Government will pocket $8B profit from ObamaCare ‘bailout’ program, CBO says

The non-partisan Congressional Budget Office (CBO) on Tuesday threw a potential wrench into House Republican plans to tie an elimination of ObamaCare risk corridors to the next debt-ceiling increase.

The CBO now says that the program, which critics deride as an insurance “bailout,” will earn the government $8 billion over the 2015 to 2017 period. Last May, the CBO said that the program had not net budgetary effect.

{mosads}The government will pay insurers $8 billion over the period but will collect $16 billion in return from companies, yielding a net benefit. 

The fact the program helps the budget could make GOP arguments against it more difficult and could require the party to find an offset in any bill repealing it. 

But CBO Director Doug Elmendorf cautioned that the office has not precisely looked at the budgetary effect of repealing the program.

“That does not mean that repealing the risk corridor program would cost the government $8 billion,” Elmendorf said of the new analysis.

Determining the precise effects of repeal would be a complex matter because repeal could change the behavior of insurers and cause them to charge higher premiums, he said.

Elmendorf explained that the new analysis is based on a revised look at Medicare Part D, which has “consistently reaped savings” for the government.

House Republicans say they will need “concessions” from Democrats to raise the borrowing limit, but have yet to decide what those might be. At a conference retreat last week, one of several ideas discussed was conditioning the bill on repeal of the risk corridors program.

Senate Budget Committee Chairwoman Patty Murray (D-Wash.) touted the CBO report as showing that the GOP’s “most recent debt-limit ransom idea” would have negative consequences for the country.

“It’s a reminder that Republicans are so desperate to attack the Affordable Care Act that they will do or say just about anything, including throwing their own supposed principles on debt reduction under the bus,” Murray said.

A kind of insurance policy for insurers, the risk corridors will provide payments to companies that face higher-than-expected costs after enrolling more sick people than they planned. A similar program is part of Medicare Part D, which was passed by Republicans during the George W. Bush administration.

Under the program, the government will collect payments from insurers that do better than expected and pass those funds along to their less fortunate peers. If that money runs out, the government would step in to reimburse insurers, which Republicans say is a likely outcome due to ObamaCare’s problems.

Healthcare experts say the system serves as a “shock absorber” to ensure premiums don’t spike or fluctuate from year to year.

Elise Viebeck contributed. 

This story was last updated at 1:24 p.m.

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