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Leviathan on Steroids

SCOTUS ruling could add $500 billion to Obamacare cost, says former CBO director

• June 29, 2012 12:28 pm

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The Supreme Court’s ruling on the president’s controversial health care law could end up costing taxpayers up to half-a-trillion dollars more than originally thought.

Douglas Holtz-Eakin, a former director of the nonpartisan Congressional Budget Office (CBO), told the Washington Post that once the CBO recalculates the cost of the bill to incorporate the tweaks included in the court’s decision, the law’s total price tag could increase by $500 billion over the next decade.

"There’s real money at stake here," Holtz-Eakin said.

How does it work? The Affordable Care Act seeks to cover the uninsured in two ways: It requires states to expand Medicaid to cover those earning less than 133 percent of the federal poverty level, with the federal government initially picking up the full tab (though federal funding would later fall to cover just 90 percent of the cost of expansion). It also creates new subsidies to help people at slightly higher income levels afford private insurance on new insurance exchanges.

Under the court ruling, the federal government may not punish states that refuse to expand Medicaid eligibility. Holtz-Eakin argues that this legal development gives states a huge financial incentive to opt out of the Medicaid expansion and encourage residents earning 100 percent to 133 percent of the poverty level to seek the more expensive subsidies for private insurance, which are funded entirely by the federal government.

"Suppose that every state takes advantage of this opportunity, and that every individual who is either on Medicaid or would be eligible for the expansion actually moves to the exchanges. The federal government would save as much as $130 billion in Medicaid in 2014, but it would be on the hook for $230 billion in new insurance subsidies," Holtz-Eakin writes. "The net bottom line: a $100 billion annual expansion in federal costs."