CBO Quietly Drops Forecast That Obamacare Will Cut the Deficit
Policy + Politics

CBO Quietly Drops Forecast That Obamacare Will Cut the Deficit


One of the Obama administration's major selling points in passing the Affordable Care Act in 2010 was a Congressional Budget Office forecast that the controversial legislation would reduce the deficit by more than $120 billion over the coming decade.

The CBO has consistently projected that President Obama's overhaul will reduce the deficit, and the agency estimated that the Republicans’ 2011 effort to repeal the legislation would increase deficits by $210 billion from 2010 to 2021.

Related: Problems Found with 2 Million Obamacare Signups

In April, the agency quietly signaled that it can no longer make that projection; that the law had been changed and delayed so much that there is no longer a credible way to estimate the long-term effects on the deficit of all elements of the program taken together.

In a little noticed footnote to a report updating estimates of the effects of the insurance coverage provisions of the law, the agency headed by Douglas Elmendorf acknowledged that neither CBO nor the Joint Committee on Taxation could determine precisely how scores of provisions other than the insurance coverage would impact long term government spending.

“CBO and JCT can no longer determine exactly how the provisions of the ACA that are not related to the expansion of health insurance coverage have affected their projections of direct spending and revenues,” the CBO wrote. “The provisions that expanded coverage established entirely new programs or components of programs that can be isolated and reassessed. Isolating the incremental effects of those provisions on previously existing programs and revenues four years after enactment of the ACP is not possible.”  

The footnote was first reported this week by Roll Call and is just now gaining the attention of health care policy experts who question the basis of CBO’s retreat from its earlier forecasting.

Related: The Coming Obamacare Shock for 170 Million Americans

The CBO’s acknowledgment that there is no longer a credible method for gauging the long term budgetary effects of the huge and complex program for extending health coverage to millions of Americans could become fodder for renewed Republican attacks during the mid-term congressional  election campaign.

“From purely an analyst’s perspective, I don’t think I would consider this terribly exciting,” Bill Hoagland, a senior vice president at the Bipartisan Policy Center and a former Senate Republican budget expert, said in an interview Wednesday. “But politically, I think it’s dynamite.”

Hoagland said critics are almost certain to say, “Wait a minute, you told us it would reduce the deficit back in 2010, why can’t you tell us that today?” 

Related: Voters Want the GOP to Move On from Obamacare

After an incredibly rocky launch of the Affordable Care Act last fall, the program has signed up slightly more than 8 million people through the state and federal exchanges, while millions more enrolled through an expansion of the Medicaid program.  

Republicans continue to hammer away at the program, on Capitol Hill and on the campaign trail, although the issue has lost some of its intensity after the administration matched or surpassed its sign-up targets for the first year of operation. And while the law remains largely unpopular among the public—45 percent have negative views of Obamacare—the majority would prefer that lawmakers fix it and then focus on other issues.

Now it’s unclear whether the law is still on track to reduce the deficit or end up adding many billions of dollars more to the current $17 trillion national debt. CBO and JCT currently estimate that the insurance coverage provisions alone of the ACA will have a net cost of just under $1.1 trillion over the 2012–2021 period.

A little-noticed rule change in May will also add to the overall cost of the law. The Department of Health and Human Services’ new regulation slows the growth of premiums on subsidized exchange plans, shifting the cost to the government-at an additional cost of $7 billion over 10 years, according to an analysis by Investor’s Business Daily.

Related: Over $5 Billion and Counting for Obamacare Websites   

CBO continues to maintain, however, that many of the provisions of the law other than the insurance coverage and subsidies – will “on net” reduce budget deficits in the future. The law created 21 tax hikes, limits to deductions, tax credits, tax breaks, and other changes that will raise revenue and defray the cost of the government subsidies.

As the Roll Call story noted, the CBO based its original estimate of long term deficit reduction on the assumption that the new law – including hundreds of billions of dollars of Medicare cuts and tax increases to finance insurance subsidies—would be implemented as written.

That was before a blizzard of administrative changes, delays in deadlines for implementation and an important 2012 Supreme Court ruling upholding the law but granting states the discretion to opt out of a new expansion of the Medicaid program.

“Now, after a chaotic start and a series of delays or adjustments in various provisions of the act, including an employer mandate that was expected to bring in new tax revenue, it’s unclear to what extent those promised savings are being realized,” according to Roll Call. 

Related: CBO Says Obamacare Will Cost Less Than Projected

Charles Blahous, a senior research fellow at George Mason University’s free-market oriented Mercatus Center, characterized CBO’s inability to project the net effect of the law “a real problem,” according to Roll Call.

“The ACA’s financing provisions were assumed to be effective so as to get a favorable score out of CBO upon enactment,” he said. “But no one is keeping track of whether they’re being enforced. . . . We receive occasional updates on the gross costs of the law, but none on whether the previously projected savings provisions are producing what was originally projected.”

The Fiscal Times’ Brianna Ehley contributed to this report

Top Reads from the Fiscal Times