Snap Fact #257 - The Objective Economic Skinny on the Financial Aspects of ObamaCare - it's a no-brainer!

Post date: Jul 27, 2012 2:58:4 AM

Snap Fact #257

The Objective Economic Skinny on the Financial Aspects of ObamaCare - it's a no-brainer!

To fully understand the accuracy and importance of the source of the information in today’s SNAP-CAP we need to know about the CBO and its work. Here is a thumbnail sketch. The full description of the CBO can be accessed by clicking the first link below.

The objective, impartial, and non-partisan Congressional Budget Office (CBO) is THE ultimate authority in determining the fiscal ramifications of proposed bills and amendments proposed within the chambers of Congress. They are required to do a cost analysis on every bill out of committee. 

The CBO not only is totally apolitical and they employ the same methods and standards no matter what party has sponsored a bill under their scrutiny. Once done, they are mandated to disclose their methodology for arriving at their published conclusion. They also are available to discuss and explain their results with any member of Congress. This transparency, along with other safeguards, such as extensive review of their work, assures the veracity of the CBO.

The 35 year record of objectivity and work product of the CBO has earned the overwhelming confidence of both parties. They are strictly concerned with the fiscal aspects of a bill and they never get involved in political or policy aspects. 

CBO’s baselinebudget projections are intended to show the future paths of federal spending and revenues under current law and policies. The baseline is meant to serve as a neutral benchmark that lawmakers can use to measure the effects of proposed changes to spending and taxes. All of their cost estimates and reports are posted on their website. There is rarely a murmur about their results as they are regarded as the ultimate authority.

Knowing the gravitas of the CBO we can now turn to 3 of their critical factual findings regarding the financial impact of ObamaCare. Their first conclusion is the result of their evaluation of the July 11, 2012 H.R. 6079, the Repeal of ObamaCare Act passed by the House of Representatives. The CBO says, “Repealing the health care law passed in 2010 and upheld by the Supreme Court in June would increase the federal deficit by $109 billion over 10 years, a new Congressional Budget Office analysis estimates”.

The House repeal bill, which passed unanimously among Republicans and received support from a handful of Democrats, will not pass in the Senate and the President will not sign it into law in the unlikely event it did. The scary thing is that if we get a Republican president and congress in the coming election, this sort of self destructive legislation is going to become the law of the land.

Yahoo News reports that, “in a separate analysis, the CBO also measured the impact of the June Supreme Court ruling that struck down parts of the health care law but left core provisions intact, and found that it would save $84 billion because of reduced Medicaid spending.

The CBO estimated in 2011 that the health care law would reduce the federal deficit by $210 billion over 10 years because of the law's revenue increases.

Rather than providing a link, I am including the actual notification from the CBO to the House Majority Leader. It supplements the above SNAP-CAP and it speaks for itself:

Letter to the Honorable John Boehner providing an estimate for H.R. 6079. 

July 24, 2012

CBO and the staff of the Joint Committee on Taxation (JCT) have estimated the direct spending and revenue effects of H.R. 6079, the Repeal of Obamacare Act, as passed by the House of Representatives on July 11, 2012. H.R. 6079 would repeal the Affordable Care Act (ACA), with the exception of one subsection that has no budgetary effect. This estimate reflects the spending and revenue projections in CBO’s March 2012 baseline as adjusted to take into account the effects of the recent Supreme Court decision regarding the ACA.

For various reasons discussed in the report, the estimated budgetary effects of repealing the ACA by enacting H.R. 6079 are close to, but not equivalent to, an estimate of the budgetary effects of the ACA with the signs reversed.

What Is the Impact of Repealing the ACA on the Federal Budget?

Assuming that H.R. 6079 is enacted near the beginning of fiscal year 2013, CBO and JCT estimate that, on balance, the direct spending and revenue effects of enacting that legislation would cause a net increase in federal budget deficits of $109 billion over the 2013–2022 period. Specifically, we estimate that H.R. 6079 would reduce direct spending by $890 billion and reduce revenues by $1 trillion between 2013 and 2022, thus adding $109 billion to federal budget deficits over that period.

What Major Components Result in the Net Increase in Deficits?

Deficits would be increased under H.R. 6079 because the net savings from eliminating the insurance coverage provisions would be more than offset by the combination of other spending increases and revenue reductions:

The ACA contains a set of provisions designed to expand health insurance coverage, which, on net, are projected to cost the government money. The costs of those coverage expansions—which include the cost of the subsidiesto be provided through the exchanges, increased outlays for Medicaid and the Children’s Health Insurance Program (CHIP), and tax credits for certain small employers—will be partially offset by penalty payments from employers and uninsured individuals, revenues from the excise tax on high-premium insurance plans, and net savings from other coverage-related effects. By repealing those coverage provisions of the ACA, over the 2013–2022 period, H.R. 6079 would yield gross savings of an estimated $1,677 billion and net savings (after accounting for the offsets just mentioned) of $1,171 billion.

The ACA also includes a number of other provisions related to health care that are estimated to reduce net federal outlays (primarily for Medicare). By repealing those provisions, H.R. 6079 would increase other direct spending in the next decade by an estimated $711 billion.

The ACA includes a number of provisions that are estimated to increase federal revenues (apart from the effect of provisions related to insurance coverage), mostly by increasing the Hospital Insurance (HI) payroll tax and extending it to net investment income for high- income taxpayers, and imposing fees or excise taxes on certain manufacturers and insurers. Repealing those provisions would reduce revenues by an estimated $569 billion over the 2013–2022 period. 

What Would be the Effect of Repealing the ACA on Discretionary Spending?

In addition to those effects on direct spending and revenues, by CBO’s estimates, repeal of the ACA would reduce the need for appropriations to the Internal Revenue Service by between $5 billion and $10 billion over 10 years. Repealing the ACA would also reduce the need for appropriations to the Department of Health and Human Services by between $5 billion and $10 billion over 10 years, CBO estimates. Such savings might be reflected in reductions in total discretionary spending, or they might free up room for additional spending for other purposes under the caps on discretionary appropriations that were established by the Budget Control Act of 2011. H.R. 6079 would also repeal a number of authorizations for appropriations, which, if left in place, might or might not result in additional appropriations.

Why Are These Estimates Uncertain?

Projections of the budgetary impact of H.R. 6079 are quite uncertain because they are based, in large part, on projections of the effects of the ACA, which are themselves highly uncertain. Assessing the effects of making broad changes in the nation’s health care and health insurance systems requires estimates of a broad array of technical, behavioral, and economic factors. Separating the incremental effects of the provisions in the ACA that affect spending for ongoing programs and revenue streams becomes more uncertain as the time since enactment grows. The recent Supreme Court decision that essentially made the expansion of the Medicaid program a state option has also increased the uncertainty of the estimates. However, CBO and JCT, in consultation with outside experts, have devoted a great deal of care and effort to the analysis of health care legislation in the past few years, and the agencies have strived to develop estimates that are in the middle of the distribution of possible outcomes.