CBO lowers U.S. deficit estimates as health subsidies fall

WASHINGTON Mon Apr 14, 2014 11:10pm EDT

Arminda Murillo, 54, reads a leaflet at a health insurance enrollment event in Cudahy, California March 27, 2014. REUTERS/Lucy Nicholson

Arminda Murillo, 54, reads a leaflet at a health insurance enrollment event in Cudahy, California March 27, 2014.

Credit: Reuters/Lucy Nicholson

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WASHINGTON (Reuters) - Health insurance subsidies under the Affordable Care Act will cost slightly less than previously thought, helping to slow down the forecast growth of U.S. deficits over the next decade, the Congressional Budget Office said on Monday.

The non-partisan CBO, in revisions to its annual budget estimates, said the reduced subsidy cost estimates partly reflect lower premiums now being charged in government-run "Obamacare" exchanges and accommodations that allow previously canceled health plans to be extended.

The reduced health cost estimates made up the bulk of a $286 billion reduction in CBO's cumulative deficit forecast for fiscal years 2015 through 2024, compared with a forecast in February, to $7.62 trillion.

The revisions gave the Obama administration a small piece of positive news on the embattled healthcare reforms after last week's departure of Health and Human Services Secretary Kathleen Sebelius prompted fresh criticism of Obamacare's troubled launch. White House spokesman Jay Carney wasted no time in trying to capitalize on it.

"This report demonstrates the Affordable Care Act is working," Carney told a news briefing. "It shows that marketplace healthcare costs have gone down because premium estimates have gone down."

The report also forecast less severe premium increases in benchmark health plans offered through the exchanges.

For the fiscal year 2014 ending September 30, CBO said, the deficit would fall to $492 billion from a $514 billion February estimate - and nearly a third lower than last year's $680 billion deficit. The forecasts assume no changes to tax and spending laws.

The agency attributed this year's decline to technical revisions to spending estimates for discretionary programs. But from 2015 onward, it estimated a $186 billion reduction in health insurance subsidies and related spending.

The current CBO estimate for the average subsidy for 2014 is $300, or 6 percent less than estimated in February. The subsidy estimated for 2024 is $1,200, or 14 percent less.

In an accompanying report, CBO and the Joint Committee on Taxation left unchanged their estimate that 6 million people on average will be covered by private health insurance purchased through Obamacare's marketplaces over the course of this year, saying enrollment will vary at different times as people leave and enter the marketplaces.

The administration announced last week that 7.5 million people have signed up for private coverage and the number is expected to rise.

CANCELED PLANS LIVE ON

Several factors led to the lower CBO cost estimates for Obamacare marketplace subsidies, including steps the administration took last year to accommodate people who were notified that their health insurance plans would be canceled for not complying with Obamacare's benefits and consumer protection standards. Researchers said plan premiums were also less costly than expected, while narrow provider networks made some insurance coverage less attractive.

Millions of people received cancellation notices from their insurers last fall, spawning a brief public uproar against Obama, his law and the Democrats who voted for it. The administration responded by saying state insurance regulators could allow people to renew noncompliant plans through September 2017. It also offered hardship exemptions to those who preferred to go uninsured or opt for low-premium catastrophic coverage.

People taking advantage of these accommodations would remain outside the Obamacare marketplaces in plans that do not qualify for subsidies.

CBO also estimated a $98 billion 10-year reduction in Medicare outlays due to lower spending on prescription drugs and hospital insurance compared with the February estimate. Medicaid, the healthcare program for the poor, would see a $29 billion reduction, CBO said.

FALLING DEFICITS TO END The CBO left intact its previous economic projections, which envision rising deficits after 2015 as more of the massive "baby boom" generation retires and draws more federal benefits or drops out of the workforce.

Mandatory spending programs, including Medicare, Social Security and Medicaid, will swell to 11.5 percent of GDP in 2024 from 9.5 percent in 2013. In 2024, they will cost $3.1 trillion, CBO said, accounting for more than half of all federal spending.

