Obamacare Breaks the Bank

The president's reform package is likely to drive federal healthcare spending up, adding as much as a half a trillion dollars to the deficit.

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One of the primary selling points of President Barack Obama's healthcare reform initiative was that it would "bend the cost curve." Unfortunately, a new report says, it may be bending it upward.

In "The Fiscal Consequences of the Affordable Care Act," Charles Blahous, a scholar at George Mason University's Mercatus Center and a public trustee of the Medicare and Social Security programs, finds that the president's reform package is likely to drive federal healthcare spending up, adding as much as a half a trillion dollars to the deficit over a 10 year period.

White House health adviser Jeanne Lambrew, Reuters reported Tuesday, attacked Blahous's analysis. "This new math fits the old pattern of mischaracterizations about the Affordable Care Act when official estimates show the health care law reduces the deficit," Lambrew, deputy assistant to the president for health policy, wrote in a blog post on the White House website.

[See a collection of political cartoons on healthcare.]

Among the key findings in Blahous' report:

  • Over the coming decade (2012-2021), the Affordable Care Act is expected to increase net federal spending by more than $1.15 trillion, and to add more than $340 billion and as much as $530 billion to federal deficits over the same period, and increasing amounts thereafter.
  • The ACA's fiscal effects are often misunderstood because government scorekeeping conventions contrast with enacted law.
  • The ACA relies upon substantial savings already required under previous law to maintain the solvency of the Medicare Hospital Insurance Trust Fund. These do not represent new net savings, available to be spent without widening the deficit, but substitutions for spending reductions that would have occurred by law in the absence of the ACA.
    • These cost-savings provisions have the effect of extending and expanding Medicare's future spending authority. The ACA also uses the same cost-savings to finance new health entitlement spending.
    • The ACA's total new spending thus well exceeds its cost-savings provisions.
    • This is not a mere matter of presentational "double-counting" but of evaluating the actual change in law upon the ACA's enactment.
    • By law, as distinct from prevailing scoring conventions, the ACA has unambiguously worsened the federal government's fiscal position.
    • Several of the ACA's provisions may not be enforced as currently specified. Among these, the costs of new health exchanges may be significantly higher than projected; the rising projected revenues of provisions such as the "Cadillac-plan" tax and the new 3.8-percent surcharge on incomes over $200,000/$250,000 may not fully materialize; the cost-saving recommendations of IPAB might be legislatively overridden; and the CLASS program—previously scored as saving $70-$86 billion over its first 10 years—is no longer expected to be implemented.
    • To ensure the ACA does not worsen the federal fiscal outlook, fully two-thirds of the ACA's new health exchange subsidies must be repealed, or financing offsets must be found, before benefits begin in 2014.
    • To ensure the ACA does not further increase federal health care financing commitments, the entirety of its new health exchange subsidies and most of its Medicaid/CHIP expansion must be eliminated, unless corrections reduce other spending by an equal amount.
    • [Read the U.S. News debate: Should the Supreme Court Overturn Obama's Healthcare Law?]

      According to Blahous, the new law can be expected to increase net federal spending by more than $1.15 trillion and add between $340 billion and $530 billion to deficits over the 10 year period 2012-21. Meaning, once again, that healthcare reform is not all that it has been said to be. In fact it appears to be much, much more expensive.

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