What’s the Score? CBO’s Updated Baseline Released

By Martha Heberlein

I don’t know what you did yesterday, but I spent the day eagerly awaiting CBO’s annual March baseline. As the “official scorekeepers” in Washington, their projections of spending and enrollment in Medicaid, CHIP, and coverage under the exchanges carry a lot of weight. Besides, who wouldn’t love the neat little tables they produce – so much information in such a small package! If only we could all be so concise.

Starting with the big picture – the projected cost of the coverage provisions under health reform decreased by about $50 billion from last March’s estimate to just under $1.1 trillion dollars. [Side note – these estimates don’t include all the budgetary impacts of the ACA.] Why the change?

Well there were a few pieces of legislation that changed the ACA’s coverage provisions and of course there were some technical changes to their model (perfectionists!). One of these modifications worth mentioning is their accounting for the slower growth in health spending seen over the last few years. Between 2000 and 2005, private health insurance premiums grew by 8.4% per year on average; that dropped to 5.3% between 2005 and 2010. As a result of this new data, CBO now projects a lower rate of growth (5.7%) going forward.

The economy also played a role – with a higher unemployment rate and lower wages expected over the next 10 years than previously anticipated. As a result of the slower economic recovery, CBO expects that more people will be eligible for Medicaid and CHIP under the ACA. There will also be some movement in and out of the exchanges – some folks are now projected to have lower income that shifts them into Medicaid, while other folks who had been expected to have income above 400% FPL, will become eligible for subsidies as their income is now estimated to be lower.

Getting down to brass tacks – what do they project will happen to coverage? Largely as a result of the economy, in 2016, the ACA will increase enrollment in Medicaid and CHIP by 17 million (up from 16 million in last year’s baseline) and 20 million folks will receive coverage in the exchanges (a change from 22 million). Sadly, more folks are expected to be uninsured – 26 million as opposed to 21 million. But without the ACA, an additional 30 million people would be left stranded without coverage.

A few other things of note – outlays in Medicaid and CHIP are expected to increase by $168 billion, while spending on exchange tax credits and cost-sharing subsidies decreases by $97 billion. (A quick note to our state friends – the state share in spending is still about $60 billion from 2012-2021, unchanged from last year’s baseline as most enrollees will be considered newly-eligible and thus be federally-funded).

Some of this spending change can be explained by the adjustment in coverage composition described above, but the proposed rules issued by the Administration also come into play. Specifically, confirmation in the rule that stair-step kids who will move from CHIP into Medicaid in 2014 will continue to draw down CHIP-match and the ability of states to pick their method of determining who will be considered “newly-eligible” for matching purposes both increase federal spending, according to CBO.

One last interesting tidbit – the decrease in the cost of premiums (the technical fix noted above), is slightly offset by an increase in the estimated cost of providing the essential health benefits required under the ACA.  Because of the bulletin released in December, CBO expects that the scope of benefits will be slightly broader than previously anticipated. Some food for thought there!