A Project of The Annenberg Public Policy Center

Conflating Costs of the ACA


Q: Did the CBO say Obamacare will cost $50,000 for every person who is insured?

A: No. A newspaper calculated the cost at $50,000 per newly insured person. But that’s over 10 years and covers more than just the previously uninsured.

FULL QUESTION

I saw an article in the Daily Mail online edition that claims there is an updated CBO report that says Obamacare will cost taxpayers $50,000 for every person who is insured. Is that accurate?

FULL ANSWER

Many readers have been asking us about a viral claim that the Affordable Care Act will cost $50,000 per insured person — or $50,000 per person, period, as some headlines on conservative sites say. The claim appears to have originated in a Jan. 26 article in the British tabloid the Daily Mail. That article says: “It will cost the federal government – taxpayers, that is – $50,000 for every person who gets health insurance under the Obamacare law, the Congressional Budget Office revealed on Monday.”

That’s not what the CBO said. Instead, the Daily Mail takes the CBO’s Jan. 26 budget report and does its own calculation on the numbers.

The CBO presented its updated estimates on the Affordable Care Act’s costs and impact on insurance coverage in a 15-page appendix. It estimated that the total net cost of the insurance coverage provisions of the law would be $1.35 trillion over 10 years, from 2016 through 2025. This net cost includes gross costs of $1.993 trillion, which includes spending on subsidies for insurance obtained through the exchanges, tax credits to small businesses and expanded Medicaid coverage, minus revenues of $643 billion, which includes penalty payments from those who don’t obtain insurance and employers who don’t provide it.

The CBO also estimated that “the annual number of uninsured is expected to … [be] between 24 million and 27 million fewer than would have been uninsured in the law’s absence.” In order to derive the “$50,000 in taxpayer money for every American who gets health insurance,” the Daily Mail divides the 10-year net cost, $1.35 trillion, by the annual number of people who gained insurance under the law, 27 million.

Comparing the 10-year cost of the program to a one-year number of those who will gain insurance is illogical, however. The director of the UCLA Center for Health Policy Research, Gerald Kominski, told us that kind of calculation amounts to “crazy math.”

Also, the spending related to the law doesn’t only go toward those gaining health insurance, as the Daily Mail‘s math suggests. As the CBO writes, the nearly $2 trillion (gross) that will be spent in the next 10 years is “for subsidies for insurance obtained through the exchanges and related spending and revenues, for Medicaid and CHIP, and for tax credits for small employers.” The CBO estimates that 27 million fewer people will be uninsured in 2020 under the law, compared with what would have been the case without the ACA, but 34 million would get either subsidized insurance on the exchanges or coverage through Medicaid or the Children’s Health Insurance Program.

In the more immediate future, CBO expects 16 million to get subsidies in 2016 and 13 million to gain Medicaid/CHIP coverage. The spending on those individuals, however, is expected to be close to $5,000 per person that year, without accounting for any revenue from the ACA. The CBO estimates that the 16 million getting subsidies for exchange health policies in 2016 would get an average subsidy of $4,700, and the $64 billion spent on Medicaid and CHIP that year comes out to $4,923 per new Medicaid enrollee.

Whether subsidizing health insurance for people other than those previously uninsured is a worthwhile government expense is a matter of opinion, of course. But readers should know that the law’s spending goes beyond the uninsured.

Finally, the Daily Mail article laments the “stunning” spending figures from the “bombshell” report, but the CBO’s latest spending projections are in fact downward revisions of previous estimates.

Congressional Budget Office, Jan. 26: Compared with the projection from last April, which spanned the 2015–2024 period, the current projection represents a downward revision in the net costs of those provisions of $101 billion over those 10 years, or a reduction of about 7 percent. And compared with the projection made by CBO and JCT in March 2010, just before the ACA was enacted, the current estimate represents a downward revision in the net costs of those provisions of $139 billion — or 20 percent — for the five-year period ending in 2019, the last year of the 10-year budget window used in that original estimate.

Kominski stressed to us that while the costs associated with the ACA are not insignificant, they are a small portion of total national health expenditures in the United States. In 2013 alone, national health spending totaled $2.9 trillion, more than double the 10-year net cost of the ACA. The nation’s total spending for that year amounted to $9,255 per person.

— Alexander Nacht

Sources

Beattie, James. “CBO: Obamacare To Cost $50,000 Per Person.” Western Journalism. 27 Jan 2015.

Martosko, David. “Obamacare program costs $50,000 in taxpayer money for every American who gets health insurance, says bombshell budget report.” Daily Mail. 26 Jan 2015.

Congressional Budget Office. “The Budget and Economic Outlook: 2015 to 2025.” 26 Jan 2015.

Congressional Budget Office. “Appendix B: Updated Estimates of the Insurance Coverage Provisions of the Affordable Care Act.” 26 Jan 2015.

Congressional Budget Office. “Updated Estimates of the Effects of the Insurance Coverage Provisions of the Affordable Care Act, April 2014.” 14 April 2014.