The ACA Was Never Fully Paid For

[Geee]

Real Clear Policy

The White House celebrations for the twelfth anniversary of the passage of the Affordable Care Act (ACA) remind us that twelve years is a sufficient passage of time to compare the initial claims of the ACA designers and promoters to the actual outcomes and consequences of this massive, partisan, legislation. In the following analysis, I focus on the ACA financing.

The Congressional Budget Office (CBO) estimated on March 20, 2010 that the ACA’s expansion of health insurance coverage would cost the federal government $938 billion from 2010 through 2019. This gross expenditure would consist mainly of subsidies for purchasing insurance on the exchanges, expanding Medicaid eligibility, and enhancing Medicaid cost-sharing with the states. The CBO further estimated that — taking into account the reductions in payments to providers and certain tax features — the ACA would increase the federal budgetary commitment to health care by $390 billion. The health care and revenue provisions actually were estimated to reduce the deficit by $124 billion from 2010 to 2019, and by up to one-half of a percentage point of GDP in the subsequent decade. The financing would come from many sources and new programs, including several new taxes, mainly payroll ones, and spending cuts to Medicare providers. While promoting the ACA in 2009 and 2010, President Obama announced that it would be fully paid for.

Yet, as shown in the table below, the financing turned out to be off by at least $282 billion. Instead of a reduction, the ACA has caused an estimated $158 billion increase in the deficit during its first ten years (or about 40 percent of the health care budget increase). Moreover, because many of the now missing taxes and savings were back-loaded in the ACA, the increase in the deficit from the ACA in its second decade is even larger. This clearly confirms that the ACA was never fully paid for.