The cost of President Obama's signature health care law is continuing to fall.
The Congressional Budget Office announced on Monday that the Affordable Care Act will cost $142 billion, or 11 percent less, over the next 10 years, compared to what the agency had projected in January.
The nonpartisan agency said the Affordable Care Act will cost less for two essential reasons: health insurance premiums are rising more slowly, and fewer people are now expected to sign up for Medicaid and for subsidized insurance under the law's marketplaces.
More people aren't signing up for the law because , the agency added, fewer employers than anticipated are canceling coverage and more people than earlier estimated had private coverage. By 2025, the CBO estimates "the total number of people who will be uninsured ... is now expected to be smaller than previously projected."
All around, it's positive news for Obama's law, which has been accused of killing jobs and draining federal coffees. To be sure, the law is still expensive -- expected to cost $1.2 trillion over 10 years -- but the price has been falling since the law was passed in 2010 and went fully into force last year.
In March 2010, the CBO predicted that the law would cost $710 billion during the period from 2015 to 2019, without trying to come up with projections beyond that. After several revisions, the law is now expected to cost $506 billion 29 percent less -- during those same five years, as shown in the chart.
CBO issued its new estimates less than a week after the Supreme Court heard a case challenging a crucial provision of the law. Its unclear how the justices will rule, and a decision against the Obama administration could make these estimates irrelevant.
In revising their estimates, the agencies noted two trends.
The first is the relatively modest increase in how much private insurance companies spend on their policyholders' health care. Between 1998 and 2005, spending on health care increased by an average of 5 percent per year, adjusting for inflation and demographics. That figure fell to 1.8 percent per year for the period from 2006 to 2013, the latest year for which data are available.
The administration has said that this decline in spending on medical care is at least partly a result of cost-saving measures in the Affordable Care Act. Critics have argued on the contrary that the decline was due to the recession, and that health care costs could begin to rise again. Independent experts have suggested that much of the effect is due to the weak economy, but not all of it.
The CBO had previously expected that the pace of increasing spending would rise fast again, but now they predict that "such a bounce back seems less likely in light of the further slowing of spending growth observed in the most recent data."
The agencies also revised their estimates in response to new data on who was insured and how before the law took effect.
They concluded that fewer people were employed by firms that might stop offering coverage as a result of the law's passage, since their employees are now able to buy coverage individually through the exchanges. And they realized that fewer people were uninsured to begin with than they had thought.
As a result, fewer people will need to purchase insurance through the exchanges or need federal help to do so.
The agencies also concluded that the number of people who rely on Medicaid is smaller than they had anticipated, which is another source of savings.
These revisions mean that while fewer people will gain coverage as a result of Obamacare, the number of people who will still lack insurance despite the law's passage is also lower than previously anticipated.
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