Impact on the Deficit of Much-Higher Outlays for Health Insurance Exchange Subsidies

Guest post Ken Perez, vice president of healthcare policy, Omnicell.

Ken Perez
Ken Perez

Soon after passage of the Affordable Care Act (ACA), the Congressional Budget Office, the Obama Administration and private research firms, such as Health Policy Alternatives, concluded that the health reform law would generate budget surpluses over the 10-year period of 2010-2019 of $124 billion to as much as $150 billion.

However, according to the CBO’s report, “The Budget and Economic Outlook: 2016 to 2026,” released in January of this year, the divergence between past rhetoric and current reality has widened, at least in terms of the coverage expansion initiative of health insurance exchange subsidies.

According to an April 22, 2010, memorandum from Richard S. Foster, chief actuary for the Centers for Medicare and Medicaid Services (CMS), the ACA’s health insurance exchange subsidies were projected to total $153 billion from 2014-2019. However, arguably because of the higher-risk pool of individuals participating in the exchanges, the recent CBO report projects $347 billion in federal outlays for health insurance exchange subsidies for 2014-2019, leading to a deficit just for the subsidies of $194 billion for that period, outweighing the previously projected budget surplus.

Even worse, the higher health insurance exchange subsidies aid a significantly smaller exchange enrollment population, down about 40 percent from 21 million to 13 million individuals for 2016, per the CBO. Moreover, the CBO projects exchange enrollment to peak at 16 million in the next decade, a third less than the 24 million it predicted in March 2015.

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