Revised Estimate for H.R. 3962, the Affordable Health Care for America Act

November 20, 2009

CBO has just released a revised estimate of the net budgetary impact of H.R. 3962, the Affordable Health Care for America Act, the health care reform bill that was passed by the House of Representatives on November 7. The revised estimate corrects a mistake that CBO made in its earlier assessment of a provision that would establish the Community Living Assistance Services and Supports (CLASS) program, a federal insurance program for long-term care. In the previous estimate, which was transmitted on November 6, CBO and the staff of the Joint Committee on Taxation (JCT) estimated that changes in direct spending and revenues from enacting H.R. 3962 would yield a net reduction in federal budget deficits of $109 billion over the 2010-2019 period. To reflect the change in our assessment of the CLASS provision, CBO and JCT now estimate that the legislation would yield a net reduction in deficits of $138 billion over the 10-year period.

According to the CLASS provision in H.R. 3962, both active workers and their nonworking spouses would be eligible to enroll in a voluntary federal program of long-term care insurance. Because of an oversight discussed in yesterdays blog, CBOs original estimate of the CLASS provision did not reflect the inclusion of nonworking spouses. CBO anticipates that the average nonworking spouse who would enroll in the program would have more functional limitations than the average enrolled worker, which would make nonworking spouses more likely to qualify in the future for the programs benefits.

CBOs corrected estimates are that the monthly premium for the CLASS program as it is specified in H.R. 3962 would average about $146 in 2011 (as compared with $123 in the original estimate) and that the program would reduce deficits by about $102 billion over the 2010-2019 period, rather than the original estimate of a reduction of about $72 billion over 10 years. (The bill would require premiums to be set so as to cover the full cost of the program as measured on an actuarial basis; the programs cash flows would show net receipts for a number of years, followed by net outlays in subsequent decades.)

As explained in yesterdays blog, the CLASS provision in the Senate bill proposed this week would not include nonworking spouses, and CBO projects that the CLASS program in the Senate legislation would reduce deficits by $72 billion over the 2010-2019 period.