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Obamacare’s Fiscal Nightmare

Home - by - February 8, 2013 - 09:45 America/New_York - 11 Comments

Hoover.org

If the law isn’t scaled back by 2014, we’re ruined.


Throughout 2009 and early 2010, supporters of the then-pending Affordable Care Act (ACA) argued that health-care reform was necessary to repair the federal government’s untenable fiscal outlook. More than any other factor, it was said, health-care cost inflation was the driving force behind massive projected federal deficits, and comprehensive reforms were required to cure the problem. Unfortunately, when enacted, the ACA worsened federal finances rather than improved them.

The legislation as originally passed would have added at least $340 billion to federal deficits in its first ten years (and over $1.15 trillion to federal spending) and far more in each subsequent decade. This past summer, the Supreme Court threw a wild card into the fiscal picture, striking down the federal government’s power to compel the states to participate in the ACA’s vast Medicaid expansion, while essentially leaving the rest of the law standing.

As a result, depending on policy decisions yet to be finalized by elected officials at all levels of government, the ACA could ultimately prove either far more expensive—or significantly less so—than originally estimated.

The ACA and America’s Fiscal Future

The ACA’s worsening of the federal fiscal outlook is unambiguous but has been poorly understood because of the scorekeeping rules under which the Congressional Budget Office (CBO) operates. Rather than evaluate the effect of the ACA’s literal change in law, as is done with many other areas of the budget, CBO is directed to treat changes affecting Medicare differently. To fully understand this requires some familiarity with the basics of Medicare financing.

Medicare (like Social Security) is only authorized to make benefit payments when there is a positive balance in its trust funds. Lawmakers are on notice that if the Social Security or Medicare Hospital Insurance trust funds face depletion, action must be taken either to increase revenues or slow the growth of payments to avoid a sudden interruption in benefits.

CBO is instructed to disregard this restriction on Social Security and Medicare financing whenever it scores legislation. Instead, CBO is directed to assume that Social Security and Medicare will make full scheduled benefit payments in perpetuity, even though the programs lack the financial resources and statutory authority to do so. This is important not only because this assumption differs markedly from actual law (as CBO publications are careful to acknowledge), but also because it is without historical precedent.

Though lawmakers’ management of Social Security and Medicare has exhibited flaws, historically trust fund financing limitations have been taken seriously. These restrictions are the reasons behind the substantial benefit restraints and tax increases of the 1983 Social Security amendments, none of which would have been obligatory if Social Security were permitted to spend in excess of its trust fund resources as CBO is compelled to assume. Instructing CBO to ignore these critical statutory restrictions distorts its scorekeeping findings.

In sum, the scorekeeping baseline used to show a positive fiscal effect for the ACA reflects neither actual law nor historical practice. This hypothetical scenario, involving as it does perpetual overrides of Social Security and Medicare financing restrictions, would be untenably expensive. Yet it was only in comparison with this extreme and extra-legal scenario that the ACA was found to slightly reduce projected federal deficits. In comparison with actual prior law, the legislation greatly worsened the fiscal outlook.

MORE   http://www.hoover.org/publications/defining-ideas/article/139986

» 11 Comments

  1. Noodengr

    February 8th, 2013

    A few years ago, my 5 ft tall friend was in a minor bicycle accident while in Jamaica . To check out for any injuries the did a full body x-ray of her and charged her $25. An X-ray ,a medical procedure that has been done for over 100 yrs now. If she had the same x-ray done in the states, the cost would have been well into 4 figures. Please have someone in healthcare, justify the cost difference, for the same ‘let’s check for broken bones” x-ray
    Tell you what I will be pay $30 since I am 5′-8″
    Until competition is introduce into all aspects of health care and everyone is held accountable for way out of control cost the health care price cost will never be fixed.

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  2. Claudia

    February 8th, 2013

    @Noodegr, it’s the malpractice insurance, personnel costs that include wage and benefits (thanks to the unions), equipment and supplies, federal regulations for medical practices (clinics, hospitals, etc), taxes and research (it costs LOTS of money to develop new and better equipment and drugs).

    My take on the problem from 30 years in the medical field: tort reform (which will make malpractice insurance less costly as a side benefit) and allow insurance to be sold nationwide.

    Gee, that solution sounds a lot like what the Republicans proffered during the Obamacare debate.

    I’d add one more: reduce federal regulations. You wouldn’t believe the amount of extra (and NOT valuable) work caused by staying compliant with useless regulations JUST in the billing of services, much less the rest of the clinic/hospital.

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  3. Noodengr

    February 8th, 2013

    Claudia, I do not disagree with any of your statemenets, lawyers and our too quick to sue mentality are big issues. But I still go back to a simple x-ray with tried and true technology to check for a broken bone, should not cost an arm and a leg, ( pun intended).

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  4. Claudia

    February 8th, 2013

    Agreed, Noodengr.

    Which reminds me of a call I received when working in the billing department of a major hospital:

    Woman: I can’t believe the hospital would charge $25 for a box of kleenex.

    Me: Kleenex?

    Woman: Yes, I was in the hospital overnight and on my bill it has $25 for a box of kleenex.

    Me: Let me check your bill. (while I was looking it up) I have never even seen a charge for kleenex before.

    Woman: Well, it’s on my bill!

    Me: (stifling a laugh) Ma’am, the only charge I see for $25 is for tissue.

    Woman: Yes, kleenex!

    Me: No, tissue. As in a lab on a sample of your tissue. Did you have a biopsy on something?

    Woman: (Pause) Oh. sorry.

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  5. Stranded in Sonoma

    February 8th, 2013

    Do not forget that when Obrainless went to Europe on one of his apology tours, both Sarkozy and Merkel told him NOT to institute national health care. They told him it was killing their country and the balance of payments were impossible to meet. Guess what our Ivy League educated brain-dead socialist did anyway?

    The battle cry of all socialists: A century of failure proves nothing! (thanks to the People’s Cube).

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  6. BILL

    February 8th, 2013

    it doesn’t take a economics major to have come to this conclusion, well hell, even a “plumber” could have told you that!

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  7. Maudie N Mandeville

    February 8th, 2013

    I didn’t read anywhere about why it’s Obama’s fiscal nightmare. Why would he care?

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  8. McFartus Spontaneous

    February 8th, 2013

    But, but, but, what difference does it make? Americans are suckers says Botox Nan, & she cant really get rid of that mustache Babs Boxer, lets pass it so they can see whats really in it. Im serious, punch a lib n the face day really should b a federal paid day off.

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  9. McFartus Spontaneous

    February 8th, 2013

    Snowing heavy, damn, falling horizontal

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  10. Stranded in Sonoma

    February 8th, 2013

    @McFartus Spontaneous — Sorry, dude. 70 and sunny here in Sonoma County, CA. I guess we’re even. The weather is nice; the socialism is unbearable.

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  11. Tim

    February 8th, 2013

    This was BO’s plan from the start – it is certainly NOT his nightmare – more like his wet dream.

    He is an evil socialist would-be dictator, not some likable dunce who just woke up in the White House.

    His economic war against this country has been orchestrated with malice aforethought, and executed with exacting precision. The destruction will continue long after he’s left the national stage.

    The gov’t is now predicting the economy might turn around by 2017 – and you know what a good job they’ve done so far.

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