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Cost of health care overhaul down, but uninsured up due to Supreme Court ruling

The Congressional Budget Office said Tuesday that due to the Supreme Court’s June 28 decision on the 2010 health care overhaul, the law will cost $84 billion less over 10 years than CBO had previously estimated.

But CBO said 3 million more people will be left uninsured compared to its previous estimate of the number of uninsured in 2022 – that’s because at least some states are expected to forgo the Medicaid expansion that had been mandated by Affordable Care Act (ACA).

Amid the fallout from the theater shooting in Colorado, Melissa Harris-Perry and her guests talk about what went right in the emergency response, and how it ties in with the Medicaid expansion under the Affordable Care Act.

“Fewer people will be covered by the Medicaid program, more people will obtain health insurance through the newly established exchanges, and more people will be uninsured,” the CBO said in its report Tuesday.

The law – as upheld and limited by the Supreme Court – will leave 30 million nonelderly U.S. residents uninsured by 2022, the end of the budget forecasting window.

Before the Supreme Court’s decision, the CBO had estimated the number of uninsured in 2022 would be 27 million.

The CBO issued its new estimate based on its assessment of the effects of the Supreme Court’s ruling, which upheld much of the ACA but also said the federal government couldn’t coerce states into acceding to the law’s expansion in the number of people eligible for Medicaid coverage.

The court ruled that the federal government couldn’t penalize states by withholding all their federal Medicaid funds if they chose to not participate in the expansion, which is set to take place in 2014.

If some governors and legislatures opt out of the expansion, about 3 million people who would’ve been covered by the expansion will be eligible for more expensive taxpayer subsidies in the new health insurance exchanges set up by the law.

Some governors – such as Govs. Rick Scott of Florida and Rick Perry of Texas – have said their states would not participate in the Medicaid expansion, but it’s still too soon to know which states will adopt the program and which ones won’t.

The CBO said Tuesday “the reductions in spending from lower Medicaid enrollment are expected to more than offset the increase in costs from greater participation in the exchanges.”

That will be true, it said, “despite the fact that the government’s average additional costs per person in the exchanges will be greater than its average savings per person for those who, as a result of the Court’s ruling, will not enroll in Medicaid.”

It explained that the number of additional people entering the exchanges as a result of the Supreme Court ruling will be “only about half the number who will not be obtaining Medicaid coverage, many of whom will be ineligible to participate in the exchanges.”

The CBO emphasized the uncertainty in its projections. It said, “How flexible executive branch agencies will be regarding the choices that states will have — particularly states’ options for pursuing partial (Medicaid) expansions — is unclear. Hence, what states will be able to do and what they will decide to do are both highly uncertain.”

Two weeks ago in previewing the CBO’s new estimate, former CBO chief Doug Holtz-Eakin, now president of a conservative advocacy group American Action Forum, pointed out that since expansion does not take place until 2014 governors and state legislatures have time to weigh the costs and benefits of the Medicaid expansion. “It’s a far from obvious decision. They should take their time and do the calculus carefully,” he said.

Under the ACA, the federal taxpayers will pay 100 percent of the cost of covering the people made eligible for Medicaid for the first two years and then will pay 90 percent of the costs for the newly eligible until 2020, at which point the normal federal matching formula would apply. That matching formula varies depending on per capita incomes of people in each state -- so poorer states such as Arkansas have more of their Medicaid costs paid for by the federal taxpayers than richer states such as Connecticut do. The minimum federal match is 50 percent.

Early in 2010, the CBO had estimated that the entire ACA would cause a net reduction in federal deficits of $143 billion over the 2010-2019 period. It estimated that the additional cost of providing insurance to 32 million more Americans would be more than offset by cost savings imposed on Medicare and the tax increases in the law.

That CBO estimate was crucial since it gave some congressional Democrats in competitive districts and states the political cover they needed to vote for final passage of the bill.