Is Obamacare Decreasing the Federal Deficit? – DEBATED
General Reference (not clearly pro or con)
The US Government Accountability Office (GAO) stated the following in its Jan. 31, 2013 report, “Patient Protection and Affordable Care Act: Effect on Long-Term Federal Budget Outlook Largely Depends on Whether Cost Containment Sustained,” available at gao.gov:
“The effect of the Patient Protection and Affordable Care Act (PPACA), enacted in March 2010, on the long-term fiscal outlook depends largely on whether elements in PPACA designed to control cost growth are sustained [such as productivity adjustments for Medicare payments, the Independent Payment Advisory Board, and the Medicare Shared Savings Program]. There was notable improvement in the longer-term outlook after the enactment of PPACA under GAO’s Fall 2010 Baseline Extended simulation, which assumes both the expansion of health care coverage and the full implementation and effectiveness of the cost-containment provisions over the entire 75-year simulation period…
The Fall 2010 Alternative simulation assumed cost containment mechanisms specified in PPACA were phased out over time while the additional costs associated with expanding federal health care coverage remained. Under these assumptions, the long-term outlook worsened slightly compared to the pre-PPACA January 2010 simulation…
[T]he long-term fiscal outlook improved in our Baseline Extended simulation. The primary deficit declined 1.5 percentage points as a share of GDP over the 75-year period in this simulation. On the spending side, about 1.2 percent of GDP of this improvement was attributable to PPACA [Obamacare]. In contrast… the primary deficit under our Alternative simulation increased by 0.7 percent of GDP during this time period, due largely to increased spending on Medicaid, CHIP, and exchange subsidies.”
“In keeping with the President’s pledge that reform must fix our health care system without adding to the deficit, the Affordable Care Act reduces the deficit, saving over $200 billion over 10 years and more than $1 trillion in the second decade. The law reduces health care costs by rewarding doctors, hospitals and other providers that deliver high quality care and making investments to fund research into what works.
Rising health care costs are a major driver of our long-term deficits, and getting them under control is crucial if we want to grow the economy, create jobs and compete in the world economy.”
The Congressional Budget Office (CBO), in testimony delivered by its Director, Douglas W. Elmendorf, PhD, stated the following during a Mar. 30, 2011 hearing before the Subcommittee on Health of the US House Committee on Energy and Commerce, available at cbo.gov:
“In March 2010, CBO and JCT [Joint Committee on Taxation] estimated that enacting PPACA and the Reconciliation Act would produce a net reduction in federal deficits of $143 billion over the 2010–2019 period…
In February 2011, CBO and JCT estimated that repealing PPACA and the health related provisions of the Reconciliation Act would produce a net increase in federal deficits of $210 billion over the 2012–2021 period… Therefore, CBO and JCT effectively estimated in February  that PPACA and the health-related provisions of the Reconciliation Act will produce a net decrease in federal deficits of $210 billion over the 2012–2021 period…
The difference between the two estimates is primarily attributable to the different time periods they cover…
Over the eight years that are common to the two analyses—2012 to 2019—enactment of PPACA and the health-related provisions of the Reconciliation Act was projected last March to reduce federal deficits by $132 billion, whereas the February 2011 estimate shows that those provisions will reduce deficits by an estimated $119 billion…
On the basis of its February 2011 analysis, CBO projected that PPACA and the Reconciliation Act would reduce federal budget deficits during the 2022–2031 period by an amount that is in a broad range around one-half percent of GDP, assuming that all provisions of the legislation were fully implemented.”
[Editor’s Note: The CBO and JCT have also confirmed that the PPACA will reduce the deficit via their July 24, 2012 and May 15, 2013 letters referenced below.
In a July 24, 2012 letter to Speaker of the House John Boehner (R-OH), the CBO and JCT estimated that HR 6079, the Repeal Obamacare Act, would increase the federal deficit by $109 billion over the 2013-2022 period. The letter stated that “the estimated budgetary effects of repealing the ACA by enacting H.R. 6079 are close to, but not equivalent to, an estimate of the budgetary effects of the ACA with the signs reversed.”
