CBO: Obamacare Pricetag at Least $820 Billion More Than Expected

CBO: Obamacare Pricetag at Least $820 Billion More Than Expected
May 15, 2012

Loren Heal

Loren Heal (loren.heal@gmail.com) is a research programmer at the University of Illinois at Urbana-... (read full bio)

The Congressional Budget Office now projects President Obama’s health care law will cost $1.76 trillion over a decade, not the $940 billion the CBO estimated before it was signed into law. This number could climb even higher if the expectations of some analysts come to fruition.

According to Rea Hederman, a research fellow at the Heritage Foundation, fundamental flaws in the Patient Protection and Affordable Care Act (ACA) have emerged since it was signed into law two years ago.

“The more we’re finding out about this bill, the worse it is, because we’re finding out the costs are higher than expected, it’s covering few people, and we know that some of the big ‘pay fors’ of the bill will never take place,” Hederman said.

Updated Timeline, More Costs

Sean Riley, a legislative analyst at the American Legislative Exchange Council, said part of the reason for the increased costs is the odd timeline used originally, which hid the costs of the law.

“The original cost estimate of $940 billion was based on a ten-year projection from 2010 to 2019, even though major provisions of the law for subsidies and Medicaid expansion don't kick in until 2014,” Riley said. “If we use CBO's latest numbers starting in 2014, the ten-year cost through 2023 is on pace to eclipse $2 trillion and would continue to increase moving forward.”

Jeffrey Anderson, a senior fellow at the Pacific Research Institute, echoed Riley.

“The originally publicized costs for the ACA were for 2010 to 2019, even though the ACA wouldn't really go into effect until 2014. So six years' worth of costs were passed off as ten years' worth of costs,” Anderson said.

“Predictably,” said Anderson, “the real 10-year costs would be much higher. Now that the CBO is looking at 2013 to 2022, the figure being publicized is $1.76 trillion. But even that's only really counting nine years' worth of the ACA, not ten. The ACA's costs for its real first decade [2014 to 2023], as the CBO makes clear, would be more than $2.0 trillion—$1.753 trillion from 2014 to 2022, plus more than $265 billion in 2023—a truly colossal sum.”

Still an Underestimate?

Anderson says even the updated number is likely to be an underestimate.

“Even that $2.0 trillion and change,” said Anderson, “would cover only the costs of the ACA's ‘coverage provisions,’ which mostly consist of its taxpayer-subsidized ‘exchanges’ and its massive and underreported expansion of Medicaid. As the CBO notes, the other parts of the ACA would add about another 30 percent to the ACA's real first-decade costs.”

“So, all in all, if the ACA isn't repealed or struck down, we're looking at real first-decade costs in the neighborhood of $2.6 trillion according to the CBO. And as the CBO notes, the ACA would get more expensive from there,” Anderson added.

Merrill Matthews, a health policy analyst at the Institute for Policy Innovation, agrees the new number is probably an underestimate.

“Every honest economist and health policy expert knew it, and it is likely to be a very low estimate. That's because the ACA imposes cuts on Medicare and other places that Congress is very likely to override when the time comes. In order to get the bill under a trillion dollars, the Democrats had to make assumptions that the CBO had to include in its calculations, whether anyone believed the numbers or not.”

States Have Fiscal Options

Although the Supreme Court may strike down all or part of the law, legislators who want to avoid fiscal irresponsibility still have options to help avoid unnecessary costs, says Riley.

“Policymakers in the states opposed to the law can refuse to voluntarily establish the law's health exchanges—new bureaucracies designed to facilitate a federal takeover of health insurance regulation and distribute subsidies,” Riley said. “Because a technical error in the law only authorizes subsidies in state—not federal—exchanges, states have tremendous power and can effectively block much of the law's spending by refusing to create an exchange.”

 

Internet Info:

Updated Estimates for the Insurance Coverage Provisions of the Affordable Care Act, Congressional Budget Office: http://cbo.gov/publication/43076

Loren Heal

Loren Heal (loren.heal@gmail.com) is a research programmer at the University of Illinois at Urbana-... (read full bio)