How the Supreme Court’s Decision Saves Money, Leaves People Uninsured

06 Aug

At the end of July, the Congressional Budget Office (CBO) released a report that revised estimates of insurance coverage under the Affordable Care Act to reflect the Supreme Court’s decision, particularly letting states opt-out of the Medicaid expansion without penalty. Reading the document (pdf here) really provides a wonderful example of the multiple moving parts affected by a single policy change, but since most of you probably won’t do that, here’s a very brief summary.

The Supreme Court’s ruling has removed the teeth from the ACA’s Medicaid expansion efforts, allowing states to opt-out without penalty. At last count, seven states have decided not to participate. Result number one? Uninsured individuals with incomes below 138 percent of the federal poverty level (133% plus the 5% income disregard) will not gain coverage in these states as once expected. That effect will be more significant in larger states with a significant proportion of uninsured residents (e.g., Texas and Florida) than in smaller states with a lower uninsurance rate (e.g., Iowa and Nebraska). Overall, CBO estimates that 6 million people who would have qualified for Medicaid won’t get the chance. If more states refuse to participate, that number could rise substantially. That saves the federal government about $6,000 per person at the expense of each person’s health.

Things don’t stop there, though. While two-thirds of the uninsured (4 million) will have incomes too low to be eligible for federal subsidies, the other one-third (2 million) will qualify for federal assistance to help them purchase private insurance coverage. The CBO conservatively estimates that they all will, while acknowledging that many won’t. If that sounds confusing, it’s really not. They’re just saying, we don’t expect the number to be higher than 2 million, we’re not sure how much lower it will actually be than that, but to be cautious we’re assuming everyone eligible for a subsidy gets insurance through the exchanges.

Putting it all together, the federal government is expected to save $289 billion because 6 million fewer individuals will be covered by Medicaid, while spending an additional $210 billion to provide subsidies to the 2-3 million of those individuals who are expected to buy private coverage through the exchanges. Toss in another $5 billion in savings for various odds and ends, and the CBO expects the net result of the Supreme Court’s decision to be something in the neighborhood of $84 billion less expensive over the next decade, with an additional 3 million Americans remaining uninsured. And that’s how the Supreme Court’s decision saves money, but leaves more people uninsured.


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