In a May 15, 2013 letter to the Chairman of the Committee on the Budget Paul Ryan concerning HR 45, another bill to repeal Obamacare, the CBO and JCT stated that they were unable to estimate the budgetary effects of HR 45 due to time constraints, however they stated that they “anticipate a similar result” as their estimation on the effects of HR 6079 – an increase in the federal deficit of $109 billion over the 2013-2022 period.
In a June 17, 2014 article titled “Estimating the Budgetary Effects of the Affordable Care Act,” available at cbo.gov, the CBO stated that while the CBO and JCT “have no reason to think that their initial assessment [made in Mar. 2010] that the ACA would reduce budget deficits was incorrect,” they are no longer updating their assessment now that the ACA is current law. Making a “retrospective analysis of the ACA that is analogous to the cost estimate provided by the agencies in 2010” is “a challenging undertaking that is beyond the scope of CBO’s usual analyses.”]
Robert Greenstein, President of the Center on Budget and Policy Priorities, stated the following in his July 26, 2011 testimony before the Senate Committee on Finance, available at cbpp.org:
“In the long run, the single largest contribution to deficit reduction will need to come from slowing the rate of growth of health care costs throughout the U.S. health care system…
The recently enacted health reform law includes most of the steps we know how to take now to reduce expenditures in these areas; that is how the Affordable Care Act is able to produce modest deficit reduction even as it extends coverage to 34 million uninsured Americans…
To help address the need to slow systemwide cost growth, the Affordable Care Act contains an extensive array of demonstration projects, pilots, and research to test and identify cost-saving reforms in health care delivery and payment systems that could produce substantial savings throughout the health care system. (It also includes important mechanisms, including the Independent Payment Advisory Board, to help assure implementation of cost-saving reforms.)”
The Council of Economic Advisers, an agency within the Executive Office of the President, stated the following in their Feb. 2012 publication “The Annual Report of the Council of Economic Advisers,” available at nber.org:
“Health care legislation passed in 2010 is a key factor to gains in longrun deficit reduction. The Affordable Care Act addressed the Nation’s most profound long-run budget challenge by limiting the growth in health care costs in several ways…
The Act includes Medicare payment reforms that will restrain spending growth by rewarding improvements in health care productivity. It established the Center for Medicare and Medicaid Innovation, which will fund and test new strategies for providing high-quality care more efficiently, and the Independent Payment Advisory Board, which will recommend policies to reduce the growth in Medicare spending, without limiting beneficiaries’ access to care…
[I]n the absence of recent health care reform, long-run budget projections would be substantially worse.”Feb. 2012
The US Senate Committee on the Budget Republicans stated in its Oct. 14, 2014 article titled “Analysis of CBO Data Shows That Obamacare Will Increase Deficit over Next Decade,” available at its website:
“The most recent CBO estimate, released in July 2012, indicated the law was projected to reduce the deficit by $109 billion over the 10-year period from FY 2013–2022. Nevertheless, considerable changes have occurred since then: a botched rollout of the insurance exchanges; unilateral changes made by the Administration to exempt certain groups from complying with key aspects of the law; technical adjustments to CBO’s baseline projections for federal health spending; updated economic forecasts; a better understanding of the labor market effects of the legislation; and a new 10-year budget window…
Altogether, the SBC Republican staff analysis finds that after taking these significant changes since 2012 into account, the Democrats’ health care law will increase the budget deficit by $131 billion over the current 10-year budget window (FY 2015–2024). This estimate is arrived at by taking the $180 billion in projected deficit reduction from the CBO 2012 extrapolation and then accounting for the lower net cost of the coverage provisions ($83 billion), the lower estimated federal health care savings under the plan ($132 billion), as well as the lower projected revenue levels when including the labor market effects of the legislation ($262 billion). The difference between the 2012 extrapolation and the current estimate of the cost of the Democrats’ health law amounts to a $311 billion change in its net deficit impact.”
