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Immigration reform could boost cost of Obamacare by hundreds of billions

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Politics,Beltway Confidential,Philip Klein,Politics Digest

Earlier today, I posted on why I thought it was unlikely that immigration reform would actually pass this year. But there’s another reason why it will be difficult for Republicans to back legislation as currently outlined – immigration reform could represent a massive expansion of Obamacare, potentially costing hundreds of billions of dollars over the next decade.

As the Washington Post’s Sarah Kliff details, legalizing immigrants who are currently in the country illegally could make millions of them eligible for Obamacare. Though the exact number is difficult to pin down for a number of reasons, and we don’t know how many immigrants would obtain legal status as a result of any reform package, one Congressional Budget Office report estimated that 7 million to 8 million illegal immigrants would be uninsured after Obamacare because they won’t qualify for benefits. If this population were legalized and became eligible, it would mean increasing the number of Obamacare beneficiaries by over 20 percent. (The CBO has estimated that Obamacare would cover 36 million people either through the Medicaid expansion or the exchanges.)

My very rough estimate based on existing CBO analysis is that an expansion of Obamacare on that scale could easily cost several hundred billion dollars over a decade – maybe more than a half trillion. The reason why it’s difficult to make a projection is that it’s hard to say who would qualify for Medicaid and who would qualify for subsidies. Also, given that the subsidies vary by income level, it’s hard to say (beyond educated guessing) where on the scale this newly eligible population would fall and thus how generous their subsidies would be. Also, it’s hard to say how many of them would have incomes low enough to qualify for existing Medicaid benefits anyway, which they would have been able to claim with or without Obamacare.

Having made these caveats, here are some ways of looking at what it could cost to insure newly eligible immigrants under various assumptions. After the Supreme Court’s Obamacare decision, the CBO estimated that the law would cover an additional 11 million people on Medicaid (at a cost of $643 billion from 2013 through 2022) and 25 million through the exchanges (at a cost of just over $1 trillion over the same period). So, for every additional 1 million people on Medicaid, the federal government will be spending about $58 billion over the next decade and for every 1 million people on the exchange, taxpayers would be spending about $41 billion. Projecting this out for 8 million new beneficiaries would give a range of $328 billion to $464 billion. This would be conservative, however, because the current 10-year CBO estimate includes fiscal year 2013, though the law isn’t going to be implemented until 2014 – thus the actual 10-year cost is understated. Also, this method understates the per capita cost, because I’m dividing for the decade as a whole, even though the population covered by Obamacare grows over time.

As the details of any legislation get fleshed out, let’s hope the CBO provides more clarity on this issue. If there aren’t enough provisions in the legislation to prevent immigration reform from becoming a de facto expansion of Obamacare, my guess is it won’t have that many GOP takers.

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