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Obamacare Will Cost Billions Less Than Expected

According to a new New York Times report, the cost of the Affordable Care Act is expected to end up billions of dollars less than originally projected. With healthcare costs rising at a slower rate, the Medicaid expansion and private insurance subsidies that the government is rolling out could cost as much as $190 billion less over the next decade than originally expected.

A decade ago, healthcare spending grew at around 5 percent annually. In the two years following the recession, healthcare spending only grew around 1.8 percent each year and has since grown by just an average of 1.3 percent per year. That slowdown means big savings because healthcare costs are lower than expected when the bill was written. If the growth remains slowed, the price tag on Obamacare is going to continue to drop.

Of course, the slow growth has a lot to do with the weak economy. High deductibles and copays discourage people from going to the doctor. The government is expected to enroll nine million people in the expanded Medicaid program and provide subsidized coverage for as many as seven million Americans. That means more people will have access to healthcare and demand will increase.

The economy is only part of the equation, though. Both Medicare and Medicaid figure to see substantial savings as well, even if healthcare costs return to previous trends. The Congressional Budget Office has cut their projected Medicare spending in 2020 by 15 percent, down to $137 billion. The cost of Medicaid is expected to be 16 percent lower than originally expected, down to $85 billion. Overall, private insurance premiums are expected to be 9 percent lower than projected.

According to Harvard economist David Cutler, if slower growth continues over the next decade, the government could save as much as $750 billion.

Another aspect is the integration of the law itself. Because of the problems with the Healthcare.gov website, many people may not sign up for a long time. Twenty five states have yet to expand Medicaid as the program lays out. If those 25 states remain holdouts, the government would save $45 billion by 2016.

(Image courtesy of Joe Crimmings)

About the author

Igor Derysh is the Managing Editor of Latest. com and a syndicated columnist whose work has appeared in The Los Angeles Times, Chicago Tribune, Boston Herald, Baltimore Sun, and Orlando Sun Sentinel, and AOL News. His work has been criticized in even more publications. Follow him on Twitter @IgorDerysh