Immigration Reform = Increase in Obamacare Costs

When Obamacare is fully implemented by 2014, legal immigrants can apply for benefits.  As Sarah Kliff of Washington Post’s WonkBlog posted yesterday:

The health-care law does offer new coverage options for legal immigrants. They, like American citizens, are eligible for subsidized health insurance coverage if they earn less than 400 percent of the poverty line ($44,680 for an individual).

Legal immigrants can also qualify for Medicaid coverage after five years of legal residence in the United States. This was true prior to the Affordable Care Act, but will likely become more meaningful when many states expand their Medicaid programs up to 133 percent of the federal poverty line.

Legal immigrants will also be subject to the mandated purchase of health insurance coverage at the start of next year.

However, if this new immigration reform package manages to be signed into law, the illegal immigrants, who are exempted from the individual mandate, would be eligible for benefits.  As Kliff noted:

if immigration reform were to shrink the undocumented population – or eliminate it altogether – new paths to coverage would open up – and that uninsured population would likely shrink. The Congressional Research Service estimates that 80 percent (17.5 million people) of non-citizens would, due to their income level, qualify for some part of the insurance expansion.

Keep in mind, CRS data does not break out documented and undocumented non-citizens; this graph includes both groups. Still, it’s a helpful guide to think about the income levels of this population.

The yellow chunk of the pie chart shows everyone earning less than 133 percent of the poverty line. These are people who would qualify for the Medicaid expansion, although would be subject to a five-year waiting period (during that time, however, they would have the option to buy insurance using federal subsidies).

The blue slice, 46.3 percent of the non-citizen population, would qualify for federal subsidies to purchase private insurance coverage. The last part of the population, represented in red, would not qualify for assistance – not due to their immigration status, but because of their higher income. They would still, however, have access to their state health insurance exchange. Right now, undocumented immigrants are specifically barred from buying coverage there (as part of the purchasing process, Homeland Security will verify citizenship status).

This means more money for programs, like Medicare, which will soon be rendered useless by Mr. Arithmetic.  Phlip Klein at The Washington Examiner wrote on January 29 that his:

…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.

Again,we have another instance that shows there are no free lunches in American public policy.  Someone gets screwed over to benefit a specific group.  It’s simple economics.  In this case, it’s the American taxpayer, who is already buckling under the weight of the state.