Court Ruling on Medicaid Expansion Will Reduce Cost of ACA

August 1, 2012

A report prepared by the Congressional Budget Office (CBO) projects that the Supreme Court's ruling on the Affordable Care Act will result in fewer Americans securing health insurance coverage.

The study, prepared in conjunction with the staff of the Joint Committee on Taxation, was released on July 24 and looked specifically at the Court's rejection of the requirement that states expand Medicaid roles or face penalties with respect to their existing Medicaid programs.

The analysis projected that 6 million fewer persons would be covered by Medicaid due to some states deciding against extending Medicaid coverage to childless adults with incomes up to 133% of the federal poverty level or setting coverage at a lower income level. That is just less than half of the estimated increase in Medicaid enrollment under the ACA.

Of those losing coverage, about half - approximately 3 million - could obtain coverage through health insurance exchanges or other means, leaving another  3 million without health insurance.

The authors cautioned that they based their estimates not on a state-by-state analysis of prospective Medicaid enrollment, but by looking at populations in different income categories and how states would make differing choices in expanding coverage.

This shift of low-income Americans from Medicaid to exchanges could complicate provision of coverage as the ACA anticipated that many of those with incomes above 133% FPL would be able to afford to purchase insurance through exchanges, while those under that level would be covered by Medicaid. 

Even with a number of states opting out of the Medicaid expansion either partly or entirely, the CBO estimates that 30 million additional persons will still obtain health coverage under the ACA. 

While providing health care coverage through exchanges will cost less than Medicaid, it is still substantial. The study estimated the cost at $210 billion over that originally estimated. Some persons shut out of Medicaid may be prevented from participating in the exchanges due to high cost-sharing, keeping them in the ranks of the uninsured.

The reduction in Medicaid coverage would reduce Federal spending by $289 billion for the decade ending in 2022. With Washington picking up some of the costs of providing coverage via exchanges through tax credits and direct contributions, the net savings would total approximately $84 billion.