Deficit-Reduction Doubts: ObamaCare's Additional Costs


On the day the Affordable Care Act passed, the New York Times ran an op-ed by former Congressional Budget Office director Douglas Holtz-Eakin. He argued that despite the current CBO's projection that the law would reduce the deficit by about $140 billion over the next decade, the more likely outcome was that the law would increase the deficit in the neighborhood $550 billion. In the newest issue of Health Affairs, Holtz-Eakin (now of the American Action Forum) and co-author Michael J. Ramlet expand on this argument, projecting that the law will add nearly $1.5 trillion to the deficit during its second decade and arguing that the CBO's official projections aren't reliable because they "[hinge] on provisions of the legislation that the CBO is required to take at face value and not second-guess." To put it another way, the CBO is not allowed to account for political or logistical uncertainty—the possibility that future Congresses or administrations might not implement the law as originally designed. So Holtz-Eakin and Ramlet's essay is not a swipe at the CBO's work so much as a recognition of the scope and boundaries of the office's duties; indeed, the CBO has made similar points about the potential uncertainty of its projections.

And, as Holtz-Eakin and Ramlet write, the CBO also noted in its reports that implementing and operating the law would require a significant additional spending that was never scored for Congress—spending that the authors estimate will add hundreds of billions to the total price tag:

To operate the new health care programs over the first ten years, future Congresses will need to vote for $274.6 billion in additional spending. This unbudgeted spending includes discretionary costs of $7.5 billion for the Internal Revenue Service (IRS) to enforce and $7.5 billion for the CMS to administer insurance coverage. It also includes $50.0 billion in explicitly authorized health care grant programs and $209.6 billion for the Medicare Physician Payment Reform Act, which would revise the sustainable growth rate formula for physician reimbursement.

Just by themselves, these additional costs, which I don't recall having seen added up anywhere else, more than wipe out the law's projected deficit reduction.

It may turn out that the big-picture deficit estimates offered by Holtz-Eakin and Ramlet are high. They've taken all the areas where the law is likely to cost more than expected and added them up; it's entirely possible that some of those potential additional costs will not materialize. But given the sheer number of hidden costs, low-balled price tags, and political hurdles to implementation, it seems increasingly unlikely that the law's much-touted deficit reduction will ever come to pass.

NEXT: Confirmation Theater

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  1. Having a healthy society costs money. Maybe we could cut back on prison costs.

  2. So what are the odds this monstrosity will get struck down in court as unconstitutional? Anyone have any educated guesses? Is it a long shot pipedream or is there a real chance?

    1. Don’t ask me! Hell, I wouldn’t tell you anyway what I think the commerce clause covers! I’ve got a confirmation to get; like I was going to be Borked anyway! Republican pussies!

    2. It’s not impossible. But it’s a long shot.

      See here: https://reason.com/blog/2010/06…..-obamacare and here: https://reason.com/blog/2010/03…..anks-to-ob

      1. “Anyone have any educated guesses?”

        1. Well, since things are going well at the hearings, here’s my educated guess: It will not be struck down, because it’s too important and people put so much work into it.

  3. This is an iteresting site:


    Bacon Today: Daily Updates on the World of Sweet Sweet, Bacon

    1. Cool! I just signed up for their newsletter.

  4. Reason needs to take one of their interns and have them go back and read every claim made about the deficit reducing effects of Obamacare made by media assholes like Ezra Klein and Democrats during the debate over Obamacare. Then compare those claims to the reality that is now emerging. Don’t let those fuckers act like none of the bullshit they ever put out happened.

    1. Irrelevant.

      If Obamacare delivers on its promise to reduce or even maintain deficits, Team Blue wins.

      If there are any cost overruns, it’s because Tem Red starved the beast. Team Blue wins.

  5. Are you serious?

  6. Are you serious? Are you serious?

  7. Hey, don’t blame me.

    We had to pass it to find out what was in it.

  8. I feel bad that my always glosses over big numbers. Hold my hand.

  9. I feel bad that my eyes always glosses over big numbers. Hold my hand.

  10. Well let’s recap:

    Obama is a big fat liar about his healthcare bill (and pretty much everything else) and the lapdog liberal mainstream media are still carrying water for him and covering up for him as best they can.

    Just like they have been since the first minute he started running for president.

  11. It may turn out that the big-picture deficit estimates offered by Holtz-Eakin and Ramlet are high.

    I’ll bet $9,000,000,000,000 their estimate is low.

    1. Agreed.

  12. Is anyone surprised by this?

    1. I doubt it. I don’t even think the people who supported it and passed it are surprised. They just think the deception was a necessary evil in order to pass this for the greater good.

      1. It’s not like there’s been any palm-to-the-forehead moment in Massachusetts about their state “healthcare reform” plan.

        Healthcare reform is like garbage collection. It has to constantly be ‘tended to’ to make sure everyone gets access.

  13. Tut, tut, tut there poor Peter. (Wagging finger).

    Never mind the cost, we now have free health care.

