CBO Report: Eliminating the Individual Mandate and Associated Penalties Would Reduce Deficit by $300 Billion

The CBO and JCT have completed a preliminary estimate of the net budgetary effect of eliminating the requirement that individuals purchase health insurance and associated penalties established by the Patient Protection and Affordable Care Act.  They estimate that eliminating that requirement and the associated penalties would reduce the deficit by about $305 billion over the 2015-2025 period. That total consists of a $311 billion decrease in direct spending partially offset by a $6 billion decrease in revenues.

How, you might ask?

Eliminating the individual mandate and the associated penalties would increase the number of people without health insurance coverage in 2025—relative to current-law projections—by about 14 million people, resulting in 41 million uninsured in that year. That increase in the uninsured population would consist of roughly

• 5 million fewer individuals with coverage under Medicaid or the Children's Health Insurance Program, 
• 1 million fewer individuals with employment-based coverage, and 
• 8 million fewer individuals with coverage obtained in the individual market (including individual policies purchased through the exchanges or directly from insurers in the non-group market). 

Similar changes in coverage would occur in most other years.

The savings generated from not having to buy other people healthcare in Medicaid, CHIP and the Exchanges more than offsets any associated national costs for uncompensated care.