How Much Will the Supreme Court's Obamacare Decision Cost the Federal Government?

| Tue Jul. 24, 2012 10:58 PM EDT

Several states have said that they don't plan to sign up for Obamacare's expansion of Medicaid now that the Supreme Court says they don't have to. Assuming they stick to their guns, what are the likely budgetary implications of this?

On the one hand, the federal government saves money if there are fewer people enrolled in Medicaid. So that would bring the cost of Obamacare down. On the other hand, some of the people who are no longer going to be eligible for Medicaid will probably choose to buy subsidized private insurance via the exchanges. That's more expensive than Medicaid would have been, which raises the projected cost of Obamacare.

So what's the net cost? Today the Congressional Budget Office weighed in:

  • Decreased cost of Medicaid: -$289 billion
  • Increased cost of subsidies: $210 billion
  • Miscellaneous changes: -$5 billion
  • Net difference between 2012-2022: -$84 billion

So we're saving money. But wait!  The American Action Forum also released an estimate today, just for the six states that have already promised to opt out, and it looks like this:

  • Decreased cost of Medicaid: -$120 billion
  • Increased cost of subsidies: $195 billion
  • Miscellaneous changes: -$3 billion to +$5 billion
  • Net difference between 2014-2021: $72-80 billion

There are some different assumptions at work in these two estimates. But what's important isn't the difference in amount, but the difference in sign. CBO projects a net cost decrease for each state that opts out, while AAF projects a net cost increase.

In other words, we still don't know how this will play out. Stay tuned.