Repealing the Affordable Care Act would add $109 billion to federal budget deficits from 2013-2022, according to an update released Tuesday by the Congressional Budget Office.
In a letter to House Speaker John Boehner the CBO and the staff of the Joint Committee on Taxation estimate the direct spending and revenue effects of H.R. 6079, the Repeal Obamacare Act, as passed by the U.S. House on July 11. It would repeal the Affordable Care Act with the exception of one subsection with no budgetary effect. The subsection was not specified.
The new estimate reflects spending and revenue projections in the CBO’s March 2012 baseline as adjusted to take into account the effects of the recent U.S. Supreme Court decision regarding the Affordable Care Act.
Assuming H.R. 6079 becomes law near the start of fiscal year 2013, the revised findings estimate direct spending and revenue effects of repealing the law would reduce net spending by $890 billion from 2013-2022 and reduce revenue by $1 trillion during the same period, adding $109 billion to federal budget deficits.
Major components of the Affordable Care Act resulting in the net increase in deficits include:
• Costs of coverage expansions such as the cost of subsidies via state-based exchanges (a mechanism for organizing the health insurance marketplace), increased outlays for Medicaid and the Children’s Health Insurance Program and tax credits for certain small employers will be partially offset by penalty (or depending on who is talking tax) payments from employers and uninsured individuals, revenues from the excise tax on high-premium insurance plans and net savings from other coverage-related effects. Repealing those coverage provisions of the law during the 2013-2022 would yield gross savings of an estimated $1.677 billion and net savings — after accounting for the just mentioned offsets — and net savings of $1.171 billion.
• The Affordable Care Act also includes a number of other provisions related to health care estimated to reduce federal outlays, primarily Medicare. By repealing those provisions, H.R. 6079 would increase other direct spending during the next decade by an estimated $711 billion.
• A number of provisions in the Affordable Care Act are estimated to increase federal revenue, apart from the effect of provisions related to insurance coverage, mostly by increasing the hospital insurance payroll tax and extending it to net investment income for high-income taxpayers and by imposing fees or excise taxes on certain manufacturers and insurers. Repealing those provisions would reduce revenue by an estimated $569 billion from 2013-2022.
The projections are uncertain since they are based in large part on projections of the effects of the Affordable Care Act, which are themselves highly uncertain, according to the authors of the letter to Boehner.
The CBO also released estimates for the insurance coverage provisions of the Affordable Care Act related to the recent U.S. Supreme Court ruling.
On June 28, the Supreme Court essentially made Medicaid expansion under the law a state option. The CBO and the Joint Committee on Taxation now estimate the insurance coverage provisions will have a net cost of $1.168 billion from 2012-2022 compared with the $1.252 billion projected in March 2012 for that 11-year period, for a net reduction of $84 billion. The figures do not include the budgetary impact of other provisions of the Affordable Care Act which in the aggregate reduce budget deficits.
Projected net savings resulting from the ruling arise because spending reductions from lower Medicaid enrollment are expected to more than offset the increase in costs from greater participation in the newly established exchanges.
Under the law as enacted but before the ruling Medicaid expansion appeared to be mandatory for states that wanted to continue receiving federal matching funds for any part of their Medicaid program.
The CBO and the Joint Committee on Taxation expect some states eventually will expand but will not do so by 2014 as specified in the Affordable Care Act.
The CBO and the Joint Committee on Taxation estimate that in 2022 Medicaid and the Children’s Health Insurance Program are expected to cover about 6 million fewer people than previously expected, about 3 million more people will be enrolled in exchanges and about 3 million more will be uninsured.
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