WASHINGTON — The cost of President Barack Obama’s signature health care law is continuing to fall.
The Congressional Budget Office announced Monday that the Affordable Care Act will cost $142 billion, or 11 percent less, over the next 10 years, compared with what the agency had projected in January.
The nonpartisan agency said the Affordable Care Act will cost less for two essential reasons: Health insurance premiums are rising more slowly, and slightly fewer people are now expected to sign up for Medicaid and for subsidized insurance under the law’s marketplaces.
More people aren’t expected to sign up for the law because, the agency added, fewer employers than anticipated are canceling coverage and more people than earlier estimated had private coverage. By 2025, the CBO estimates “the total number of people who will be uninsured … is now expected to be smaller than previously projected.”
All around, it’s positive news for the health care act, which has been accused by Republicans of killing jobs and draining federal coffers. Indeed, the CBO warned last year the health care law could reduce full-time employment as some chose to give up jobs that provided health care as they relied instead on the government’s subsidies. The administration’s own poor handling of the ACA’s online launch in the fall of 2013, combined with other errors, have tarnished the law’s image among many Americans. And to be sure, the law is still expensive — expected to cost $1.2 trillion over 10 years.
But the cost of the law has been falling for several years, and analysts are beginning to assess the evidence of the law’s impact from its first-full year of implementation.
In March 2010, the CBO predicted that the law would cost $710 billion during the period from 2015 to 2019, without trying to come up with projections beyond that. After several revisions, the law is now expected to cost $506 billion — 29 percent less — during those same five years, as shown in the chart.
CBO issued its new estimates less than a week after the Supreme Court heard a case challenging a crucial provision of the law. It’s unclear how the justices will rule, and a decision against the Obama administration could make these estimates irrelevant.
In revising their estimates, the agencies noted two trends. The first is the relatively modest increase in how much private insurance companies spend on their policyholders’ health care. Between 1998 and 2005, spending on health care increased by an average of 5 percent per year, adjusting for inflation and demographics. That figure fell to 1.8 percent per year for 2006 to 2013.
The administration has said that this decline in spending on medical care is at least partly a result of cost-saving measures in the Affordable Care Act. Critics have argued on the contrary that the decline was due to the recession, and that health care costs could begin to rise again. Independent experts have suggested that much of the effect is due to the weak economy, but not all of it.
