The CBO has issued a new estimate for the costs of the Patient Protection and Affordable Care Act (“PPACA”). Compared with the original projected total cost of approximately $900 billion over a ten year timeframe, the new estimate is nearly double.  At the same time, the impact on the deficit is more positive than in prior estimates, due, in part, to the inability or unwillingness of small businesses to take advantage of the tax incentives provided in the law  for small employers who provide coverage for their employees. Since the time-frame of the estimate is from the present until ten years in the future (2012-2021), it covers an additional year of full implementation of the law, compared with the 2011-2020 estimate.  The entire report is worth examining, since it demonstrates the changes in the many moving parts of the cost estimation process–from changes in implementation schedules, to changes in economic outlook, to changes in real-world experience compared with initial assumptions, to changes in laws and regulations.  It is also worth noting that CBO has noted the concern of many third parties as to the “rosy” estimates of the number of employers who will continue to offer health insurance to their employees after implementation of PPACA and has promised to issue an analysis “shortly”:

Some observers have expressed surprise that CBO and JCT’s previous estimates did not show a much larger reduction in the number of people receiving employment-based health insurance. CBO and JCT’s estimates take account of the expanded eligibility for Medicaid and the subsidies to be provided through the insurance exchanges, but they also recognize that the legislation leaves in place substantial financial incentives for firms to offer health insurance coverage and also creates new financial incentives for firms to offer such coverage and for many people to obtain it through their employers. Shortly, CBO will release an extensive analysis conducted with JCT of the incentives for firms to offer or not offer health insurance under the ACA, as well as a range of estimates of sources of coverage and federal budgetary outcomes that would result from the ACA under alternative assumptions about employers’ behavior.

  • I can’t say that I am at all shocked by this news. If you think back to the debate in Congress, to get the ACA passed, the President and his friends needed a to get under the $1 trillion mark. To get there was done with some pretty fuzzy math. If you took some time to dive into the math, even at the 30,000 foot view, it really didn’t add up. Now CBO comes back and says it will be roughly double the cost. My bet is that the costs are still low by at least a half trillion.