Douglas Holtz-Eakin, PhD, former Director of the CBO, and Michael J. Ramlet, former Director of Health Policy at American Action Forum, stated the following in their June 2010 publication “Health Care Reform Is Likely to Widen Federal Budget Deficits, Not Reduce Them,” published in Health Affairs:
“The final score of the Patient Protection and Affordable Care Act with reconciliation amendments was released publicly 20 March 2010. The CBO and the Joint Committee on Taxation estimated that the act would lead to a net reduction in federal deficits of $143 billion over ten years, with $124 billion in net reductions from health reform and $19 billion derived from education provisions…
Is it really likely that a large expansion of public spending will reduce the long-run deficit? The answer, unfortunately, hinges on provisions of the legislation that the CBO is required to take at face value and not second-guess.
A more realistic assessment emerges if one strips out gimmicks and budgetary games and reworks the calculus…
What is the bottom line? Removing the potentially unrealistic annual savings, reflecting the full costs of implementing the programs, acknowledging the unlikelihood of raising all of the promised revenues, and preserving premiums for the programs they are intended to finance produces a radically different bottom line. The act generates additional deficits of $562 billion in the first ten years. And because the nation would be on the hook for two more entitlement programs rapidly expanding as far as the eye can see, the deficit in the second ten years would approach $1.5 trillion.”
Jeff Sessions, US Senator (R-AL), stated the following during his Sep. 26, 2013 speech on the Senate floor, available at the U.S. Senate Committee On The Budget website:
“A report issued in February at my request by the Government Accountability Office revealed that under a realistic set of assumptions the health care law is projected to increase the federal deficit by 0.7% of GDP over the next 75 years, an amount that is equivalent to $6.2 trillion in today’s dollars. This estimate excludes debt service costs. This is an enormous sum…
This report is crucial. It clearly answered the question. It sank any validity to the President’s claim that his plan would not add ‘one dime to our deficits, now or anytime in the future, period’…
So, despite what we were told by proponents of this law, the truth is the President’s health care law will further increase the cost of health care, add to our already unsustainable deficits and debt.”
[Editor’s Note: The “February” Government Accountability Office (GAO) report referenced in the above quote by Senator Jeff Sessions is the Jan. 31, 2013 GAO report referenced in our chart and general reference quote at the top of this page. Unlike the CBO, the GAO is allowed to explore alternative scenarios at congressional request. Senator Sessions requested that the GAO prepare both a baseline scenario and an alternative scenario which assumed various cost containment provisions in Obamacare would be eliminated by Congress over time including productivity adjustments for Medicare payments, the Independent Payment Advisory Board, and the Medicare Shared Savings Program. The GAO’s baseline report found that Obamacare would decrease the federal deficit by 1.5% of GDP over 75 years while the alternative scenario report found Obamacare would increase the federal deficit by 0.7% over 75 years.]
Charles Blahous, Senior Research Fellow at the Mercatus Center at George Mason University, stated in his Mar. 3, 2012 study “The Fiscal Consequences of the Affordable Care Act,” available at the Mercatus Center website:
“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… 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.”Mar. 3, 2012
Michael Tanner, Senior Fellow at the Cato Institute, stated the following in his Jan. 19, 2011 article “Five Myths about New Health Care Law,” published in the Orange County Register:
“Myth: The health care law reduces the deficit.
It is true the CBO has officially ‘scored’ the health care bill as costing $950 billion and warns that repealing it would add $230 billion to the deficit. However, those numbers do not tell the whole story, nor do they reveal the bill’s true cost.
For example, CBO estimates do not include roughly $115 billion in implementation costs, such as the cost of hiring new IRS agents to enforce the bill’s individual mandate.
The CBO estimate also assumes Congress will not repeal an anticipated 23 percent reduction in Medicare spending (the so-called ‘doc-fix’). But Congress already has postponed those cuts by a year, and no one seriously expects them to remain intact.
A true accounting of all the bill’s costs suggests that repeal could actually reduce the budget deficit by as much as $700 billion over 10 years.”Jan. 19, 2011