What You Need To Know About Medicaid And Obamacare

On May 24, the Congressional Budget Office released its estimates of federal spending on health programs for Americans below the age of 65 as well as sources of health coverage. The media tends to focus on the coverage numbers from these reports despite vast amounts of evidence that health insurance is weakly related to overall health outcomes, but much more can be learned from these estimates.

Two major policy changes affect CBO’s estimates over the next several years, principally the end of the COVID continuous coverage requirements for Medicaid and the expiration of the enhanced Obamacare premium subsidies after 2025. Here are the 10 key takeaways from CBO’s report, which concentrate on the effects of Medicaid redeterminations and Obamacare trends.

1) Medicaid enrollment will significantly decline over next two years

According to CBO, Medicaid enrollment for those under 65 reached 76.6 million people last year. Medicaid enrollment soared over the past three years because states stopped doing eligibility reviews of program enrollees in early 2020. Those reviews have restarted in several states and will resume in all states soon. CBO estimates that 15.5 million people will be removed from Medicaid from this process. CBO expects Medicaid enrollment to fall to 75.9 million people in 2023, 67.2 million people in 2024, and 64.3 million people in 2025.

2) Most people who lose Medicaid will enroll in employer coverage

CBO estimates that nearly 22 million people had multiple sources of coverage in 2022. This is an expected effect of stopping eligibility reviews in Medicaid. Table 1 shows that as the unemployment rate fell between 2020 and 2022, Medicaid enrollment for those under 65 continued to grow. The most common dual enrollment situation is coverage in Medicaid and an employer plan. According to CBO’s projections, slightly more than half of people who lose Medicaid (an estimated 7.8 million people out of 15.5 million people who lose Medicaid overall) will enroll in an employer plan.

3) There will be an increase in the number of people without health insurance, but most of them are eligible for subsidized coverage.

CBO estimates that 6.2 million people who lose Medicaid will be uninsured. According to past analysis, most of the uninsured who are lawful residents have access to some form of subsidized health insurance (typically employer coverage or a subsidized exchange plan) and choose not to enroll. Only 1.7% of people under the age of 65 are uninsured and lack access to subsidized coverage.

Those who are removed from the program because they may not have returned renewal paperwork but remain eligible for Medicaid are effectively still covered through Medicaid retroactive eligibility. Retroactive eligibility means that people eligible for Medicaid can enroll when they need medical services with Medicaid responsible for the last three months of their expenses so long as they were eligible during that period.

4) Obamacare spending will be $214 billion this year

According to CBO, federal spending on Obamacare’s Medicaid expansion will be $123 billion and spending on Obamacare’s premium subsidies, which includes the Basic Health Program (BHP) subsidies, will be $91 billion this fiscal year. Fiscal year 2023 is from October 1, 2022, through September 30, 2023. New York and Minnesota use large subsidies through the Basic Health Program to provide coverage to people with income below 200% of the poverty line who do not qualify for Medicaid.

5) Obamacare’s spending will be $2.5 trillion over the next decade

CBO estimates that federal spending on the Medicaid expansion will be $1.45 trillion from 2024-2033 while spending on Obamacare premium subsidies, including the BHP, will be $1.05 trillion.

6) Obamacare is exacerbating annual federal deficits

Although not directly in the CBO report, the new estimates are a reminder that Obamacare is significantly contributing to annual federal deficits despite the promise that the law would be paid for. Most of the tax increases that were enacted to pay for Obamacare have been eliminated. These include the health insurance tax, the medial device tax, the Cadillac tax, and the individual mandate tax. Obamacare’s employer mandate is raising less than 5% of what was expected. The only two aspects of Obamacare that reduce federal deficits are the law’s reductions in Medicare payments and its investment tax, which are nowhere near the amount of Obamacare spending.

7) Per enrollee, Obamacare is 3 times more expensive for taxpayers than employer coverage

Premiums for employer coverage are not subject to federal income or payroll tax, which results in a revenue loss to the federal government. CBO reports this revenue loss in its report. Dividing that revenue loss by the number of people enrolled in employer coverage yields a per capita revenue loss of $2,075 in FY 2023. This is significantly less than the federal cost of both Medicaid expansion ($7,069) and premium subsidies ($6,169). Overall, people migrating from Obamacare to employer coverage is a large net positive for the federal budget.

8) Almost everyone buying coverage in the exchange receives a subsidy

CBO estimates that 15.1 million people will receive coverage through an exchange in 2023. Of these, 14.1 million people—or 93%—will receive subsidies. In addition to these people, another 1.2 million people receive coverage in the subsidized BHP and 3.4 million people are enrolled in off-exchange nongroup coverage.

9) Obamacare exchange enrollment will rise and then fall

In early 2021, Congress significantly increased subsidies for people who purchase coverage through the exchanges. In the Inflation Reduction Act, Congress maintained these higher subsidies through 2025. These higher subsidies present several major problems, but they have led to about 3 to 4 million additional exchange enrollees. Since nearly 2 million people who lose Medicaid from the redeterminations are projected to enroll in subsidized exchange coverage, CBO projects that overall Obamacare exchange enrollment will rise to 17.9 million people in 2025 (up from 15.2 million this year). CBO projects that the loss of the enhanced subsidies will cut exchange enrollment to 12.8 million in 2027.

10) Stability of employer coverage

CBO expects that between 57.1% and 58.2% of people under the age of 65 will enroll in an employer plan for every year between 2022 and 2033. The average over this period is 57.8%.

Aging of the Population

Finally, in addition to these ten findings, one other data point has profound implications for federal health programs and U.S. fiscal policy—nearly all of America’s net population growth over the next decade will be from senior citizens. According to CBO’s estimates, the total population under the age of 65, which includes legal immigrants and noncitizens not lawfully present, will grow from 271.1 million people in 2022 to 272.9 million people in 2033. This means that almost all projected U.S. population growth over the next decade (around 13 million people) will be from Americans over the age of 65. Since such a large percentage of federal spending are transfers from workers to seniors, the stagnation of the population below the age of 65 is an ominous indicator and another data point for why federal health programs need significant reform.

Notes

1) CBO’s coverage estimates represent average annual enrollment in a given program over the course of the year.

2) CBO reports expenditures by fiscal year and enrollment by calendar year. For the per capita estimates shown in this post, we converted enrollment to fiscal year estimates.

Source: https://www.forbes.com/sites/theapothecary/2023/05/25/cbos-new-numbers-what-you-need-to-know-about-medicaid-and-obamacare/