- This story was updated at 4:11 p.m.