Last week, the Congressional Budget Office released its report on H.R. 2, the House-passed legislation that would fully repeal Obamacare. The takeaway message was that American taxpayers simply cannot afford Obamacare.
CBO’s initial scoring of Obamacare analyzed its effects from 2010 to 2019, including only six years of full implementation, since main spending provisions do not go into effect until 2014. The new document reports on 2012 to 2021, including an additional two years of full implementation. This still fails to show the true 10-year cost of the law, but gets a little closer. Over eight years, the gross cost of Obamacare’s coverage provisions jumps from $938 billion to $1.39 trillion, which includes $677 billion to create a new health entitlement offering generous subsidies to the middle class to purchase health insurance.
It also includes an expansion of Medicaid, which will cost $674 billion. Initially, the federal government will almost entirely fund the expansion, but will pass costs on to the states starting in 2020. This will have serious consequences, as states already face tough choices to tackle mounting deficits. The combined increase in states’ Medicaid costs will be $60 billion. CBO’s initial score showed the Medicaid expansion costing states just $20 billion. The addition of just two extra years increased this number threefold, revealing the crippling effect the expansion will have on state budgets.
Obamacare proponents say the new law cuts the deficit. But the CBO report pulls the mask off the bill and reveals what it really is: a massive tax increase that, on paper at least, is slightly greater than the massive spending hike it also contains. Obamacare thus indisputably represents a massive new burden on current taxpayers and future generations.
Finally, several of Obamacare’s “pay-fors” are unlikely to ever become reality. One example is the excise tax on “Cadillac” health plans, an unpopular change that isn’t supposed to occur until 2018—after President Obama is safely out of office. If the Congress and White House responsible for creating this tax weren’t willing to put it into effect, it is unlikely that future lawmakers will do so. Without the Cadillac tax, Obamacare loses $111 billion of offsets for new spending.
Unsustainable cuts to the Medicare program are also expected to pay for new spending. Both the CBO director and Medicare’s Chief Actuary have warned that these cuts to Medicare provider payments could reduce access to care for seniors and reduce quality of care. Congress’s past behavior proves its hesitance to allow similar changes to the program, so savings within Medicare will likely not materialize.
The reality is that the offsets for Obamacare spending cannot occur without serious negative consequences, and without them, it adds significantly to deficit spending. CBO Director Douglas Elmendorf’s letter to Budget Committee Chairman Paul Ryan last week stated that repeal would reduce the deficit if these provisions don’t occur.
So the facts are in. Obamacare includes tremendous new levels of federal spending at a time when lawmakers are seeking ways to reduce the unaffordable size of government. It pays for new spending by increasing taxes on the American people, burdening individuals and businesses and putting further strain on the economy. And, as we explain further in recent research, a realistic scoring of Obamacare shows that it is certain to increase deficits.