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Ruling could hike CBO’s health law cost estimate

- The Washington Times - Tuesday, July 3, 2012

The next big shoe to drop in the health care debate after last week's Supreme Court ruling is an updated cost estimate from Congress' chief scorekeepers, which could tip the massive program into the red.

While the court upheld most of the health law, it made one key change that could mean fewer people take part in Medicaid and instead end up in heavily subsidized health exchanges — a move that could make the law more expensive for the federal government.

"People haven't fully internalized how much of a monkey wrench this court ruling has thrown into the finances of the legislation," said Chuck Blahous, a research fellow at George Mason University's Mercatus Center and a public trustee for Social Security and Medicare.

When President Obama signed the law, the Congressional Budget Office — the scorekeeper for all legislation — said it actually would cut the deficit, thanks to hundreds of billions of dollars in tax increases and spending cuts elsewhere, which combined to more than balance out the nearly $900 billion in new health care spending.

In a brief statement last week, CBO said it'll work up a new estimate based on the law as it stands now.

Democrats hope the latest figures will still show a lower deficit. But Republicans are salivating, saying the re-estimate could show spending now exceeds the new taxes and spending cuts.

It all hinges on how many states decide not to expand their Medicaid programs, as the law requires.

As written, the law says states must expand Medicaid eligibility to include adults up to 133 percent of the federal poverty level, or else face the loss of all federal Medicaid money, even for current beneficiaries.

The court's majority, however, said the government can't hold states hostage like that.

The Medicaid expansion is intended to cover Americans who aren't poor enough to qualify for traditional Medicaid but not wealthy enough to qualify for federal subsidies to buy coverage on insurance exchanges.

At least 15 Republican-led states have expressed reluctance to expand Medicaid, with some of those states already flatly ruling it out.

In states that opt out, the federal government must instead offer subsidies to help those caught in the middle to join health exchanges.

Opponents of the law say that's likely to steepen its price tag, potentially reversing the CBO's original projection that it would whittle the deficit down $132 billion by 2019.

"It's going to go up, that seems unmistakable," said Doug Holtz-Eakin, former CBO director under President George W. Bush.

But supporters of the law say the exchange subsidies will cost less to the federal government than it would have paid under Medicaid.

If states don't expand their Medicaid programs, the government won't be shelling out any help to Americans who don't qualify for the current Medicaid program and earn below 100 percent of the poverty line, said Edwin Park, a health care specialist at the Center on Budget and Policy and Priorities.

"They have no Medicaid, they can't get premium credits and unfortunately, they won't get coverage," Mr. Park said. "That's clearly going to outweigh the increased cost for people between 100 and 133 percent of poverty."

Still, that means they'll be without insurance — eating into Mr. Obama's goal of universal coverage.

Meanwhile, Republicans said that the court's ruling stamping the mandate that all Americans obtain insurance a "tax" means Mr. Obama has violated his pledge not to raise taxes on the middle class.

Complicating matters is a provision in the law that bans the government from spending more than about half a percent of gross domestic product on insurance subsidies.

The government could hit that trigger if it has to pay out more insurance subsidies in the exchange, said Mr. Blahous, who has been a harsh critic of the way the CBO calculates the cost of the bill.

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