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Health care law could reduce government costs

Nancy Marshall-Genzer Jul 25, 2012
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Stacey Vanek Smith: A report from the Congressional Budget office says President Obama’s health care law could save the federal government $84 billion over the next decade. That savings is mostly because of the Supreme Court ruling last month, and a part of the law it ruled out.

Marketplace’s Nancy Marshall-Genzer explains.


Nancy Marshall-Genzer: Last month, the Supreme Court ruled that states can refuse to expand their Medicaid rolls. The CBO says that means three million people will be shut out of Medicaid. That’s where the savings comes from. But some of those people will end up buying subsidized insurance on the state health insurance exchanges the health care law establishes.

And that will be more expensive than Medicaid, according to Jonathan Gruber, a health economist at MIT who advised the Obama administration on health care reform.

Jonathan Gruber: Covering someone on Medicaid costs about two thirds as much as covering them in private health insurance, for two reasons. One is because Medicaid pays providers less; and the other is Medicaid has lower administrative costs.

The CBO yesterday didn’t have an update on total deficit reductions from the health care law. But it did estimate that Republican legislation to repeal it would increase the deficit by $109 billion.

In Washington, I’m Nancy Marshall Genzer for Marketplace.