Foundation

CBO’s Medicaid Estimate Missed Badly

by Demian Brady / /

The passage and implementation of the Affordable Care Act (ACA) has been rife with controversies, but among the biggest problems has been its Medicaid provisions. Originally the ACA required states to expand Medicaid to cover those earning less than 138 percent of the Federal Poverty Level, but the Supreme Court struck this down as unconstitutional. So instead of the mandate, states that expand Medicaid will receive a 100 percent match from the federal government for the new enrollees through 2016.

Although many have argued that states ought to expand coverage and not leave “money on the table,” there is a catch: the federal match rate will gradually drop to 90%. The states’ share will rise for the remaining costs that are turning out to be higher than originally expected. The Mercatus Center at George Mason University released a new study showing that the Congressional Budget Office (CBO) badly missed the mark when estimating the ultimate costs of the ACA’s Medicaid expansion. 

Comparing CBO’s original estimates before the expansion with what actually occurred, Mercatus found that the number of enrollees was nearly 50 percent higher than expected. This has a significant impact on the ensuing costs: “After adjusting previous projections for current assumptions of state participation, the Congressional Budget Office’s current expectation of federal Medicaid spending between 2016 and 2024 is $232 billion in excess of 2014 estimates.” (Emphasis added.)

This is another example of why more accountability is needed over the “Most Powerful and Little-known Agency in Washington.” The state-level decisions could have turned out differently if the numbers driving the policy debate were better. As is, nineteen states have opted not to expand Medicaid. That figure could have been higher if federal and state taxpayers were aware of the cost-risks.


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