November 3, 2014

Budget Committee Report Confirms the ACA Worsens the Deficit

Charles Blahous

J. Fish and Lillian F. Smith Chair
Summary

A recent Senate Budget Committee (SBC) Republican report about the fiscal effects of the Affordable Care Act (ACA, or so-called “Obamacare”) has stimulated public and press interest. The report concluded that whereas earlier analyses appeared to find the ACA would reduce deficits, updated analysis employing Congressional Budget Office (CBO) methodology finds it is worsening deficits.

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A recent Senate Budget Committee (SBC) Republican report about the fiscal effects of the Affordable Care Act (ACA, or so-called “Obamacare”) has stimulated public and press interest.  The report concluded that whereas earlier analyses appeared to find the ACA would reduce deficits, updated analysis employing Congressional Budget Office (CBO) methodology finds it is worsening deficits.

I am already on record as finding that the ACA worsens federal deficits, albeit for different reasons than the SBC study. My 2012 study showed that the ACA worsened budget deficits relative to prior law; CBO’s earlier projection of deficit reduction was instead in comparison with a baseline scenario it is required to use under congressional scorekeeping rules.  Importantly, that baseline assumes substantial future spending increases will be enacted in any event. It’s only in comparison with this spending-increase baseline that the ACA appeared to reduce the deficit.  

Unlike mine, SBC’s study compares the ACA only to the scorekeeping baseline imposed on CBO. In addition, the SBC analysis updates projections for recent CBO findings concerning the ACA’s costs and its effects on the labor market.  I believe the SBC finding to be correct, as I will detail below.  If so, this means the ACA worsens the deficit irrespective of whether you compare to prior law (as in my study) or the scorekeeping baseline (as in SBC’s).

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