A BETTER WAY FORWARD
Obamacare Is a Budgetary Disaster

Its advocates’ contention that Obamacare will cut future deficits even while expanding health coverage is based on unrealistic cuts and accounting gimmicks.

New Spending

The most important thing to remember about Obamacare is that it is a massive expansion in entitlement spending.  Consider:

• The Medicaid program is expanded to cover all households with incomes up to 133 percent of the federal poverty level (FPL).[1]
• Subsidized insurance is provided for families with incomes between 133 and 400 percent FPL.[2]
• The Congressional Budget Office (CBO) estimates that these two entitlement expansions will bring 34 million people onto the federal rolls by 2017, and that, by 2019, these “coverage” provisions will cost more than $200 billion annually – and increase rapidly after that.[3]

Worse, the new spending under Obamacare is also likely to be far higher than official estimates indicate.

• CBO assumes only about 3 to 5 million or so people will move out of job-based insurance into Obamacare’s entitlements.[4]  There will be strong financial incentives for even more workers to migrate into the new entitlement programs because the promised subsidies under Obamacare far exceed the tax break for job-based plans.  CBO says a family of four with $50,000 in annual income in 2016 would get $11,300 in additional support if it got its insurance through Obamacare’s new health exchanges instead of at work.[5]
• If millions of low wage workers make the switch to take advantage of this federal assistance, taxpayer burdens will soar.

Gimmicky, Unsustainable Cuts

Obamacare cuts Medicare by about $500 billion over ten years in order to pay for the new entitlement,[6] but that is not the end of the story…

• The Chief Actuary of the Medicare program has stated repeatedly that these cuts are completely unrealistic because reimbursement rates would fall so low that many providers of services would stop seeing Medicare patients.[7]  If Medicare were to follow Medicaid’s lead, the result would be severe rationing for seniors.
• Obamacare presents an awful choice for future policymakers:  allow the Medicare cuts to take place as President Obama planned (at the expense of seniors’ access to their doctors), or repeal the cuts in Medicare but explode the deficit.  It is not difficult to see which way Congress will go.

But even if these Medicare cuts were sustainable, Obamacare engages in accounting gimmicks to pretend the program is less costly than it is.  It does so by spending the Medicare “savings” twice.

• First, the law uses the Medicare cuts to pay for Obamacare’s new entitlement expansion.
• Second, the law uses those “savings” to pay future Medicare claims.
• According to a research paper authored by Charles Blahous, the end result is an increase in the federal budget deficit of at least $340 billion over the next decade.  Over the long run, this double-count will add around $8 trillion to the national debt.[8]