Supreme Court Ruling Could Add to Health Care Costs

The U.S. Supreme Court's recent ruling on the Affordable Care Act (ACA), also known as "Obamacare," could add significantly to the national debt, economist Charles Blahous argues.

The court ruled unconstitutional the ACA's provision that would have allowed the federal government to remove all existing Medicaid from states that opt out of the law's expansion of Medicaid eligibility. As a result, Blahous said, the court has changed the law in a way that considerably worsens its impact on the federal budget and will likely lead to cuts, later in this decade, in subsidies for low-income individuals to purchase health insurance, as they are required to do under the law.

Florida Governor Rick Scott has already said his state, which led the lawsuits against the law's Medicaid penalty for opting out, will not participate in the Medicaid expansion. Another six states are considering doing the same -- Iowa, Louisiana, Mississippi, South Carolina, Texas and Wisconsin.

What this means is that fewer people will be on Medicaid than originally estimated and more people will participate in the health insurance exchanges and, thus, be eligible for the subsidies, said Blahous, a senior research fellow at the Mercatus Center, a libertarian think tank, and a public trustee for Medicare and Social Security.

At this point, he said, no one knows how much the Court's change to the ACA will add to the nation's deficits, but some previous estimates suggest that for every 1 million people who get exchange subsidies rather than become eligible for Medicaid, $50 billion to $90 billion will be added to federal government deficits over 10 years. The impact, therefore, will depend on which states choose to opt out.

Additionally, Blahous pointed out a little known provision in the law that places a cap on the total cost of the health exchange subsidies. So if in 2019 the costs of those subsidies are higher than expected (because more people than expected are using the exchanges) the subsidies would face automatic cuts under the law. This means that some low income individuals would receive less money from the government to purchase health insurance.

Blahous authored a report in April saying that the ACA will add between $340 billion to $530 billion to federal government deficits over the next 10 years. The Supreme Court's decision, therefore, only makes these numbers worse, in Blahous's view.

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