Cost of health reform’s subsidies getting pricier

The cost of health reform keeps on rising—at least according to new analysis.

The cost of providing subsidies to help people buy insurance has increased by nearly 25 percent since the Patient Protection and Affordable Care Act was passed and will continue to rise in coming years, a report published by the American Action Forum finds.

The think tank—led by former Congressional Budget Office director Douglas Holtz-Eakin—compared CBO’s initial estimates for the law to CBO's most recent analysis, issued this summer after the Supreme Court upheld the law.

“The ACA health insurance subsidies are the most significant expansion of entitlements since the 1960s,” the group's paper says. “In light of the precarious fiscal outlook for the federal government, its cost is a central concern to policymakers and taxpayers alike.”

After the PPACA was passed, the Congressional Budget Office projected the budget cost for subsidies between 2012 and 2019 would be $462 billion. By June 2012, the cost for these same years had jumped to $574 billion, an increase of nearly 25 percent.

A central feature of the PPACA is the subsidies for insurance purchased through the state-based exchanges. To be eligible for the subsidies, a household’s income must be between 100 percent and 400 percent of the federal poverty level and must purchase a “qualified health plan” through an exchange.

Given the risks of faster-than-expected health care inflation, slow growth in incomes, and the potential for less employer-sponsored insurance in the future, analysts project the cost will rise even further.

“The lesson is clear: in its brief existence, the ACA entitlement has already increased in cost by nearly 25 percent,” analysts write. “Given the continued rise in health care costs in the United States, the stagnation of incomes during the post-2009 recovery, and the large upside risk due to employers no longer providing insurance, there is substantial reason to suspect that the price tag could rise much further yet.”

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