The Affordable Care Act (aka Obamacare) just got 29% more affordable.
According to the nonpartisan Congressional Budget Office (CBO), slowing healthcare costs due to slower rising insurance premiums and fewer people than were previously thought to be without insurance, are driving down the price of the law.
Estimates by the CBO released on March 9, 2015 reduce the projected cost of the Act by $142 billion over the next decade. That’s 11% lower than previous estimates. The budget office still expects 24 million to 25 million people a year to get coverage under the law.
Slowing Healthcare Costs
According to the CBO, spending on healthcare increased by an average of 5% per year between 1998 and 2005, adjusting for inflation and demographics. That figure fell to 1.8% per year for the period from 2006 to 2013, the latest year for which data are available.
The CBO report says the healthcare law will cost the federal government $1.2 trillion over the next decade. The agency has been steadily reducing the projected cost of the law since it was enacted 2010. In 2010, the agency projected that the insurance-related provisions of the health law would cost the federal government $710 billion from 2015 through 2019. The most recent projections put the five-year cost at $506 billion, a reduction of 29%.
A White House spokesperson said the projections are the “latest in a long line of data points” that show the law was holding down health costs and generating economic benefits. He said one of the goals of the legislation was to address the threat that growing health costs pose to the broader economy.
Silver Tsunami Budget Deficits
While good news for the healthcare law and resulting in $431 billion less in annual budget deficits than previously thought, deficits will soar again in the next decade as more baby boomers retire and start receiving Social Security and Medicare. In 2025, the budget office says the annual deficit will once again hit $1 trillion, unless Congress acts. The annual deficit hit a record $1.4 trillion in 2009 as the government borrowed heavily to stimulate a struggling economy.
The deficit dropped to $485 billion in the budget year that ended last September.
The CBO cautioned about the uncertainties of projecting healthcare spending, stating, “Projections of spending by private health insurers are highly uncertain, especially because the causes of the pronounced slowdown in spending in the past several years are not well understood. Projections of growth in premiums for private health insurance offered through the exchanges are even more uncertain because the exchanges are so new.”
