CBO Concludes Supreme Court Decision Lowers Projected ACA Cost, Number Of Covered Individuals

The Supreme Court’s ruling on the Patient Protection and Affordable Care Act (ACA) will reduce the federal government’s projected net cost of the law’s insurance coverage provisions by $84 billion over the 2012–2022 period, the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) have concluded.

In March 2012, before the Supreme Court decision was issued, the CBO and JCT had projected a net cost of $1,252 billion for that 11-year period. The two agencies explained that those figures do not include the budgetary effect of other provisions of the ACA, which in the aggregate reduce budget deficits. These projected net savings to the federal government arise because the reductions in spending from lower Medicaid enrollment [in states that do not expand Medicaid eligibility, as provided in the ACA] are expected to more than offset the increase in costs from greater participation in the health insurance exchanges.


The Supreme Court’s decision in effect allows states to choose whether or not to expand eligibility for coverage under their Medicaid program pursuant to the ACA. Under that law as enacted but prior to the Court’s ruling, the Medicaid expansion appeared to be mandatory for states that wanted to continue receiving federal matching funds for any part of their Medicaid program. Hence, CBO and JCT’s previous estimates reflected the expectation that every state would expand eligibility for coverage under its Medicaid program as specified in the ACA. As a result of the Court’s decision, CBO and JCT now anticipate that some states will not expand their programs at all or will not expand coverage to the full extent authorized by the ACA. CBO and JCT also expect that some states will eventually undertake expansions but will not do so by 2014 as specified in the ACA.

The CBO and JCT now estimate that fewer people will be covered by the Medicaid program, more people will obtain health insurance through the newly established exchanges, and more people will be uninsured, 30 million nonelderly residents, by the end of the coming decade. Before the Supreme Court’s decision, the latter number had been 27 million, the CBO noted. In 2022, for example, Medicaid and the Children’s Health Insurance Program (CHIP) are expected to cover about 6 million fewer people than previously estimated, about 3 million more people will be enrolled in exchanges, and about 3 million more people will be uninsured.

For the average person who does not enroll in Medicaid as a result of the Court’s decision and becomes uninsured, federal spending will decline by roughly an estimated $6,000 in 2022. For the average person who does not enroll in Medicaid as a result of the Court’s decision and enrolls in an exchange instead, estimated federal spending will rise by roughly $3,000 in 2022—the difference between estimated additional exchange subsidies of about $9,000 and estimated Medicaid savings of roughly $6,000.

Because the average savings for each person who becomes uninsured are greater than the average additional costs for each person who receives exchange subsidies, the projected decrease in total federal spending on Medicaid is larger than the anticipated increase in total exchange subsidies, the CBO explained.

The report, Estimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision, is available at http://www.cbo.gov/publication/43472.