High Court Health Ruling to Increase Uninsured, CBO Says

July 24 (Bloomberg) -- The Supreme Court decision that threw out part of President Barack Obama’s health-care overhaul will cut the law’s cost and leave more people uninsured, according to the Congressional Budget Office. Megan Hughes reports on Bloomberg Television's "Bottom Line." (Source: Bloomberg)

About 3 million fewer low-income Americans will have health insurance as a result of the Supreme Court decision that threw out part of President Barack Obama’s health-care overhaul, the Congressional Budget Office said.

The cost of expanding coverage will shrink by $84 billion to $1.168 trillion under the court decision, which voided a requirement that states expand Medicaid coverage for the poor in 2014, the nonpartisan agency said in a report yesterday.

At the same time, the report said the per-person cost of expanding aid will increase because some who would have been covered by Medicaid will instead receive more-expensive subsidies to buy private health insurance.

It is the first official estimate of the effects of the June 28 court decision upholding the core requirement in the Patient Protection and Affordable Care Act that most Americans carry health insurance or pay a penalty.

The court threw out a provision requiring states that don’t comply with the Medicaid expansion to lose existing federal Medicaid funding. The court said Congress can require states to meet conditions to receive new Medicaid money.

The CBO said it is impossible to know how many states will opt out of the Medicaid expansion. At least eight Republican governors are balking, according to the Republican Governors Association. Wisconsin Governor Scott Walker told reporters at the National Governors Association meeting this month in Williamsburg, Virginia, that his state won’t act on a program that may be “on a path to being repealed.”

‘Highly Uncertain’

“What states will be able to do and what they will decide to do are both highly uncertain,” the CBO said without identifying any particular state. The estimates “reflect an assessment of the probabilities of different outcomes.”

The CBO predicted a “wide range” of state reactions to the ruling. Some states will forgo any expansion. Others “will try to work out arrangements” for a partial expansion to avoid a gap between people who get Medicaid and those who receive subsidies to buy insurance through an online exchange.

Other states may postpone any decision until after 2014, when the main provisions of the health-care overhaul take effect. The agency said its estimate represents the “middle of the distribution of the many possible outcomes arising from the Supreme Court’s decision.”

In March, the CBO predicted the health-care law would extend coverage to 33 million Americans by 2021, which would increase the share of the population with insurance to 93 percent from 82 percent. The agency now anticipates 92 percent will have coverage by 2022.

Poverty Line

The legislation would expand coverage in part by extending Medicaid to almost everyone with income up to 138 percent of the poverty line. The law also will provide subsidies to those earning between 100 percent and 400 percent of the poverty line to help them buy private insurance on so-called exchanges.

The court decision means about 6 million fewer Americans will be enrolled in Medicaid, CBO said. About 3 million who would have received Medicaid under the original law will now receive the exchange subsidies.

That will push up federal spending on those people by $3,000 each, the agency said, because private health insurance plans tend to pay providers more than Medicaid and also have higher administrative costs.

Representative Tom Price, a Georgia Republican, said in an e-mailed statement that the CBO findings show “the president’s health care law remains a dramatic and expensive expansion of Washington control over the American people’s health care.”

Fiscal Burden

There are “significant” incentives and disincentives for states in the Medicaid expansion, the CBO said. Even though the federal government would pay most of the cost -- 100 percent until 2017, with the states’ share rising to a maximum 10 percent after that -- that could still represent a major burden for some states, CBO said. Governors may also fear that Congress will roll back federal support in response to pressure to cut the budget, the agency said.

States may also decide to go along with the expansion because they would probably see savings in other programs providing care to the uninsured, the CBO said.

Opting out would also create a gap in coverage. That’s because the lowest-income Americans would continue to receive help through existing Medicaid programs. States set their own income criteria, with 17 limiting enrollment for parents to those earning less than half of the official poverty threshold, which last year was $18,500 for a family of three. Those whose earnings exceed the Medicaid income limits yet fall short of qualifying for the exchange subsidies would receive nothing.

‘Affordable Care’

“We hope states will take advantage of the options in the health care law to improve access to affordable care,” Nancy- Ann DeParle, an Obama administration health-care adviser, said in a White House blog post. “As the president has said, this law is here to stay, and we will continue our efforts to work with states to deliver the benefits of the law to the American people.”

Hospitals may press states to take part in the Medicaid expansion, the CBO said, because the law reduces special government payments to facilities that treat a large share of uninsured people on the assumption those people would instead be covered through Medicaid.

Also yesterday, an independent study by consulting firm Deloitte LLP found that most companies expect higher costs as a result of the law and are preparing to revise employee health programs to share the burden. About 69 percent of companies surveyed plan to increase workers’ deductibles and co-payments in the next three to five years, and 68 percent will raise employee premium contributions, Deloitte said.

Deloitte Study

In the survey of 560 companies, 26 percent of those with 50 to 100 employees said they aren’t prepared to implement or respond by 2014 to the provisions taking effect that year. About 9 percent of all companies surveyed said they expect to drop employee health insurance within one to three years, and 10 percent say they’re undecided as to whether to maintain coverage, the study showed.

While employers aren’t required to offer health insurance, penalties will be imposed starting in 2014 for those with more than 50 workers that don’t meet government standards for affordable coverage. Businesses with fewer than 25 full-time workers are eligible for tax credits to help pay for insurance.

To contact the reporter on this story: Brian Faler in Washington at bfaler@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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