Repeal of Obamacare Would Not Add to the Deficit


Saturday January 22nd, 2011   •   Posted by David Theroux at 4:19pm PST   •  

Former Congressional Budget Office (CBO) officials Douglas Holtz-Eakin (Director), Joseph Antos (Assistant Director) and James Capretta (Associate Director) show in a new Wall Street Journal article, “Health Care Repeal Won’t Add to the Deficit,” that repealing Obamacare (“Affordable Care Act” or ACA) will not increase the federal deficit. In so doing, they refute the claims of the current CBO whose findings are distorted by the rigged and erroneous numbers given by congressional leaders with which they were compelled to use.

The Congressional Budget Office says repealing the Affordable Care Act would increase the deficit by $230 billion over the coming decade and by a modest amount in the decade after that. The CBO estimate has become the central defense by ACA advocates fighting the upcoming repeal vote in the House.

They might want to re-think their strategy. A close examination of CBO’s work and other evidence undercuts this budget-busting argument about repeal and leads to the exact opposite conclusion, which is that repeal is the logical first step toward restoring fiscal sanity.

Federal finances are buckling under the weight of unaffordable entitlement programs. So what is the primary aim of the ACA? Open-ended entitlement expansion: to more people at greater expense than anytime since the 1960′s. If CBO is right, 32 million people will be added to the health entitlement rolls, at a cost of $938 billion through 2019, and growing faster than the economy or revenues thereafter.

How, then, does the ACA magically convert $1 trillion in new spending into painless deficit reduction? It’s all about budget gimmicks, deceptive accounting, and implausible assumptions used to create the false impression of fiscal discipline.

For starters, that $1 trillion price is a low-ball estimate, covering only six—not ten—years of subsidies that don’t begin until 2014. The uninsured were clearly less of a priority than the deception of making the law look less expensive than it really is over its first decade. Over ten years of full implementation, it’s more like $2.3 trillion.

Next up is the CLASS Act (for the Community Living Assistance Services and Supports Act) providing a new long-term care insurance entitlement. CLASS hitched a ride on the ACA for one reason only: premiums are collected in the first ten years, but no benefits are provided. Voila, it creates the perception of $70 billion in deficit reduction. In fact, CLASS is a bailout waiting to happen, as it will attract mainly sick enrollees. Only in Washington could the creation of a reckless entitlement program be used as “offset” to grease the way for another entitlement.

The deepest spending cuts in the ACA are in Medicare. Let us be very clear: Medicare needs real reform that generates genuine budget savings. Sadly, the ACA’s cuts are illusory. Medicare’s payments to health care providers would fall below those of Medicaid. The network of hospitals and physicians willing to care for Medicaid patients is notoriously constrained. About 15 percent of the nation’s hospitals would have to stop seeing Medicare patients in just a few years to stem their losses. The idea that Medicare could pay less than Medicaid is such sheer folly that Congress will rapidly reverse course. What’s worse, ACA’s advocates are double-counting this fictional savings, claiming it can pay both for the ACA’s entitlements and Medicare solvency too. The truth is, these cuts cannot be relied upon to pay for anything.

The fantasy of deficit reduction from the ACA is also built on a $410 billion tax increase over the coming decade, and a flood of revenue in the years after built on cynically replicating the flawed AMT-style revenue creep. New Medicare taxes initially apply only to individuals with incomes over $200,000 and couples with incomes above $250,000. But those income thresholds do not rise with inflation, so more and more families will pay them each year. Similarly, the new “Cadillac tax” on expensive insurance applies to premiums for family coverage above $27,500 in 2018, but that threshold will rise with general inflation, not medical costs. It’s particularly noteworthy that this tax is instrumental to the claim of deficit reduction in the second decade, but it is so controversial that Barack Obama was never willing to collect it himself. Overall, CBO says the ACA’s tax hikes will reach 1.2 percent of GDP in 2035, or a whopping $180 billion annually in today’s terms. . . .

Repeal isn’t a budget buster; keeping the ACA is. Assertions to the contrary are, well, audacious.

For the full article, please click here.




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