ObamaCare: Drastic Payment Cuts or Ballooning Deficit

March 20, 2013

The Affordable Care Act ("ObamaCare") is projected to add $6.2 trillion to the federal deficit over the next 75 years. If Congress alters the health care law's payment cuts to doctors and hospitals, costs could skyrocket, magnifying the unsustainable trajectory of the federal budget, says Christopher Conover, an adjunct scholar at the American Enterprise Institute.

  • The Government Accountability Office (GAO), the official auditor of the U.S. Congress, foresees two scenarios: one where the current law is enacted exactly as it was envisioned, or an alternative scenario where the health care law is modified by Congress.
  • As demonstrated by precedent, Congress often deviates from the letter of the law like it did when it previously refused to cut Medicare physician fees in 2003 as was legally required by the 1997 Balanced Budget Act.
  • Regardless of which scenario occurs, current U.S. spending is unsustainable in the long run and is projected to reach 200 percent of gross domestic product at some point in the future.

If the law is enacted as envisioned, the long-term fiscal outlook would improve slightly but it is more likely that Congress will alter the bill as it stands due to its draconian cuts.

  • Among the cuts, ObamaCare will slash physician fees by 25 percent next January, and Medicare will pay 60 percent less than private health insurance plan by 2030.
  • By 2050, the Medicare actuary estimates that 15 percent of Medicare Part A providers will be insolvent.

Proponents of ObamaCare have claimed that the GAO cooked the books in coming up with its $6.2 billion estimate, but the estimate is consistent with projections produced by other government agencies.

  • The GAO's alternative scenario does not eliminate all revenue streams from its projection and assumes that the federal government will continue to collect its average level of revenue.
  • The current law envisions that the government will collect record levels of federal revenue between 2020 and 2086 and that this revenue, in conjunction with payment cuts, will reduce the deficit.
  • This projection is unlikely, lending more credence to the alternative GAO scenario that predicts that ObamaCare will reduce gross domestic product and only improve the deficit if the law is followed as envisioned and drastic payment cuts are enacted.

Source: Christopher Conover, "'Not One Dime': Health Care Law Projected to Add $6.2 Trillion to U.S. Deficit," The American, March 14, 2013.

 

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