    1. Free, my ass. What are you, a fuckin’ Commie?

      I don’t want no Commies in my car.

      No Christians either!

  14. the CBO’s official projections aren’t reliable because they “[hinge] on provisions of the legislation that the CBO is required to take at face value and not second-guess.” To put it another way, the CBO is not allowed to account for political or logistical uncertainty?the possibility that future Congresses or administrations might not implement the law as originally designed.

    Of course, the assumption put forward here is that the uncertainty created only cuts in one direction, rather than the more typical case whereby the uncertainty creates a confidence interval around the estimate with the estimate considered to be worse than the best case and better than the worst case scenario.

    1. You’re assuming that the original estimate was centered in the true confidence interval, instead of on the low side or even outside the ci.

      1. “The true confidence interval” ?

        I am not assuming anything. I am pointing out that when your critique starts with “there are too many unknowns in the calculation to trust the estimate” you are saying that the estimate could be too high or too low. Assuming the error only cuts in one way requires a biased assessment of those “unknowns.”

  15. All this fear-mongering about the increasing deficit is just superstition. I’m tired of hearing about. It’s really because you whiny libertarians don’t care about anyone except yourselves, and you use the deficit as an excuse.

  16. ObamaCare sucks and is opposed by 65% of the public because it doesn’t go far enough. For the same amount of dollars we are spending today (17% of GDP) we could provide first-class Cheney-care to 100% of our population. Including those in Medicaid, and those who are uninsured and under-insured. Single-payer!!!

    We’d pay for the system through our national infrastructure? about 2% on individual taxes and 8% on companies (as opposed to the 15% they pay today). Businesses could spend the savings on keeping jobs in the US instead of outsourcing to countries already with universal healthcare. A bailout for 100% of our businesses, not just the banks and car manufacturers.

    1. I thought you were joking, especially the last line about 100% bailout, but the link makes me think otherwise.

      You seem like a friendly, enthusiastic guy, but not one statement in your post is correct:
      The idea that 65% opposed AND opposed because the bill wasn’t totalitarian enough (“didn’t go far enough”) is fantasy. Show me the poll.
      In countries with universal health care, only the rich get “Cheney-care” while the rest get the bare essentials approved by the government.

      The taxing percentages to fund single payer are also fantasy, and it’s the type of liberal falsehood (MORE HEALTHCARE FOR LESS MONEY) that liberals run in elections, but abandon in practice (MORE HEALTHCARE FOR MORE MONEY).

      Companies aren’t exporting jobs to countries with universal health care; companies export jobs to countries with CHEAP LABOR (India, Indonesia, Malaysia, other countries stitched into your shirt tags).

      1. No, I’m not joking. Single payer would have passed hands down except for the $125M in campaign contributions (bribes) from the industry. That kept it “off the table” for consideration.

        But look, I don’t care whether you believe me or not, but if you care about our economy you will learn more about the issue than you appear to know. If you want to learn about countries with universal health care, look here: http://tinyurl.com/22qn9xm … the US is absolutely LAST on the list of overall care, yet we are twice the cost of all others.

        Understand this: the current system with the health insurance middleman consumes 31% of healthcare costs just in insurance bureaucracy costs alone. We can eliminate this 31% and spend it on health care instead. This 31% includes high CEO salaries, bonuses, shareholder profits, broker commissions, actuarial costs, and even their lobbying and campaign contributions that are passed on to the patient.

        Think of it this way. If you were to start a pizza delivery service you’d add a delivery person. Would you ALSO add a chauffeur to drive the person to the customer? That’s exactly the position the insurance industry is in. A total waste of money! See http://moneyedpoliticians.net/medicare-for-all/

        Cheap labor is only PART of the problem. GM makes more cars in Canada than in the US because it costs them $800 per year per employee for health care there, versus $6500 per year here.

  17. I oppose the government’s intervention into health care, as I oppose its intervention into lots of stuff, like Social Security and the rest of it. I strongly believe its bad policy – for the nation, for business, and especially for the poor it frequently is meant to help.

    But I’m willing to concede that in this democracy, my ideas might not win the support of the majority and maybe Health Care Reform will pass over my objections and be loved and even needed and maybe even, in its own way, useful.

    What I can’t and won’t concede is the budget busting aspects of it. You want single payor/government health care, OK, fine. If you can pass it, good for you, but you damn well better make sure its budget neutral. And if that means you have to cut the hell out of Social Security, so be it. Hypothetically, the exitence of one reduces the need for the other.

    1. Completely agree, but progressives will always find budgeting tricks to at least fool the majority that elected them that these great new entitlements will come at little to no cost.

      The time to beat this thing was before it passed (or even the 2008 election), but now we’re stuck with it. The confusing part is that folks like Mr. Lohman above, despite liberals winning the fight for a healthcare bill, still find displeasure in it.

      1. Please, marlok, don’t be confused. Study the options, and if a single-payer does not make the most sense, present your options. But please stay away from the free-market option that we now have and which has put us in last place for quality but first place in cost.

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