"If current laws do not change, the period of shrinking deficits will soon come to an end," the CBO said in the report.

Deficits will reach a low point of $469 billion, or 2.6 percent of U.S. gross domestic product, in fiscal 2015, then gradually start to rise, topping $1 trillion again in 2023 and 2024, a level that would be near 4 percent of GDP.

(Reporting By David Lawder; Editing by Doina Chiacu and Mohammad Zargham)

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Comments (16)
Bakhtin wrote:
The righties all said Obamacare would bankrupt the USA. Real-life proves them wrong. Again…

They said debt would destroy the USA. It hasn’t.
They said deficits would kill the USA. They haven’t.
They said inflation would spiral out of control. It hasn’t.
They said Obamacare would never get enough people to be viable. It has.
They said Obamacare would increase deficits. It hasn’t.

An impressive track record…

There is only one thing that has destroyed the US economy in the past couple of decades – Republicans.

Apr 15, 2014 3:04am EDT  --  Report as abuse
lysergic wrote:
NOW THEY WILL SAY THE CBO IS LYING, ESPESCIALLY POSTER 4825, BECAUSE HE’S ALWAYS WRONG.

Apr 15, 2014 8:30am EDT  --  Report as abuse
morbas wrote:
“If current laws do not change, the period of shrinking deficits will soon come to an end,” …

Tax is not just on Income,
Disposable income is required to spur the economy. However the city-county municipality are short the revenue, thus tending to increase low income burden. Property and fee based revenue are the only constitutionally available revenues and the fixed-low income people know it. This revenue base unfairly burdens sustenance side economics. This is favored by the Tea-GOP because they are funded by the 1%, while the DNC is supported by the 99% economics. North Carolina represents a precursor if Tea-GOP is allowed control of the Federal Government. North Carolina H998 Tax unburdens the top 1% by 35% income tax reduction, paid for by education furloughs and education voucher shell game unfavorable to the 99%. The North Carolina Tea-GOP copied out of state ALEC dictation into law then took a year leave attempting to avoid NAACP Clergy and constituent majority.
USA tax structure is the fault and an obstacle to worldly potential. Transaction tax code imposes disproportionate burden at the most fundamental rights of liberty, justice. Any encumbrance on sustenance is contrary to equality in the ’pursuit of happiness’. Debt and deficit is simply insufficient revenue. We can nationalize the tax code eliminating all other taxation, immediately balancing the budget(s), through a margin graduated income tax principle.

To: Office of Senator ____________________
United States Senate Washington,
D.C. 20510
To: Office of Representative_________________________
U.S. House of Representatives
Washington, DC 20515
We the people of this United States do proclaim this federal government ‘of, by and for the people’. That, in order to fairly distribute revenue burden, to satisfy ‘net income’ progressive taxation, to balance all governments budgets, and to not tax poverty;
The people mandate:
Income National Tax code that shall use margin graduated income tax principle: Margin $30k 0% single, $60K 0% joint, income above this a linear increasing rate {Income-[$30k or $60k])*(Income/$800k)*90%; 90% limit} . Exemptions shall be prohibited. The Federal Reserve shall amend the (90%) rate, and control currency printing mandated to maintaining currency availability and value. The Federal Reserve shall set the Margin rate value well (>2x) above highest of all State Poverty Level(s). Revenue shall be proportioned 1/3rd Federal,1/3rd State proportioned per cast ballot and 1/3rd Local proportioned per cast ballot.
This National Tax is a peoples tax, no other citizen taxation shall be permitted. Business shall not be taxed. The Federal Reserve shall control taxation. The people will by simple majority approve or reject all margin and rate changes at every Congressional House Representative election year ballot.

Everyone think they are paying just about the right level of taxation. Guess you like to pay the ultra rich tax burden, and they think that is good and just.

I am no patsy!
morbas(i)

Apr 15, 2014 9:17am EDT  --  Report as abuse
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