NCPA - National Center for Policy Analysis

Health Care Repeal Won't Add to the Deficit

January 21, 2011

The Congressional Budget Office (CBO) says repealing the Affordable Care Act (ACA) would increase the deficit by $230 billion over the coming decade and by a modest amount in the decade after that.  A close examination of the CBO's work and other evidence leads to the exact opposite conclusion, according to Douglas Holtz-Eakin, former director of the CBO, Joseph Antos, former assistant director at the CBO and James C. Capretta, former associate director at the Office of Management and Budget.

If the CBO is right, 32 million people will be added to the health entitlement rolls at a cost of $938 billion through 2019, and growing faster than the economy or revenues thereafter.  How, then, does the ACA magically convert $1 trillion in new spending into painless deficit reduction?  Through budget gimmicks, deceptive accounting and implausible assumptions.

  • For starters, $1 trillion is a low-ball estimate, covering only six -- not 10 -- years of subsidies that do not begin until 2014.
  • Over 10 years of full implementation, it's more like $2.3 trillion.

The deepest spending cuts in the ACA are in Medicare.  No doubt Medicare needs real reform, but the ACA's cuts are illusory.  Medicare's payments to health care providers would fall below those of Medicaid.  The network of hospitals and physicians willing to care for Medicaid patients is notoriously constrained, say Holtz-Eakin, Antos and Capretta.

  • About 15 percent of the nation's hospitals would have to stop seeing Medicare patients in just a few years to stem their losses.
  • What's worse, ACA's advocates are double-counting this fictional savings, claiming it can pay both for the ACA's entitlements and Medicare solvency too.
  • The truth is, these cuts cannot be relied upon to pay for anything.

So, even if the CBO's analysis were flawless, the authors of the ACA guaranteed a misleading bottom line.  Their legislative prescriptions were written to create deficit reduction only on paper -- not in reality.

Source: Douglas Holtz-Eakin, Joseph Antos and James C. Capretta, "Health Care Repeal Won't Add to the Deficit," Wall Street Journal, January 19, 2011.

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