The Independent Institute


Obamacare’s Cost per Beneficiary Explodes with Shrinking Enrollment

The Congressional Budget Office’s latest budget estimate shows Obamacare’s costs per beneficiary have exploded, as enrolment in Obamacare’s broken exchanges collapses. January’s update estimates 2016 exchange enrolment at 13 million people (p. 69). Although the president’s administration had previously downgraded its estimate of Obamacare enrolment, this is the first significant change by the non-partisan CBO.

As recently as March 2015, CBO was still assuming 21 million enrollees in Obamacare’s exchanges this year (Table 2). In the January update, it has changed its estimate only for 2016 enrollment, not for future years. Next March’s update will include a more thorough analysis including future years, and we can expect those estimates to be similarly downgraded.

What is shocking, however, is that the January update still estimates that tax credits, which subsidize insurers participating in exchanges, will cost taxpayers $56 billion this year (p. 182). That amounts to about $4,308 per enrollee (although not all are subsidized). Back in March 2010, CBO estimated that 21 million people would be covered in exchanges in 2016, for a total cost of $59 billion in tax credits (pp. 20-23). That would amount to about $2,810 per enrollee.

This leads to the conclusion that Obamacare exchanges are, in fact, high-risk pools for sick individuals who cannot get coverage elsewhere. They are not a properly functioning, broad-based market for health insurance.

And, by the way, CBO confirms that Obamacare kills jobs:

CBO anticipates that several developments in federal fiscal policy under current law will affect the economy through their impact on the labor market. The most sizable effects stem from provisions of the Affordable Care Act (ACA). The ACA’s largest effect on the labor market—especially as overall employment conditions improve—will come from provisions of the act that raise effective marginal tax rates on earnings, thereby reducing how much some people choose to work. The health insurance subsidies that the act provides through the expansion of Medicaid and the exchanges are phased out for people with higher income, creating an implicit tax on some people’s additional earnings. The act also directly imposes higher taxes on some people’s labor income. Because both effects on labor supply will grow over the next few years, CBO projects, they will subtract from economic growth over that period.

(“The Budget and Economic Outlook, 2016to 2026,” Congressional Budget Office, January 25, 2016, p. 38.)

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For the pivotal alternative to Obamacare, please see Independent Institute’s book, A Better Choice: Healthcare Solutions for America, by John C. Goodman.


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