Report: Obamacare Could Increase Deficit by Over Half a Trillion Dollars

Report: Obamacare Could Increase Deficit by Over Half a Trillion Dollars
April 10, 2012

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)

A new report by the Mercatus Center at George Mason University finds that contrary to promises by President Obama and others in arguing for the passage of his health care law, Obamacare actually adds to the deficit, as opposed to decreasing it.

Much of this has to do with the double-counting of funding within the law, a complex issue explained by this new Mercatus video. The report, authored by Medicare trustee Charles Blahous, a senior research fellow at the Mercatus Center, highlights the accounting error of this issue and its ramifications for the deficit:

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.

As the Washington Post notes, the CBO and Medicare actuary Richard Foster have both noted this trick:

“In practice, the improved [trust fund] financing cannot be simultaneously used to finance other federal outlays (such as the coverage expansions) and to extend the trust fund, despite the appearance of this result from” traditional budget rules, Medicare actuary Rick Foster wrote last year.

And in 2010, the CBO wrote that, absent the Medicare savings, the law would increase deficits by $226 billion through 2019 — instead of decreasing them by the commonly cited $132 billion.

Blahous's report has already been dismissed by the White House, but it is a serious commentary from a Medicare trustee, and as such, will likely be highlighted on future hearings on Capitol Hill.

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)