Obamacare’s Price Tag Just Went Down, According to CBO

Obamacare's insurance subsidies will cost $200 billion less than expected, the Congressional Budget Office estimated Monday.

CBO projected that the government would spend $849 billion on the subsidies over the next 10 years, down from its January estimate of $1.1 trillion. Why? The big reason is that health insurance premiums are expected to increase at a much slower rate than had been anticipated.

Private insurance spending increased "by much less than the agencies had expected for 2013," the CBO analysts wrote. Spending grew 1.8 percent on average from 2006 to 2013, compared with 5 percent from 1998 to 2005, and CBO doesn't expect growth to return to those previously high levels. That will, in turn, mean lower premiums.

CBO also on Monday reduced its expected Obamacare exchange enrollment by about 1 million, to 22 million in 2025, but the Kaiser Family Foundation's Larry Levitt said that "the bulk" of the cost savings "is the slowdown in health spending overall and in particular lower than expected premiums in the ACA's new marketplaces."

Overall, Obamacare's insurance coverage expansion is expected to cost less than CBO previously thought, with the biggest factor being the decrease in spending on subsidies. The agency also dropped the law's projected spending on Medicaid and small-employer tax credits, although it is projecting less revenue than past estimates, which drives the cost back up somewhat.

It all shakes out to the expansion in insurance coverage costing $142 billion less over 10 years than CBO's last estimate, in January.

"When the ACA was enacted, CBO estimated that the law would slightly reduce the federal budget deficit over 10 years," Levitt said. "With their now lower spending projections, it's almost certainly the case that's still true."

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