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Q&A: Why Affordable Care Act costs continue to fall

The costs of President Obama's signature healthcare program continue to fall, an analysis finds

As the Supreme Court considers the fate of government subsidies to millions of consumers receiving coverage under the Affordable Care Act, a nonpartisan budget analysis found Monday that projected costs of President Obama's signature healthcare program continued to fall.

Just in time for Washington's annual fight over government spending, the Congressional Budget Office issued its revised outlook for the projected costs of implementing the act. As it has previously, the budget office found that the program is proving to be less expensive than previously expected.

Here's a look at some of its latest findings.

Q. What's the bottom line?

Projected costs of the program are about one-third lower than when first estimated when the law was passed.

In 2010, when the Affordable Care Act became law, the insurance-related costs were estimated by the budget office to be $710 billion over the five-year period 2015-19. Today, those costs are expected to be $506 billion during the same period, a 29% reduction. For the year 2019 alone, the projection is 33% lower.

Costs have tumbled even since the last round of budget office estimates in January. The projected 10-year cost of providing healthcare under the Affordable Care Act has fallen to $1.21 trillion. That's down 11%, or $142 billion, from January's estimate of $1.35 trillion, the office said. Projected costs of the subsidies have dropped 20% from their January estimate.

Q. Why are costs lower than expected?

The main reason is that the private insurers selling health policies on the state and federal marketplaces are charging lower premiums than projected. That translates into lower costs for the government, which this year will help about 7 million low- and middle-income Americans subsidize their monthly premiums.

It's not that health insurance costs aren't continuing to rise. But they're increasing at a much slower rate than expected. Private insurance premiums are expected to grow 5.6% per year, on average, over the next decade. That's a downward revision of roughly 5% in 2016 and 10% in 2025.

Another reason costs aren't as high as expected is that slightly fewer people are now expected to enroll in Medicaid, the government-run program for lower-income Americans.

Medicaid enrollment is projected to be about 2 million lower than previously thought, in part because fewer people than anticipated lost their employer-based coverage when the program began. Also, slightly more people were already receiving Medicaid than had been understood previously.

Q. Don't healthcare costs always increase? Why are they rising less?

The reasons are still up for debate. For one thing, the Affordable Care Act has increased pressure on insurance companies to keep costs low. Under the law, insurers must provide rebates to policyholders if the companies exceed certain spending thresholds on their administrative overhead.

But the recession also slowed cost increases.

Healthcare costs grew on average 5% a year from 1998-2005, but 1.8% between 2006-13. Less spending by the private healthcare companies in 2013 "reinforced a trend" that had begun earlier, the budget office said.

Q. Are lower costs a blip or here to stay?

The budget office said it remained "unclear" whether the slower growth is due to the recession or other factors, but it found the trend to be "sufficiently broad and persistent."

The budget office noted that some of the insurance policies being sold on the exchanges may initially see a price increase in coming years as insurers broaden coverage options.

Prices are projected to rise 8.5% annually in the next few years for the benchmark "silver" policy, which is the second-lowest cost option on the exchange. But they will slow to 5.6% afterward — growing at a 6.4% annual rate, on average, over the decade.

The budget office noted the private insurance projections are "highly uncertain, especially because the causes of the pronounced slowdown in spending in the past several years are not well understood. Projections of growth in premiums for private health insurance offered through the exchanges are even more uncertain because the exchanges are so new."

Q. How many people are expected to enroll in the program?

An estimated 12 million Americans in 2015 are expected to sign up for private insurance plans on the marketplaces, the budget office said.

Over the next decade, that number is expected to grow to 22 million. An additional 14 million are projected to be covered through Medicaid and another government program specifically for children.

Q. What does the budget office report mean for Obamacare's future?

The figures are a boon to the program, particularly as it faces continued Republican opposition. GOP lawmakers are pushing to repeal or amend the law. But as more Americans become covered, undoing it becomes more politically challenging.

More importantly, the Supreme Court is expected to rule this summer on a key provision of the law that allows the government to provide subsidies to Americans who buy insurance through the marketplaces.

Opponents who brought the case argue that subsidies should not be given in the 37 states relying on the federally run exchanges, saying a strict interpretation of the law states subsidies can be offered only to state-run exchanges. The Obama administration has countered that the law allows for subsidies nationwide, regardless of the type of exchange.

Congress could simply tweak the law to clarify the provision; but with the House and Senate under GOP control, that appears unlikely.

lisa.mascaro@latimes.com

Twitter: @LisaMascaro

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