clock menu more-arrow no yes mobile

Filed under:

Obamacare is costing way less than expected

Mark Wilson/Getty Images

In January 2010, the Congressional Budget Office projected that the federal health spending would total a bit more than $11 trillion between 2011 and 2020.

Today, the Congressional Budget Office thinks it made a mistake. Costs are coming in lower-than-expected, and the CBO's newest projections suggest the federal government will spend $600 billion less on health care than they predicted back in 2010.

So far, so good: projections are always wrong by at least a bit, and it's nice to have the extra $600 billion in America's pocket.

But here's the incredible thing: as Paul Van de Water, a health care expert at the Center on Budget and Policy Priorities, points out, the January 2010 projection didn't include any of the spending associated with Obamacare. The latest projections include all of the spending associated with Obamacare.

health spending projections

Center on Budget and Policy Priorities

So even adding all the spending in Obamacare, the CBO is projecting the federal government will spend $600 billion less on health care than the agency expected in 2010, when they weren't counting even a dollar of the spending in Obamacare.

That's simply an amazing fact. It's like finding you have thousands more in the bank than you expected at the beginning of the year — even though, at the beginning of the year, you didn't know you were going to buy a new car.

Obamacare costs money. Just less than everyone thought.

Make no mistake: Obamacare spends a lot of money on its tax credits and Medicaid expansion. It recoups some, but not all, of that new spending with hundreds of billions of dollars in Medicare cuts, which reduce federal health spending (the bulk of the remainder is made up with tax increases, but they're irrelevant for this calculation). But back when the law was passing, Republicans argued up, down and sideways that the Congressional Budget Office was sharply underestimating the amount of money Obamacare spends.

In fact, the CBO overestimated the cost of Obamacare — and by quite a lot. In April 2014, they marked their Obamacare projection down by more than $100 billion.

Behind the rosy numbers is the sharp slowdown in health-care spending growth, some of which is the result of the recession, but much of which increasingly looks real. If Obamacare gets any credit for that slowdown, it's very partial credit at best — the beginning of the trend predates the law's existence.

Some health-care experts, however, think Obamacare is playing a real role in making sure the trend sticks. Drew Altman, president of the Kaiser Family Foundation, argues that "we have always seen the health-care marketplace respond by lowering costs when there is the threat of impending health reform legislation or government action on costs."

What's different this time, he says, is that "we have not only the threat [of health reform legislation] but the reality" — in other words, Obamacare, with all its payment reforms and Medicare experiments, won't permit the health industry to go back to business as usual. And so the health-cost slowdown is sticking.

Whether that's right remains to be seen. But the simple fact is that the federal government is spending less on health care with Obamacare than it expected to spend without Obamacare. That's remarkable.