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Health-care law: How Supreme Court ruling could affect US budget

US Supreme Court ruling on the health-care reform law's constitutionality will affect more than the making of public policy. It could also swing the federal budget significantly in either direction.

By Staff writer / June 28, 2012

Supporters and opponents of health care reform rally in front of the Supreme Court in Washington, March 27, as the court continued to hear arguments on the health care law signed by President Barack Obama.

Charles Dharapak/AP

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When the US Supreme Court hands down its ruling on the health-care reform law Thursday, the action will carry some big-money import for the federal budget.

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A decision that strikes down President Obama's 2010 reforms in their entirety would increase federal deficits over the next 10 years.

By contrast, a narrow ruling striking down just one portion of the massive law could have a substantially different effect on government coffers. For example, a provision to expand access to Medicaid, if struck down, could save the federal government hundreds of billions of dollars, some finance experts say.

These facts aren't necessarily central to the question of what the Supreme Court should do, of course. The justices have been considering arguments pro and con that relate to weighty questions of constitutional law.

And from a public-policy viewpoint, the biggest issues at stake arguably are things separate from government finances: the health care Americans receive, its overall cost, and the way health-care policy affects the economy and job creation.

But with those caveats in mind, here's what the ruling could portend for government budgets, based largely on a recent analysis by the nonpartisan Committee for a Responsible Federal Budget (CRFB) in Washington.

The group estimates that, if the Affordable Care Act (ACA) is overturned in its entirety, federal budget deficits will rise by about $119 billion over the next 10 years.

How does that estimate arise? The CRFB started with an earlier official estimate of effects on the federal budget, from the Congressional Budget Office. That CBO tally found that the ACA would reduce federal budget deficits, because the law's new costs (such as tax subsidies for the uninsured to buy coverage) would be offset both by new tax revenue and by lower planned spending in some areas, such as Medicare.

The CRFB adjusted the CBO numbers based on changes to the health-care law that hadn't yet been accounted for, such as the effective repeal of its so-called "CLASS Act" (a long-term-care insurance program that was slated to reap some $85 billion in federal revenue during the reform act's early years).

The Supreme Court could rule in other ways, however.

If it strikes down only the ACA's "individual mandate" on Americans to buy insurance (or pay a fine), things would be complicated, the CRFB says. But one big impact is that fewer people would get health insurance, reducing the number of people who would get government benefits such as tax subsidies to help pay for their insurance. The result of this shift could exert some big downward pressure on federal deficits.

The high court might also decide to repeal the ACA's expansion of the Medicaid program for low-income Americans. The court could rule that the provision is an unconstitutional coercion of state governments, which administer Medicaid and help to pay for it.

A ruling that eliminates the Medicaid expansion would have a major impact at the federal level.

A March estimate by the CBO pegged the federal cost of expanding Medicaid at $930 billion over 10 years – with some 17 million uninsured Americans gaining coverage. Striking down that provision would mean many of those people remain uninsured. The federal savings would be large, although they might not add up to $930 billion, because of the way different parts of the law interact with one another, the CRFB says.

In all, health-policy analysts have estimated that those 17 million people getting Medicaid would account for about half of the ACA's overall extension of coverage to more Americans – the law's central goal. So although a ruling against this provision would save big money at the state and federal level, it would also be a huge setback for the law's proponents.

One final note: Whatever the court does, Congress will keep legislating on the issue of health care – with still more implications for budgets and deficits.

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