Congressional Budget Office and Joint Tax Committee Estimates of Cost and Coverage under the ACA after the Supreme Court Ruling in NFIB v. Sebelius and the Effects of H.R. 6079, the Repeal Obamacare Act

Posted on August 1, 2012 | No Comments

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Key Developments

By Katherine Jett Hayes


The Congressional Budget Office (CBO), the legislative branch agency responsible for estimating the cost of legislation, issued two reports on July 24th related to the Affordable Care Act (ACA). The first report, revised cost and health insurance coverage estimates for the ACA in the wake of the Supreme Court ruling in NFIB v. Sebelius[1]. In that ruling, the Court concluded the individual requirement to purchase health insurance coverage, while not a reasonable exercise of congressional Commerce Clause authority, is constitutional as a tax under congressional Spending Clause authority. The Court also held that the ACA’s Medicaid expansion, requiring states to cover all non-elderly individuals with incomes below 133[2] percent of the federal poverty level was unconstitutional. However, rather than striking the requirement, the Court precluded the Secretary of the Department of Health and Human Services (HHS) from enforcing the mandate by withholding all Medicaid funds. As a result of the ruling, states now have the option of expanding coverage to 133 percent of the federal poverty level (FPL), and will receive enhanced federal matching funds as provided under the law, but are not required to expand coverage.[3]

According to CBO’s estimates, prepared with the Joint Committee on Taxation (JCT) to estimate revenue provisions, the Supreme Court decision will lower the total cost of the ACA by $84 billion and reduce the number of individuals with access to insurance coverage by three million as compared to current law by 2021. The second report released by CBO provided estimates on legislation to repeal the ACA in its entirety, as passed by the House of Representatives on July 11. According to the CBO/JCT estimates, the legislation, H.R. 6079 would increase the federal deficit by $109 billion over 10 years, and would result in 60 million fewer individuals having health insurance coverage during the same period as compared to current law.

CBO Updated Estimates based on Supreme Court Decision

In preparing estimates on the impact of the Supreme Court ruling on the ACA, CBO and JCT were required to make assumptions as to whether states will choose to expand Medicaid coverage to individuals with incomes below 133 percent of FPL. The report cautioned that there are no reliable estimates regarding which states will expand coverage and which will choose to forgo expansion. In projecting estimates of coverage, CBO and JCT predict that states will fall into categories ranging from states that do nothing, to states that choose to expand coverage to the maximum extent permitted under the ACA. CBO also presumed that some states would expand Medicaid coverage to a level that is less than 133 percent of FPL, and that states would vary timing of expansions beyond January 1, 2014. In preparing the estimates, the CBO and JCT further noted that the Court’s ruling on the individual requirement did not change previous estimates.

The report estimates that, as a result of the ruling and state decisions, six million fewer individuals will be enrolled in Medicaid and the Children’s Health Insurance Program (CHIP). CBO and JCT further estimated that 3 million more individuals will be enrolled in exchanges and 3 million more will be uninsured. The report cautioned, however, that smaller shifts in coverage are estimated as well, noting that coverage estimates reflect the net effect of all estimated changes stemming from the decision, not just the loss of Medicaid coverage. The report goes on to note that not all of the increases in enrollment in exchanges are among those who would have been eligible for Medicaid. Key coverage points from the report include:

  • Two-thirds of people previously estimated to be eligible for Medicaid will have incomes too low to qualify for premium tax credits, which are available to individuals with family incomes between 100 and 400 percent of poverty.
  • Federal spending will decline by $6,000 per enrollee for each individual who would otherwise have qualified for Medicaid prior to the decision.
  • Federal spending will rise by $3,000 for each individual federally subsidized individual who enrolls through the exchange, rather than qualifying for Medicaid ($9,000 per subsidized enrollee, less $6,000 in federal Medicaid savings for that individual).

Changes in Cost

CBO and JCT estimate that the net cost of coverage provisions of the ACA will be $84 billion less than estimated in March of 2012 as a result of the Supreme Court ruling. Medicaid and CHIP outlays will be reduced by an estimated $289 billion by 2022. Over the same period, Exchange subsidies and related spending will increase by $210 billion.

CBO Estimates on ACA Repeal

CBO and JCT also released a report estimating the direct spending and revenue effects of H.R. 6079, the Repeal Obamacare Act, as passed by the House of Representatives on July 11, 2012. According to the report, the legislation would result in an increase in the federal budget deficit of $109 billion from 2013 through 2022. Although the legislation would reduce direct spending by $890 billion over the next 10 years, it would reduce federal revenues by $1 trillion over the same period, resulting in a net addition to the deficit of $109 billion.

CBO estimates that under the legislation, about 30 million fewer individuals would have health insurance coverage by 2022 than under current law, leaving 60 million uninsured individuals. Insurance coverage rates would fall to 81 percent of legal nonelderly residents, down from the 92 percent projected coverage rates under current law.

Additional Questions Raised

In estimating the decisions made by states, CBO pointed out that detailed regulatory guidance is not yet available from the administration as to the scope of the Supreme Court decision. For example, CBO seems to indicate that states may have the ability to expand coverage to a population with incomes less than 133 percent of the federal poverty level, while still receiving enhanced matching funds. The Secretary of HHS issued a letter on July 11, 2012 indicating that the only effect of the Supreme Court’s ruling on Medicaid relates to the coverage expansion, and that the law otherwise remains unchanged. A number of questions are raised by CBO’s assumptions:

How much will other Medicaid provisions of the ACA influence state decisions? These provisions include maintenance of effort requirements, reductions in funding for Medicaid disproportionate share hospital payments (DSH), among others.

Will states be permitted to cover categories of individuals with incomes less than 133 percent of the poverty level?

If the Secretary does permit coverage of individuals with incomes below 133 percent of the federal poverty level, will a floor of 100 percent be chosen to assure that at a minimum those who are not eligible for premium tax credits and cost sharing subsidies have access to coverage?

[1] National Federation of Independent Business et al., v. Kathleen Sebelius, Secretary of Health and Human Services, et al. 132 S. Ct. 2566. (2012)
[2] Under section 2001(a) of the ACA, states were required to expand coverage to 133 percent of the poverty level, but when combined with a 5 percentage point income disregard in the calculation of “modified adjusted gross income (MAGI)” as required by section §2002(a)(14)(I)(i) of the Act, the effective income eligibility requirement is 138 percent.
[3] NFIB v. Sebelius at p. 13.
National Federation of Independent Business et al., v. Kathleen Sebelius, Secretary of Health and Human Services, et al. 132 S. Ct. 2566. (2012)
Under section 2001(a) of the ACA, states were required to expand coverage to 133 percent of the poverty level, but when combined with a 5 percentage point income disregard in the calculation of “modified adjusted gross income (MAGI)” as required by section §2002(a)(14)(I)(i) of the Act, the effective income eligibility requirement is 138 percent.
NFIB v. Sebelius at p. 13.

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