The repeal of Obamacare’s individual mandate penalties in the tax bill has lowered the projection for how much the government will spend on medical coverage for children, according to a government report released Friday.
The Congressional Budget Office and the Joint Committee on Taxation predict that the repeal of the penalties for the individual mandate, which required people to buy health insurance or pay a fine, will lower the cost of the Children’s Health Insurance Program, or CHIP. The agencies project in their report that without the mandate fewer parents will sign their children up for CHIP than otherwise would have if it had remained in place.
The program covers about 9 million middle- and low-income children, and the penalties are zeroing out beginning in 2019. CHIP funding expired in September, and though Congress allocated a short-term spending package for it, lawmakers have not reauthorized a long-term spending plan, which would pay for five years of the program.
The report goes on to say that if CHIP isn’t renewed, the federal government ultimately would spend more on healthcare for children.
Without CHIP, a segment of the population will seek coverage in the Obamacare exchanges, where people can obtain coverage that is partially subsidized by the federal government. Some states have sent letters to families letting them know that the exchanges offer a backup option to families who wouldn’t have access to CHIP.
Covering children through the exchanges would cost the government more than if they were covered by CHIP, the report predicts. The cost of exchange plans is expected to increase without the individual mandate, meaning the federal government will be kicking in more for the plans.
As a result, enacting CHIP will become less expensive than previously thought. It is projected to increase the deficit by $800 million over a decade, $7.3 billion less than estimates calculated in October, ahead of the tax bill’s passage.
The individual mandate was billed by supporters as a necessary policy to encourage more people to sign up for health insurance coverage and help lower overall costs. It was supposed to be a mechanism to encourage healthier people, who would otherwise choose not to become insured, to sign up for coverage.
Previous CBO estimates have projected that 13 million more people would be uninsured without the mandate, saving the government $338 in subsidies, but the agency is re-evaluating its projections amid criticism that it overstated the mandate’s impact. A Standard & Poor’s projection estimates that without the mandate the number of uninsured would increase by 5 million or fewer people.
