ObamaCare's Uncertain Budget Projections

Photo credit: Talk Radio News Service / Foter.com / CC BY-NC-SAPhoto credit: Talk Radio News Service / Foter.com / CC BY-NC-SA

So is ObamaCare going to reduce the deficit? Democrats often point to estimates saying that, thanks to its combination of Medicare reductions and tax hikes, it will actually reduce the deficit over time. Republicans look at the history of entitlements and the cost of the law and argue that it will certainly raise the deficit.

Another answer, though, is that is all depends on your assumptions about how and whether the law’s cost controls—its Medicare reductions and delivery system reforms—will work. That’s more or less what the Government Accountability Office (GAO) said in a report on the health law’s budgetary impact earlier this week. If the law’s cost-controls stick, then the agency says that the will result in “notable improvement” in the long-term budget outlook. But if the cost-controls derail, or fail to work as planned, then the budget outlook will be far worse as a result of the law, increasing deficits by about $6.2 trillion over the next 75 years.

With the law’s major spending and coverage provisions still almost a year away, it’s still too early to know exactly how it will work. But there’s reason to suspect that the cost controls won’t be as effective as hoped. As GAO’s report notes, a number of nonpartisan budget and entitlement officials, including Medicare’s Trustees, the Congressional Budget Office, and Medicare’s Office of the Actuary, have “all expressed concerns about whether certain cost-containment mechanisms” in ObamaCare can be sustained. The health sector productivity improvements probably won’t work out, Medicare officials have warned, and reimbursement cuts will cause providers to shut down or cease taking Medicare patients.

The GAO report doesn’t really attempt to quell the concerns of those other agencies. Instead, it notes the many uncertainties that should undermine confidence about predicting the ObamaCare’s long-range budgetary effects. Policies that affect enrollment in government health programs could change, and so could the rate of health care cost growth. State decisions about Medicaid enrollment complicate things further, as will employer decisions about whether to continue offering health benefits.

The projections are built out of a web of assumptions, and the assumptions basically determine how the estimates turn out: If you assume the law more or less works as planned, then the budgetary effect will be positive. If not, then it will add trillions to annual deficits over the coming decades. It’s still early, of course, but given the trouble ObamaCare’s administrators have had making the law work so far, I tend to assume that it won’t work as well as hoped.

One thing that the GAO reports is not so dependent on assumptions, however, is the overall debt picture going forward. Even if the health law’s cost-containment mechanisms work as well as hoped, they are “not sufficient to prevent an unsustainable increase in debt held by the public even under [the agency’s] more optimistic assumptions.” So that's the best case scenario: that ObamaCare's cost-controls work just fine—and the federal budget is still screwed. 

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Enough About Palin||

    What difference, at this point, does it make?

  • Oso Politico||

    "The projections are built out of a web of assumptions, and the assumptions basically determine how the estimates turn out:"

    And they are projecting out 75 years? LOL, I could do better with a dart board.

  • wareagle||

    this sounds suspiciously like the formula used by the AGW alarmists.

  • A Serious Man||

    Well as a certain economist once said, in long run we're all dead. And if we aren't, Obamacare will give you push in the right direction.

  • ||

    Never have there been more incredibly incompetent clowns "in charge" that insanely and delusionally think they actually know what they're doing. I can't describe how awesome it would be to have a reality show based on their daily clown shoes activities. Not only would we get an insight into how fucking pathetically inept they are, it would be entertaining as hell.

  • sarcasmic||

    I'm sure it's always been this way. The only thing about this bunch of clowns is that they have more power than the last batch, and are thus more able to fuck things up for the rest of us.
    The next batch after Obama will expand their power even more, and fuck things up even worse.
    Repeat until the revolution comes, and after that a true socialist state will be created and the notion of liberty will be officially dead.

  • ||

    I think you're correct to a degree, but the echo chamber created by our unprecedented level of communication enabled by the internet has allowed those who would have formerly just been stupid to become fucking retarded. It's one thing to be incompetent and know it and try and hide it. It's another thing to be utterly incompetent and then allow yourself to think you're not because tons of people tell you you're not. We're in the latter and it isn't good.

  • RG||

    If only Mencken were alive today. The ridicule and venom would be savage.

  • Art Vandelay||

    That was the best part about "Veep" on HBO - it made everyone in government look like retarded, self-centered buffoons.

  • Proprietist||

    Like I said on the other forum, we are witnessing statist politics at its "finest". There's a perfectly logical reason for the Obama Administration, the Democratic Party and their shills in the media to be hyperbolic and loud about the dire effects of sequestration. Over the next few years, job losses will skyrocket due to Obamacare provisions kicking in. Republicans will blame Obamacare, the Democrats will blame the sequestration, of course. Low information voters will remember the dire warnings and the media hyperbole and believe the Democrats. They did the same exact thing in 2008, successfully passing the blame consensus from Fannie and Freddie's irresponsibility and policies that subsidized beyond-means homeownership onto Republican-supported banking deregulations and corporate greed.

  • BakedPenguin||

    Yep.

  • sarcasmic||

    Failures of the free market. More command and control is needed.

  • Anonymous Coward||

    But if the cost-controls derail, or fail to work as planned, then the budget outlook will be far worse as a result of the law, increasing deficits by about $6.2 trillion over the next 75 years.

    I pick this one.

  • CE||

    There is one certain budget prediction: the costs will be higher than originally estimated.

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online

  • Video Game Nation: How gaming is making America freer – and more fun.
  • Matt Welch: How the left turned against free speech.
  • Nothing Left to Cut? Congress can’t live within their means.
  • And much more.

SUBSCRIBE

advertisement