ObamaCare: Immigration Reform's $10 Billion Hurdle

President Obama's biggest first-term success may present an obstacle on the path to citizenship for 11 million illegal immigrants, one of his highest second-term ambitions.

ObamaCare's Medicaid expansion and new subsidies to buy health insurance are among a number of factors that may raise a hurdle to immigration reform in 2013: the budgetary cost.

Now, amid signs that the political climate is more favorable for immigration reform, the economic and fiscal backdrop presents new challenges.

None of these issues looms so large as to distract from the central issue: Should the U.S. provide a legal embrace of 11 million residents who broke the law to make the U.S. their home? But the added fiscal costs, tied in large part to ObamaCare, could intensify the political battle over spending.

Back in 2007, the Senate's most recent effort to pass a comprehensive immigration bill, government number-crunchers envisioned a tax revenue bump in part from a flood of new guest workers to the U.S.

Now, with the jobless rate still at 7.8% and long-term unemployment at historic levels, politics may not allow for such a broad expansion.

Meanwhile, the 10-year cost of immigration reform may have risen substantially with ObamaCare. The 2007 bill would have made full Medicaid benefits available in five years, the usual waiting period for new legal permanent residents.

ObamaCare goes a few big steps further, expanding Medicaid eligibility to 133% of the poverty level and providing subsidized coverage to individuals earning up to 400% of poverty who lack affordable employer coverage.

Further, exchange subsidies under ObamaCare may be available to legal residents without delay. That could significantly increase the 10-year cost.

Border Budget Bulge
Bottom line: With roughly half of illegal immigrants uninsured, reform might cover several million via ObamaCare. If so, the health law could add $10 billion, possibly more, to the annual cost of immigration reform within 10 years.

The Congressional Budget Office says that in 2022, the average Medicaid beneficiary will cost the federal government $6,000, while the average recipient of subsidies to buy insurance via ObamaCare exchanges will cost $9,000. Because the average age of illegal immigrants is lower than the population, and health costs rise with age, the cost per newly legalized immigrant would likely be lower.

CBO projected that the 2007 Senate immigration bill would have had a net 10-year cost of $28 billion. Back then, with the deficit dwindling to about 1% of GDP and debt at about half of current levels, no one seemed to mind.

ObamaCare: Immigration Reform's $10 Billion Annual Cost Hurdle - Investors.com