–Affordable Care Act Repeal Would Increase Deficits By $109B FY2013-22

WASHINGTON (MNI) – The following are excerpts of updated estimates
by the Congressional Budget Office and the staff of the Joint Committee
on Taxation Tuesday of the budgetary effects of the health insurance
coverage provisions of the 2010 Affordable Care Act to take into account
June’s Supreme Court decision:

What Is the Net Budgetary Impact of the Coverage Provisions Taking
Into Account the Supreme Court’s Decision?

CBO and JCT now estimate that the insurance coverage provisions of
the ACA will have a net cost of $1,168 billion over the 20122022
periodcompared with $1,252 billion projected in March 2012 for that
11-year periodfor a net reduction of $84 billion. (Those figures do not
include the budgetary impact of other provisions of the ACA, which in
the aggregate reduce budget deficits.)

The projected net savings to the federal government resulting from
the Supreme Court’s decision arise because the reductions in spending
from lower Medicaid enrollment are expected to more than offset the
increase in costs from greater participation in the newly established
exchanges.

…

Why are the Projected Medicaid and CHIP Savings Stemming from the
Supreme Court’s Decision Greater than the Projected Additional Costs of
Subsidies Provided through the Exchanges?

Federal spending over the 20122022 period for Medicaid and CHIP is
now projected to be $289 billion less than previously expected, whereas
the estimated costs of tax credits and other subsidies for the purchase
of health insurance through the exchanges (and related spending) have
risen by $210 billion. Small changes in other components of the budget
estimates account for the remaining $5 billion of the difference.

The key factors leading to that result are as follows:

Only a portion of the people who will not be eligible for Medicaid
as a result of the Court’s decision will be eligible for subsidies
through the exchanges. According to CBO and JCT’s estimates, roughly
two-thirds of the people previously estimated to become eligible for
Medicaid as a result of the ACA will have income too low to qualify for
exchange subsidies, and roughly one-third will have income high enough
to be eligible for exchange subsidies. In addition, those who become
eligible for subsidies will have to pay a portion of the exchange
premium themselves, which will affect their decisions about whether to
enroll in the exchanges.

For the average person who does not enroll in Medicaid as a result
of the Court’s decision and becomes uninsured, federal spending will
decline by roughly an estimated $6,000 in 2022.

For the average person who does not enroll in Medicaid as a result
of the Court’s decision and enrolls in an exchange instead, estimated
federal spending will rise by roughly $3,000 in 2022the difference
between estimated additional exchange subsidies of about $9,000 and
estimated Medicaid savings of roughly $6,000.

With about 6 million fewer people being covered by Medicaid but
only about 3 million more people receiving subsidies through the
exchanges and about 3 million more people being uninsured, and because
the average savings for each person who becomes uninsured are greater
than the average additional costs for each person who receives exchange
subsidies, the projected decrease in total federal spending on Medicaid
is larger than the anticipated increase in total exchange subsidies.

—

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 20132022
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 expansionswhich include the cost of
the subsidies to be provided through the exchanges, increased outlays
for Medicaid and the Children’s Health Insurance Program (CHIP), and tax
credits for certain small employerswill 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 20132022 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 20132022 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.

** MNI Washington Bureau: 202-371-2121 **

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