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  • Obamacare’s Deficit of Savings

    The Congressional Budget Office appears to have delivered a victory to Obamacare’s cheerleaders. The agency’s latest estimate puts the cost of scrapping the law at $137 billion over the next decade.

    “Any way you slice it, repealing the Affordable Care Act will add hundreds of billions of dollars to the deficit,” boasted House Minority Leader Nancy Pelosi (D-Calif.).

    Not so fast. The CBO reveals in the fine print that its estimates of the impact of repeal are “substantially” uncertain. Further, the report didn’t consider a specific measure to repeal and replace Obamacare. So it’s evaluating an imaginary proposal.

    Obamacare’s congressional foes should give the agency a real proposal to evaluate — one that will actually reduce health costs and furnish every American with affordable coverage. They can start by building upon Rep. Tom Price’s (R-Ga.) Empowering Patients First Act, which works toward just that end.

    The details of Obamacare’s finances are so fuzzy that a year ago the CBO admitted it couldn’t calculate the effect of repealing the legislation on the deficit. This year, CBO managed to produce the $137-billion figure but hedged by saying that repealing the law “could reduce deficits . . . or could increase deficits.”

    Obamacare’s supposed fiscal responsibility depends upon preserving more than $800 billion in cuts to Medicare over 10 years. Of course, the Medicare Board of Trustees doesn’t believe that those cuts will actually happen. If they don’t, much of Obamacare’s deficit reduction will vanish.

    The CBO report also shows that Obamacare’s finances are deteriorating. Between 2016 and 2019, the agency believes that the law’s taxes will bring in $289 billion. That’s 22 percent less than it originally estimated.

    The CBO’s original forecast, from March 2010, projected that Obamacare would run a surplus of $13 billion in 2019. But after accounting for the law’s adverse economic impact, the program is now expected to run a deficit of $22 billion that year.

    Indeed, repealing the law would deliver a jolt to the economy. The CBO projects doing so would add 0.7 percent to GDP, or about $886 billion.

    The American people are ready for repeal. A recent poll pegged support for the law at 39 percent, tying an all-time low.

    But repeal is not enough. Lawmakers must replace Obamacare with something better. The Empowering Patients First Act, which was recently introduced in the House, is a good place to start.

    First, the bill would repeal Obamacare in its entirety.

    Second, rather than imposing massively expensive and disruptive regulations on the insurance market, Price’s plan would take care of those with pre-existing conditions by restoring the state-run high risk pools that Obamacare dismantled. The bill would partially fund them with federal block grants.

    Third, the Act would replace Obamacare’s complex web of subsidies for purchasing insurance with a simple refundable tax credit based on age. Shoppers could use their tax credit to buy any policy available on the market — not just those on offer through a government-run exchange.

    Finally, the bill would unleash a truly competitive insurance market by letting consumers and businesses buy insurance plans issued in other states. Such a move would expand competition among insurers, as shoppers would have more choices. And it could also foster competition among state regulatory regimes, as consumers could effectively opt out of their state’s regulations if they found them too costly or onerous.

    The CBO’s estimates of Obamacare’s financial impact have oscillated wildly in the five years since the law passed. Congress should put an end to all this uncertainty — by advancing a repeal-and-replace plan of their own.

    Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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