Obamacare Evaluation Project - Cost Update: Exchange Subsidies Grow 27 Percent
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In a recently released report for the Manhattan Institute's Center for Medical Progress, my colleague, Paul Howard, and I grade the Affordable Care Act on its predicted impact on the cost of providing health care. Based on available evidence from CMS, CBO, and other analysts, we found little evidence that the law would reduce health care spending; indeed, most evidence indicates that individual and family premiums, as well as total national health care spending will grow unabated (and possibly faster).

However, given that implementation of the ACA is still in progress, we acknowledged that our findings may change as new evidence surfaces, and that we will track and report on new findings as they are released. This is the second in a series of updates.

While the latest White House Budget (for FY 14) brought a few welcome reform ideas (switching to Chained CPI for government programs, for instance) and some less welcome (price controls in Medicare Part D) one side of the budget may have received less attention than it deserves.

The estimated cost of the exchange subsidies under the law has increased roughly 27 percent.

Cost Estimates of Exchange Subsidies (in millions of dollars)

2014

2015

2016

2017

2018

2019

2020

2021

2014-21

FY 14

32,269

58,132

71,467

78,129

82,150

87,523

94,279

101,639

          605,588

FY 13

21,553

43,262

55,903

61,830

65,723

70,661

76,339

82,563

          477,834

Difference

10,716

14,870

15,564

16,299

16,427

16,862

17,940

19,076

          127,754

CBO

28,000

55,000

96,000

122,000

137,000

143,000

147,000

154,000

          882,000


Sources: CBO, FY 13 Budget, FY 14 Budget

The Office of Management and Budget at the White House now projects the cost of the subsidies to total $605 billion from 2014, when they first begin, through 2021 - in the FY 13 budget, the estimate was $127 billion less at $477 billion. Still, these estimates are both below CBO projections for the subsidies which stand at an ominous $882 billion for the eight years - some of this may have to do with CBO including spending for high-risk pools and premium review activities - but it likely indicates different estimates (between OMB and CBO) of the number of people who will qualify for subsidies as well as their health status.

That OMB's costs are closing in on CBO's estimates seems to bode poorly for the fiscal implications of the health care law, however.

H/T to Brett Norman for spotting these numbers.

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