CBO: Cost of Obamacare Subsidy Will Increase 8-Fold in 10 Years

By Terence P. Jeffrey | September 15, 2014 | 5:07 PM EDT

(AP Photo/Carolyn Kaster)

(CNSNews.com) - The cost of the Obamacare subsidy that the U.S. Treasury will pay on behalf of people who earn under 400 percent of the federal poverty level and who buy a government-approved health-care plan on a government-run health-insurance exchange will increase by approximately 8-fold in its first ten years of operation, according to the latest budget estimate from the Congressional Budget Office.

Medicaid spending will double in the first ten years of full implementation of Obamacare, according to the CBO estimates.

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Under the Patient Protection and Affordable Care Act, the federal government requires Americans to purchase a health-insurance plan that meets government specifications. If they buy that insurance through a government-run exchange, and earn less than 400 percent of the federal poverty level, the U.S. Treasury will pay a part of their premium. The amount the Treasury pays decreases as a person’s income increases toward the 400-percent-of-poverty level.

At the same time, the Affordable Care Act expands the Medicaid rolls by providing subsidies to states that make people earning up to 133 percent of poverty eligible for the program. People signing up for insurance on the exchange whose income is below that level must be enrolled in Medicaid.

“ACA’s Medicaid expansion provisions have the potential for affecting eligibility for premium credits if certain low to middle income individuals and families seek health insurance through the exchanges,” says the Congressional Research Service. “Under ACA, states have the option to expand Medicaid eligibility to include all nonelderly, non-pregnant individuals (i.e., childless adults and certain parents, except for those ineligible based on certain noncitizenship status) with income up to 133% FPL.”

“States that choose to implement the ACA Medicaid expansion will receive substantial federal subsidies,” says the Congressional Research Service. “If a person who applied for premium credits in an exchange is determined to be eligible for Medicaid, the exchange must have them enrolled in Medicaid.”

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Under the ACA, the exchanges began enrolling people in federally subsidized health-insurance plans and in Medicaid this year.

In fiscal 2013, the year before the health insurance exchanges opened, the federal government spent $265 billion on Medicaid, according to CBO. This year, fiscal 2014, the first year that the exchanges will be in operation, the federal government will spend $305 billion on Medicaid. By 2023, the tenth year that the Obamacare exchanges will be in operation, Medicaid will cost the federal government $539 billion—more than double the $265 billion it cost in 2013.

By 2024, the last year in the CBO estimates, Medicaid spending will climb to $570 billion.

In fiscal 2014, the first year of the Obamacare exchanges, the federal government will spend $17 billion on subsidies for people who buy their insurance there. By 2023, the tenth year of the exchanges, the federal government will be spending $134 billion on subsidies for people buying their insurance there.

The $134 billion that the federal government will dole out in Obamacare subsidies in fiscal 2014 is 7.9 times as much at the $17 billion it will dole out this fiscal year.

In 2024, the last year in the CBO estimates, the Obamacare subsidies will increase to $137 billion.

The combined $707 billion that the federal government will spend on Medicaid and Obamacare subsidies in 2024 is roughly equal to the $716 billion the CBO estimates the government will spend on national defense that year.