WASHINGTON (Reuters) — Health insurance
subsidies under the Affordable Care Act will cost slightly less than
previously thought, helping to slow down the forecast growth of U.S.
deficits over the next decade, the Congressional Budget Office said on
The non-partisan CBO, in revisions to its annual budget estimates,
said the reduced subsidy cost estimates partly reflect lower
premiums now being charged in government-run "Obamacare" exchanges
and accommodations that allow previously canceled health plans to be
The reduced health cost estimates made up the bulk of a $286 billion
reduction in CBO's cumulative deficit forecast for fiscal years 2015
through 2024, compared with a forecast in February, to $7.62
The revisions gave the Obama administration a small piece of
positive news on the embattled healthcare reforms after last week's
departure of Health and Human Services Secretary Kathleen Sebelius
prompted fresh criticism of Obamacare's troubled launch. White House
spokesman Jay Carney wasted no time in trying to capitalize on it.
"This report demonstrates the Affordable Care Act is working,"
Carney told a news briefing. "It shows that marketplace healthcare
costs have gone down because premium estimates have gone down."
The report also forecast less severe premium increases in benchmark
health plans offered through the exchanges.
For the fiscal year 2014 ending September 30, CBO said, the deficit
would fall to $492 billion from a $514 billion February estimate — and nearly a third lower than last year's $680 billion deficit. The
forecasts assume no changes to tax and spending laws.
The agency attributed this year's decline to technical revisions to
spending estimates for discretionary programs. But from 2015 onward,
it estimated a $186 billion reduction in health insurance subsidies
and related spending.
The current CBO estimate for the average subsidy for 2014 is $300,
or 6 percent less than estimated in February. The subsidy estimated
for 2024 is $1,200, or 14 percent less.
In an accompanying report, CBO and the Joint Committee on Taxation
left unchanged their estimate that 6 million people on average will
be covered by private health insurance purchased through Obamacare's
marketplaces over the course of this year, saying enrollment will
vary at different times as people leave and enter the marketplaces.
The administration announced last week that 7.5 million people have
signed up for private coverage and the number is expected to rise.
CANCELED PLANS LIVE ON
Several factors led to the lower CBO cost estimates for Obamacare
marketplace subsidies, including steps the administration took last
year to accommodate people who were notified that their health
insurance plans would be canceled for not complying with Obamacare's
benefits and consumer protection standards. Researchers said plan
premiums were also less costly than expected, while narrow provider
networks made some insurance coverage less attractive.
Millions of people received cancellation notices from their insurers
last fall, spawning a brief public uproar against Obama, his law and
the Democrats who voted for it. The administration responded by
saying state insurance regulators could allow people to renew
noncompliant plans through September 2017. It also offered hardship
exemptions to those who preferred to go uninsured or opt for
low-premium catastrophic coverage.
People taking advantage of these accommodations would remain outside
the Obamacare marketplaces in plans that do not qualify for
CBO also estimated a $98 billion 10-year reduction in Medicare
outlays due to lower spending on prescription drugs and hospital
insurance compared with the February estimate. Medicaid, the
healthcare program for the poor, would see a $29 billion reduction,
FALLING DEFICITS TO END
The CBO left intact its previous economic
projections, which envision rising deficits after 2015 as more of
the massive "baby boom" generation retires and draws more federal
benefits or drops out of the workforce.
Mandatory spending programs, including Medicare, Social Security and
Medicaid, will swell to 11.5 percent of GDP in 2024 from 9.5 percent
in 2013. In 2024, they will cost $3.1 trillion, CBO said, accounting
for more than half of all federal spending.
"If current laws do not change, the period of shrinking deficits
will soon come to an end," the CBO said in the report.
Deficits will reach a low point of $469 billion, or 2.6 percent of
U.S. gross domestic product, in fiscal 2015, then gradually start to
rise, topping $1 trillion again in 2023 and 2024, a level that would
be near 4 percent of GDP.
(Reporting by David Lawder; editing by Doina Chiacu and Mohammad