Forecast Cut on Spending for Health - Capstone Brokerage

Forecast Cut on Spending for Health Las Vegas

By: Robert Pear, NY Times, April 2014

The Congressional Budget Office has reduced by one-third its estimate of how much more states will spend on Medicaid in the coming decade because of the Affordable Care Act.

In early February, the budget office estimated that state spending on Medicaid and a related program for children would be $70 billion higher from 2015 to 2024 because of the law’s coverage provisions. In a new report, the budget office puts the cost at $46 billion. 

The law allows states to expand eligibility for Medicaid, and about half the states have decided to do so. Several other states, including Utah and Virginia, are seriously considering proposals to expand the program, which already serves more than 60 million Americans.

The new cost estimate could help state officials and others pushing for the expansion of Medicaid. They could cite the new figures as evidence that the change would be less expensive than opponents contend. “The new estimates show that Medicaid expansion is an even better deal for states than previously thought,” said Edwin C. Park, an analyst at the Center on Budget and Policy Priorities, a liberal-leaning advocacy group.

The budget office did not say exactly why it had lowered its estimate of new state Medicaid spending. It still expects a significant increase in enrollment, but the mix of new beneficiaries may be somewhat different. New beneficiaries include people who were previously eligible but not enrolled, as well as those who become eligible for the first time because of the Medicaid expansion authorized by federal law. States pay more of the costs for those who were already eligible.

For newly eligible Medicaid beneficiaries, the federal government will pay the full cost of benefits from 2014 to 2016. States will then begin to pay a share, rising to 10 percent in 2020, with the federal government paying the remaining 90 percent. For those who were already eligible, states will pay their customary share, ranging from 27 percent to 50 percent of costs. Mr. Park said it appeared that the budget office had “lowered its projection of the added state costs because it now expects fewer people who were eligible for Medicaid before health reform to enroll” as a result of the law.

The budget office has not changed its estimate of additional federal spending on Medicaid. Now, as in February, it says that the federal government will spend $792 billion more on Medicaid in the next 10 years because of the health law.

The budget office said last week that federal spending on the insurance coverage provisions of the law — mainly Medicaid and subsidies for private insurance — will total $1.4 trillion in the coming decade. That is 7 percent less than what the agency predicted in February, mainly because it lowered its estimate of premiums and subsidies.