June 20, 2012

The Fiscal Consequences of the Supreme Court's Healthcare Ruling

Charles Blahous

J. Fish and Lillian F. Smith Chair

Jakina R. Debnam

Assistant Professor of Economics, Amherst College
Summary

The Supreme Court's decision on the 2010 healthcare law may result in what appears to be a fiscal windfall for the federal government. But it would be a grave mistake for lawmakers to react to illusory savings with real new spending.

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This article was originally published in U.S. News and World Report. Read the full text here.

The Supreme Court's decision on the 2010 healthcare law may result in what appears to be a fiscal windfall for the federal government. But it would be a grave mistake for lawmakers to react to illusory savings with real new spending.

To illustrate this point, let's look at a few of the possible Supreme Court rulings—and their projected fiscal consequences.

The simplest decisions would be for the court to either uphold the legislation in its entirety, or to completely overturn it.   

In the case of full implementation, federal spending is projected to increase by $1.15 trillion in the next 10 years and deficits to increase by at least $340 billion. Accordingly, in the case of the law being wholly struck down, spending will be $1.15 trillion lower over the next 10 years, and deficits would be $340 billion lower than if the law had been allowed to go into full effect.

This is not universally understood because of frequent press references to a Congressional Budget Office scoring that some have misinterpreted as meaning that the 2010 health law would reduce federal deficits. But as the Congressional Budget Office is always diligent about disclosing, this score does not evaluate the actual change in law under the 2010 statute. The effect of the actual change in law passed in 2010 is to increase deficits.

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