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Obamacare Does No Favors for the Nation’s Fiscal Outlook

Posted By Kathryn Nix On January 31, 2011 @ 10:05 am In Obamacare | Comments Disabled

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Last week served up another dose of reality for Obamacare supporters.

In addition to House committee hearings that exposed the negative effects of the new law, the Congressional Budget Office (CBO) released its new 10-year baseline [2], which unveils the “daunting economic and budgetary challenges” facing the United States. In 2011, the federal deficit will hit $1.5 trillion. Heritage budget expert Brian Riedl writes [1], “Historic increases in federal spending are set to create permanent trillion-dollar deficits, eventually pushing the national debt past 100 percent of the GDP. Without change, the nation could potentially face a Greece-like economic crisis.”

Deficits will decrease later in the decade as the economy recovers, but the CBO warns that this assumes “that tax and spending policies unfold as specified in current law. Consequently, they understate the budget deficits that would occur if many policies currently in place were continued, rather than allowed to expire as scheduled under current law.”

One such policy is the “doc fix.” Every year, physicians are scheduled to receive severe pay cuts under Medicare, which threaten seniors’ access to care. So instead, Congress continually passes a fix to delay the cuts. Obamacare creates savings in other parts of Medicare but left in place the policy of adding the extension to the deficit. Even so, the CBO must assume in its baseline that the cuts will occur, ignoring approximately $300 billion in spending over the next decade. The CBO warns that if the cuts are prolonged indefinitely, “then deficits from 2012 through 2021 would average about 6 percent of GDP, compared with 3.6 percent in the baseline.”

The doc fix isn’t the only problem. Federal spending on health care is on track to bankrupt the country over the coming decades. According to the CBO [2]:

[S]pending on the government’s major mandatory health care programs—Medicare, Medicaid, the Children’s Health Insurance Program, and health insurance subsidies to be provided through insurance exchanges—along with Social Security will increase from roughly 10 percent of GDP in 2011 to about 16 percent over the next 25 years. If revenues stay close to their average share of GDP for the past 40 years, that rise in spending will lead to rapidly growing budget deficits and surging federal debt. To prevent debt from becoming unsupportable, policymakers will have to substantially restrain the growth of spending, raise revenues significantly above their historical share of GDP, or pursue some combination of those two approaches.

Obamacare cuts Medicare, but instead of using savings to increase the solvency of the program, it creates a new health entitlement: insurance subsidies for the middle class. Moreover, the cuts are likely to follow in the footsteps of the doc fix. If they are fully implemented, the Medicare Actuary warns that 15 percent of hospitals could stop accepting Medicare enrollees altogether. Judging by Congress’s past action, lawmakers are unlikely to allow the cuts to go into effect if they would harm seniors’ access to care.

The United States faces severe economic consequences if skyrocketing federal spending on health care is not addressed. Rather than acknowledge this, Obamacare left in place an unsustainable policy that adds billions to the deficit each year. It creates the illusion of fiscal responsibility through its unsustainable cuts to Medicare and sets up yet another entitlement program to further burden taxpayers. The CBO’s report is a reminder of the ailing fiscal health of the country, which is made worse by Obamacare. To learn more about how Obamacare will add to federal deficit spending, click here [3].


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2011/01/31/obamacare-does-no-favors-for-the-nation%e2%80%99s-fiscal-outlook/

URLs in this post:

[1] Image: http://www.heritage.org/Research/Reports/2011/01/New-CBO-Budget-Baseline-Reveals-Permanent-Trillion-Dollar-Deficits

[2] its new 10-year baseline: http://www.cbo.gov/ftpdocs/120xx/doc12039/01-26_FY2011Outlook.pdf

[3] click here: http://www.heritage.org/Research/Reports/2011/01/Obamacare-and-the-Budget-Playing-Games-with-Numbers

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