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ObamaCare Will Add $527 Billion to Deficit – Medicare Trustee Study

Posted by FactReal on April 11, 2012

ObamaCare will add as much as $527 billion to federal deficits while adding $1.2 trillion to federal spending between 2012 and 2021 according to the new study ‘The Fiscal Consequences of the Affordable Care Act’ by Charles Blahous, Senior Research Fellow at the Mercatus Center at George Mason University and Public Trustee for Social Security and Medicare Trust Funds.

The Affordable Care Act (ACA) enacted in 2010 will significantly worsen the federal government’s fiscal position relative to previous law. Over the years 2012–21, the ACA is expected to add at least $340 billion and as much as $530 billion to federal deficits while increasing federal spending by more than $1.15 trillion over the same period and by increasing amounts thereafter. These adverse fiscal effects are not everywhere understood because of widely circulated analyses referencing scoring conventions of the Congressional Budget Office (CBO) and the Medicare Trustees, which compare the health care reform legislation to a baseline scenario that differs from actual law. Moreover, there is substantial risk that the ACA’s costsaving provisions will not be enforced as currently specified. To avoid worsening the federal fiscal outlook, legislative corrections are required before the ACA’s provisions become fully effective in 2014. Roughly two-thirds of the law’s subsidies for health insurance exchanges must be eliminated to avoid worsening federal deficits and the entirety of their costs eliminated to avoid further increasing federal health care financing commitments.

The table and figure below show projected net budgetary effects of the ACA (Affordable Care Act or Obamacare) under pessimistic (and probably most realistic) scenario.

The study on page 41 explains that the “net worsening of the federal fiscal outlook under the ACA is substantial. Under the pessimistic scenario (which is, as previously noted, by no means a worst-case scenario), it exceeds $100 billion annually by 2021. This is especially sobering in view of the high hopes placed in the ACA, as it indicates a significant risk that in the ACA’s second decade alone it would worsen the federal fiscal outlook by over $1 trillion.”

Net Budgetary Effects of ObamaCare ($ Billions)

SCENARIO 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012-21
Pessimistic Scenario Relative to Prior Law 18 37 9 –23 –59 –106 –95 –92 –101 –116 –527
(Graph by Inventors Business Daily)

  • Over the coming decade (2012-2021), the ACA 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 (HI) 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.
  • Moreover, 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. […]

“The health care bill of 2010 was said to provide two major benefits. First, the bill promised to find savings in the government’s biggest health insurance program, Medicare, and use those savings to reduce the deficit. Second, the bill promised to expand health care coverage to uninsured Americans. Sounds pretty good, right? But how does the government propose to pay for both?

Here’s where the math becomes fuzzy. Research from “The Fiscal Consequences of the Affordable Care Act” shows how this just doesn’t add up.”

Links to the study: Full research paper, brief summary, chart, and video.


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