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The Net Costs of “ObamaCare”

Thursday March 15th, 2012 • Posted by Craig Eyermann at 9:44am PDT • 4 Comments

Source: attorneygeneral.utah.gov

How much will the Patient Protection and Affordable Care Act (a.k.a. “ObamaCare”) really cost over a 10 year long period?

According to the Congressional Budget Office, far more than the Obama administration has previously been willing to acknowledge. The Washington Examiner’s Philip Klein reports:

President Obama’s national health care law will cost $1.76 trillion over a decade, according to a new projection released today by the Congressional Budget Office, rather than the $940 billion forecast when it was signed into law.

We thought it might be interesting to put those values into the context of the best possible scenario of the annual U.S. government budget deficit for the years from 2012 through 2022, as represented by the Congressional Budget Office’s most recent extended baseline budget scenario.

(Note: What makes the CBO’s extended baseline budget scenario so optimistic is that is assumes that today’s politicians will follow current law to the letter and not act to prevent a number of popular tax cuts and massive spending cuts from happening and that other likely spending increases will not occur.)

Our results are graphically presented below:

In our chart, what find is that under this most optimistic scenario for federal tax collections and spending, the dominant driver of the budget deficit will be President Obama’s health care law, which would grow beginning in 2013 to account for anywhere from 50 to 72% of the budget deficit, and the corresponding increase in the U.S. national debt, in any given year.

That’s the optimistic view. The Atlanta Journal and Constitution’s Kyle Wingfield explains why the critics of Obamacare were right to point out the President’s flawed estimates for the cost of the program:

The only way in which Obamacare critics were wrong in our protests that the law would cost far more than advertised was that we underestimated the damage, by about $40 billion from 2014-2023 if the cost figure continues to grow at the minimum 6 percent annually CBO is now using. That would make it $2.04 trillion during those 10 years.

This is in part because, as Obamacare opponents explained at length at the time, congressional Democrats had rigged the score by beginning the tax increases before the spending kicked in. That made the 10-year figures both for the gross cost and the deficit “savings” look better than they would have if we considered 10 years of Obamacare fully implemented.

But it’s also because, as I’ve explained here recently, the estimates were faulty. Take three years in which there’s an overlap between the two estimates: 2017-2019. The new estimate for the total costs during that time span is now $147 billion, or 30 percent, higher than the original estimate just two years ago. The new estimate for “savings” has fallen by $314 billion, or 63 percent.

The result is that the effect on the federal budget from 2017-2019 has gone from a projected “savings” of $8 billion to an increased deficit of $453 billion.

And it’s only going to get worse in future years, if the new projections hold. That’s because they see the revenue portions holding steady while the expenses keep going up, up, up.

Oh — and this fiscal worsening is taking place while the projected increase in the number of people who are insured by 2019 thanks to Obamacare has fallen by 1 million.

If you’ve had any illusions that the spending needed to support “ObamaCare” was sustainable, the direct role of that spending program will have in jacking up the national debt throughout its miserable existence will hopefully help dispel them.

Data Sources

Congressional Budget Office. The Budget and Economic Outlook: Fiscal Years 2012 to 2022. [PDF document]. January 2012. Accessed 14 March 2012.

Congressional Budget Office. Updated Estimates for the Insurance Coverage Provisions of the Affordable Care Act. [PDF document]. March 2012. Accessed 14 March 2012.

4 Responses to “The Net Costs of “ObamaCare””

libertarian jerry says:

March 15, 2012 at 12:04 pm

As with Social Security,Medicare and Medicaid the Progressives(Socialists) get their agenda into law by, among other methods, understating the costs of the programs. After a period of time,people(voters) become dependent on the programs and eventually these same programs bankrupt themselves. Of course the politicians(most of whom are either dead or out of office) who have been elected by promising the voters “pie in the sky” entitlements that are funded by putting in a nickle then taking out a dollar and then borrowing the rest, have indebted the current and future American citizens to a lifetime of debt indentured servitude. Obamacare will be no different. Medical care will be rationed and entitlement checks,because of government caused inflation, will buy less and less. This is the future for most Americans.
Jerome Bigge says:

March 19, 2012 at 7:57 pm

The high cost of US health care is driven by a government enforced monopoly. There is no “free market” in health care. We do have a “free market” in food, consumer goods (for the most part). This is why Americans pay as a percentage of income less for their food than do people living in developed countries elsewhere. Because we do not have a free market in health care, we are paying monopoly prices for health care. Getting the government “out” of health care is the solution. All the way “out” is necessary, not just part of the way “out”. In a free market system there are no prescription laws, no drug laws. You have computer software that assists you in taking care of your health without seeing a doctor for many of your needs. Without prescription laws everyone can take care of their high blood pressure for about $40 a year. (based upon the most common generic blood pressure medication sold by Wal Mart on their 90 days supply for $10) Same is true with cholesterol medication depending on dosage. My cholesterol medication would cost $80 a year under Wal Mart’s plan. So for $120 a year my blood pressure and cholesterol problems are covered. No doctor needed. It is possible under a free market system that I could purchase these same drugs for less money outside the US, but $120 a year for treating the two most common “diseases” is only $10 a month, which is certainly “affordable” for everyone. You can get free screenings for blood pressure, cholesterol and blood sugar at some Sam’s Clubs every once in a while if you watch the ads. I think some drug stores might offer the same service. In any case, to deal with the two most common “medically treatable diseases” in a true free market Libertarian society would only cost you $10 a month, which is certainly cheap enough. With the proper computer software you can also deal with less common medical problems if you spend some time educating yourself. Without prescription laws you could maintain your health for far less money than what you are likely currently spending.

Of course the medical profession will hate this as it would be their own worse nightmare not to have the government forcing people to use their services. A whole lot of doctor office visits ($100 a visit at least) involves nothing more complex than this sort of stuff. But since the doctor has the “government” behind him in the form of prescription laws, he has a real “hold” over you much like a drug pusher has a “hold” over his “addicts”. You have to do what he says or “no drugs for you!”. There is an economic term for this. It is called “rent seeking”. The doctor makes you “dependent” upon him for your medication. Of course if you have “insurance” you probably won’t be paying so much for those “office visits”, but then your insurance (for which you pay premiums) will be paying. And for most people, you’ll pay more for the health insurance than you ever get back in benefits plus you still have to pay something “out of pocket” for your office visits and medications. This is what “statism” does, and both Democrats and Republicans are all for “Big Government”. They just want the “government” to do different things, often things you’d rather not have the government doing...
Sarah Rivers says:

March 21, 2012 at 1:06 pm

Tu ne cede malis!
R.I.P: Rule of Law « fredericksonblog says:

July 2, 2012 at 9:12 am

[...] Most Americans know by now that the Patient Protection and Affordable Care Act otherwise known as Obamacare was upheld by the Supreme Court on June 28, 2012. The individual mandate states a private citizen must engage in commerce by purchasing a product the government has decided you require. Besides the loss of individual liberty, other consequences from the ACA include: imposing eighteen separate taxes on citizens (costing $503 billion), the potential for up to 46% of doctors to leave their practice, 20 million private sector employees to lose their health care coverage, 75% of Obamcare costs will fall on those making under $120,000 a year, increase the costs of college health care plans by as much as 1,112%, and will end up costing taxpayers $1.76 trillion over a decade according to the CBO. [...]

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4 Responses to “The Net Costs of “ObamaCare””