Repeal would unleash savage cuts in programs
Repealing the ACA would be a disaster for the federal budget
Before passage of our nation’s new health reform law, the projected growth in the Medicare and Medicaid programs dwarfed other aspects of our long-term federal budget outlook. The two programs, which represent 34% of the federal budget and 5.6% of gross domestic product, were expected to outpace the longterm growth of Social Security by a factor of three. Much of this growth is related to enrollment. As the baby boomer generation turns 65, it becomes eligible for Medicare coverage. It also will begin to need long-term care, which is the most expensive component of the Medicaid program.
But that’s not the entire story. A significant portion of this growth is attributable to across-the-board growth in overall healthcare costs. Medicare and Medicaid exist within the broader healthcare system and are pummeled by the same cost dynamics that affect employers and families who purchase private health insurance. Rising healthcare costs were clearly a key component of long-term federal budget shortfalls.
Our new health reform law, the Patient Protection and Affordable Care Act, expands health insurance coverage through two major approaches—premium subsidies that moderateincome families can use to purchase health insurance in the new Health Insurance Exchange, and expanded eligibility for Medicaid coverage, which will ensure that all low-income individuals will qualify for this public health insurance program. The new law also helps small businesses provide coverage to their employees through tax credits that offset the cost of coverage.
At the time the Affordable Care Act was enacted, the Congressional Budget Office projected that, all told, these coverage provisions would cost $794 billion through 2019. To pay for these new federal expenditures, the new law takes two approaches.
First, it reduces projected Medicare spending, largely by reducing scheduled increases in provider payments. This tried-and-true approach to reducing Medicare’s growth, the CBO estimated, will save $424 billion through 2019. (It also adds 12 more years of solvency to the Medicare trust fund.)
Second, the new law creates some new taxes, such as an excise tax on very-high-premium insurance policies, and expands other taxes, such as the Hospital Insurance payroll tax, which will now apply to some types of unearned income. Altogether, the combination of reduced Medicare spending and new tax receipts exceeds projected new spending under
If the CBO erred, it
was by being too conservative