April 10, 2012

The Fiscal Consequences of the Affordable Care Act

The Patient Protection and Affordable Care Act (ACA) signed into law by President Obama in 2010 will significantly worsen the federal government’s fiscal position relative to previous law. Supporters argued that this comprehensive health care reform would deliver a much-needed correction to the government’s unsustainable fiscal outlook and would benefit the country’s overall fiscal situation. However, between now and 2021, the ACA is expected to add as much as $530 billion to federal deficits while increasing spending by more than $1.15 trillion. Despite the fondest hopes from its supporters, the passage of the ACA unambiguously darkens a dim fiscal picture. 

The federal government promised the health care law would finance two different activities-increasing Medicare solvency and extending health care coverage, but with only enough savings to pay for one. Thus, the ACA’s total new spending well exceeds its cost-savings provisions. In 2014, the benefits will kick in and as history shows, it is nearly impossible to take benefits away after they are given. To ensure the ACA does not worsen the federal fiscal outlook, fully two-thirds of the ACA’s new health-exchange subsidies must be repealed, or financing offsets must be found before 2014.

  • Given that many of the ACA’s other cost-saving provisions are highly susceptible to weakening by future lawmakers, the total fiscal damage wrought by the ACA is likely to be severe indeed in the absence of near-term legislative corrections.

    Charles Blahous
    April 10, 2012
  • One of the motivating principles underlying passage of the Affordable Care Act (ACA) was that comprehensive health care reform would substantially improve the federal fiscal outlook. But new research finds the ACA falls well short of that standard.

    Charles Blahous
    April 10, 2012
  • The health care bill of 2010 was said to provide two major benefits. First, the bill promised to find savings in the government's biggest health insurance program, Medicare, and use those savings to reduce the deficit. Second, the bill promised to expand health care coverage to uninsured Americans. Sounds pretty good, right? But how does the government propose to pay for both?

    Charles Blahous
    April 10, 2012
  • Because of the federal government’s untenable long-term fiscal outlook under current law, and because of the political difficulty (and thus infrequency) of comprehensive health care reform, it is essential that such reform unambiguously and significantly improve the government’s fiscal outlook.

    Charles Blahous
    April 10, 2012
  • In “The Fiscal Consequences of the Affordable Care Act,” Charles Blahous, a senior research fellow at the Mercatus Center at George Mason University, shows that the Affordable Care Act (ACA) will add at least $340 billion to federal deficits over the next 10 years, and more than $1.15 trillion to net federal spending. The study has generated significant interest and praise—as well as some erroneous criticism. Below are brief responses to some misconceptions that have arisen about the study.

    April 10, 2012