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Why the health care cost estimate keeps changing

WASHINGTON - MARCH 23: U.S. President Barack Obama (C) is applauded after signing the Affordable Health Care for America Act during a ceremony with fellow Democrats in the East Room of the White House March 23, 2010 in Washington, DC. The historic bill was passed by the House of Representatives Sunday after a 14-month-long political battle that left the legislation without a single Republican vote. (Photo by Win McNamee/Getty Images)
WASHINGTON - MARCH 23: U.S. President Barack Obama (C) is applauded after signing the Affordable Health Care for America Act during a ceremony with fellow Democrats in the East Room of the White House March 23, 2010 in Washington, DC. The historic bill was passed by the House of Representatives Sunday after a 14-month-long political battle that left the legislation without a single Republican vote. (Photo by Win McNamee/Getty Images)Win McNamee / Getty Images

The nonpartisan Congressional Budget Office has issued a new estimate this week of the cost of providing insurance coverage to Americans under the Affordable Care Act – the landmark law President Barack Obama signed in 2010.

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The estimated gross cost of providing coverage to uninsured people will be a little higher than the CBO predicted a year ago but the net cost will be a little lower than in the CBO’s previous estimate.

WASHINGTON - MARCH 23: U.S. President Barack Obama (C) is applauded after signing the Affordable Health Care for America Act during a ceremony with fellow Democrats in the East Room of the White House March 23, 2010 in Washington, DC. The historic bill was passed by the House of Representatives Sunday after a 14-month-long political battle that left the legislation without a single Republican vote. (Photo by Win McNamee/Getty Images)
WASHINGTON - MARCH 23: U.S. President Barack Obama (C) is applauded after signing the Affordable Health Care for America Act during a ceremony with fellow Democrats in the East Room of the White House March 23, 2010 in Washington, DC. The historic bill was passed by the House of Representatives Sunday after a 14-month-long political battle that left the legislation without a single Republican vote. (Photo by Win McNamee/Getty Images)Win McNamee / Getty Images

One reason why: in its economic forecast the CBO now assumes that “the unemployment rate is higher throughout the projection period than it was in last year’s forecast.”

That means there will be an increase in the projected number of people eligible for Medicaid and a reduction in the number of people eligible for subsidies for purchasing insurance through the new health insurance exchanges. That will mean a reduction of about $97 billion in the projected cost for subsidizing people’s purchase of health insurance.

The CBO is also figuring that the cost of private health insurance premiums won’t grow in coming years as fast as CBO analysts assumed when they did the estimate last year. The CBO report pointed to the fairly modest growth in the cost of premiums in 2010 as one hopeful sign.

Figuring out the ten-year cost of the Affordable Care Act is trying to track a constantly moving target. That’s partly because the ten-year forecasting window keeps advancing each year: the new forecasting window covers the years 2012 to 2022.

The CBO explained in its report that “the addition of 2022 to the projection period has the effect of increasing the costs of the coverage provisions of the ACA relative to those projected in March 2011 for the 2012–2021 period because that change adds a year in which the expansion of eligibility for Medicaid and subsidies for health insurance purchased through the exchanges will be in effect.”

Two core provisions of the law do not take effect until 2014:  expanded Medicare eligibility for the poor and the insurance subsidies for middle-income people. And the tax on high-cost so-called “Cadillac” health insurance plans does not start until 2018.