Budget office: Obama's health law reduces deficit

WASHINGTON -- President Barack Obama's health care overhaul will shrink rather than increase the nation's huge federal deficits over the next decade, Congress' nonpartisan budget scorekeepers said Tuesday, supporting Obama's contention in a major election-year dispute with Republicans.

About 3 million fewer uninsured people will gain health coverage because of last month's Supreme Court ruling granting states more leeway, and that will cut the federal costs by $84 billion, the Congressional Budget Office said in the biggest changes from earlier estimates.

Republicans have insisted that "Obamacare" will actually raise deficits -- by "trillions," according to presidential candidate Mitt Romney. But that's not so, the budget office said.

The office gave no updated estimate for total deficit reductions from the law, approved by Congress and signed by Obama in 2010. But it did estimate that Republican legislation to repeal the overhaul -- passed recently by the House -- would itself boost the deficit by $109 billion from 2013 to 2022.

"Repealing the [health care law] will lead to an increase in budget deficits over the coming decade, though a smaller one than previously reported," budget office director Douglas Elmendorf said in a letter to House Speaker John Boehner, R-Ohio.

The law's mix of spending cuts and tax increases would more than offset new spending to cover uninsured people, Elmendorf explained.

Tuesday's budget projections were the first since the Supreme Court upheld most of the law last month but gave states the option of rejecting a planned expansion of Medicaid for their low-income residents. As a consequence, the budget office said the law will cover fewer uninsured people.

Thirty million uninsured people will be covered by 2022, or about 3 million fewer than projected this spring before the court ruling, the report said.

As a result, taxpayers will save about $84 billion from 2012 to 2022. That brings the total cost of expanding coverage down to $1.2 trillion, from about $1.3 trillion in the previous estimate.

The Congressional Budget Office has consistently projected that Obama's overhaul will reduce the deficit, although previous estimates aren't strictly comparable with Tuesday's report because of changes in the law and other factors.

At the time it was approved in 2010, CBO estimated the law would reduce the deficit by $143 billion from 2010 to 2019. And CBO estimated that last year's Republican repeal legislation would increase deficits by $210 billion from 2010 to 2021.

That may sound like a lot of money, but it's actually a hair-thin margin at a time when federal deficits are expected to average around $1 trillion a year for the foreseeable future.

When the law is fully in effect, 92 percent of citizens and legal residents are estimated to have coverage, as compared to 81 percent now.

Democrats hailed Tuesday's estimates as vindication for the president. "This confirms what we've been saying all along: the Affordable Care Act saves lots of money," said Senate Majority Leader Harry Reid, D-Nev.

Actually, the government will spend more. It just won't go onto the national credit card because the health care law will be paid for with a combination of spending cuts and tax increases.

Republicans said they remain unswervingly committed to repealing what they dismiss as "Obamacare." When combined with other budget-cutting measures, GOP leaders say that repeal will ultimately reduce deficits. Romney says if elected he will begin to dismantle the law his first day in office.

Medicaid has been one big question hanging over the future of Obama's law since the Supreme Court ruled.

Some GOP-led states, such as Texas and Florida, say they will not go forward with the expansion. Others are uncommitted, awaiting the voters' verdict on Obama in November.

Although the federal government would bear all of the initial cost of that expansion, many states would have to open their Medicaid programs to low-income childless adults for the first time.

CBO analysts did not try to predict which specific states would jump in and which would turn down the Medicaid expansion. Instead, they assumed that many states would eventually cut deals with the federal government to expand their programs to some degree.

As a result, the budget office estimates that more than 80 percent of the low-income uninsured people eligible under the law live in states that partially or fully expand their programs.

The big coverage expansion under the law doesn't start until 2014, with middle-class uninsured people signing up for subsidized private plans and more low-income people picked up through Medicaid.

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Associated Press writer Laurie Kellman contributed to this report.