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POLICY INSIGHT
BEYOND THE NUMBERS

CBO: Health Reform Is Working — and Costing Less

In new estimates that it released today, the Congressional Budget Office (CBO) projects that health reform’s coverage expansions will cost less than it previously estimated.  That’s good news for two reasons:

First, the new cost projections come even as CBO also estimates that health reform will dramatically reduce the number of Americans without health coverage.  Second, the lower cost estimate likely means that health reform will reduce budget deficits even more than CBO previously estimated.

Let’s take these one at a time.

Health reform will cut the rate of uninsurance nearly in half.  CBO estimates that health reform will reduce the share of the non-elderly population without insurance from 20 percent in the law’s absence to about 16 percent in 2014 and about 11 percent in 2016 and beyond.  That’s 26 million more people with health coverage.

This coverage expansion also will cost less than the original estimates.  In March 2010, CBO projected that the coverage expansions would have a net cost of $172 billion in 2019.  In February of this year, the projected cost had fallen to $151 billion.  The latest estimate is $144 billion — a drop of 5 percent since February and 16 percent since 2010.  Major reasons for this decline are a 15-percent reduction in projected premiums in the health insurance marketplaces and a somewhat smaller decline in the cost of covering additional Medicaid beneficiaries.

On the deficit front, CBO estimated in March 2010 and again in July 2012 that, considering all of its provisions, health reform will reduce the deficits.  CBO cannot update that estimate because it is not possible to isolate the incremental effects of many of the provisions of health reform that cut federal health spending or increased revenues.  But since the estimated cost of the legislation has fallen, there is every reason to believe that health reform will reduce the deficit by as much or more than the earlier estimates.