June 29, 2012

Blahous On the Fiscal Impact of the Health Care Ruling

Charles Blahous

J. Fish and Lillian F. Smith Chair
Summary

It’s quite possible that the decision will render the law unworkable from a fiscal perspective. Had the whole law been upheld, it would have added more than $340 billion to federal deficits over the next ten years relative to being struck down in its entirety. Now the fiscal damage could well be substantially greater.

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Mercatus Senior Research Fellow Charles Blahous discusses the fiscal consequences of the Supreme Court’s decision on the 2010 health care law:

“The Supreme Court’s action of striking down only the requirement that the states expand Medicaid may mean that the health law will do even more fiscal damage than before."

“With states no longer facing a steep financial penalty if they decline to comply, some or many of the plaintiff states may not. If that happens, Medicaid coverage under the law will be less than previously estimated, and participation in the health exchanges likely more than previously estimated."

“As we also know from previous CBO estimates, this combination is likely to add to the total costs of the legislation. It also means that the law’s cost ‘fail-safe’ provision won’t work without substantially cutting the law’s subsidies to low-income workers."

“It’s quite possible that the decision will render the law unworkable from a fiscal perspective. Had the whole law been upheld, it would have added more than $340 billion to federal deficits over the next ten years relative to being struck down in its entirety. Now the fiscal damage could well be substantially greater.”

For additional information, please see Blahous's comprehensive study, “The Fiscal Consequences of the Affordable Care Act.