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Obamacare's Top Three Budget Busters

Posted By Alyene Senger On February 14, 2012 @ 3:40 pm In Featured,Obamacare | Comments Disabled

Obamacare increases unaffordable government spending, which ultimately comes out of taxpayers’ pockets. Here, we summarize three of the most costly provisions of Obamacare:

1. Medicaid Expansion: Beginning in 2014, Obamacare expands Medicaid to include all non-elderly individuals with income below 133 percent of the federal poverty level. The expansion of Medicaid accounts for more than half of the newly insured population under Obamacare. The Congressional Budget Office (CBO) estimates [1], “By 2022, federal outlays for Medicaid are expected to total $605 billion, more than twice the 2012 amount,” and “about 95 million people will be enrolled in Medicaid at some point in the year.”

As Heritage analysts point out [2], the expansion will significantly impact both state and federal budgets. Heritage estimates the expansion will “increase state tax obligations by just under $33.5 billion for federal fiscal years (FY) 2014 through 2020. Of that amount, $21.5 billion will be the states’ share of the benefit costs, and just under $12 billion will be the states’ share of the added administrative costs.”

2. Exchange Subsidies: Obamacare establishes subsidies to purchase government-approved coverage in the new exchanges for qualified households between 138 percent and 400 percent of the federal poverty level (FPL). CBO predicts [1], “About 8 million people will receive exchange subsidies in 2014 and roughly 20 million will receive them by 2022. Outlays for providing those subsidies, operating the exchanges, and running related programs will total $104 billion by 2022.”

Heritage analysts [3] argue that the subsidies will urge employers to drop coverage, create disincentives to work, and shift the cost burden to taxpayers. Former CBO Director Douglas Holtz-Eakin calculates [4]that an additional 35 million people could receive coverage through the exchanges, costing nearly $1 trillion more than original estimates for this decade.

3. Budget Gimmicks: Obamacare used a variety of Washington budget gimmicks to claim that the health care law would reduce the deficit, beginning with taking Medicare “savings” away from shoring up Medicare to offset new Obamacare spending.

The now “suspended” CLASS Act—the government-run long-term care program—was another gimmick. As Heritage experts explain [5], under the CLASS Act, “Beneficiaries will begin paying premiums in 2011 but will not receive benefits for five years. This frontloads revenue and creates the illusion of $70 billion to pay for new spending under PPACA. In reality, premium payments from CLASS will be used to pay out benefits in later years.”

Finally, Obamacare assumed that the 27 percent scheduled cut to physicians would go into effect, even though Congress has delayed it every year since 2003. This made Obamacare seem less expensive, furthering the claim that it reduced the deficit. But of course, Congress did not allow these cuts to go into effect, and the $300 billion in savings didn’t occur.


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URL to article: http://blog.heritage.org/2012/02/14/obamacares-top-three-budget-busters/

URLs in this post:

[1] CBO) estimates: http://www.cbo.gov/ftpdocs/126xx/doc12699/01-31-2012_Outlook.pdf

[2] Heritage analysts point out: http://www.heritage.org/research/reports/2010/07/obamacare-impact-on-states

[3] Heritage analysts: http://www.heritage.org/research/reports/2011/01/obamacare-and-health-subsidies-expanding-perverse-incentives-for-employers-and-employees

[4] Douglas Holtz-Eakin calculates : http://www.politico.com/news/stories/1210/46428_Page2.html

[5] Heritage experts explain: http://www.heritage.org/research/reports/2011/01/obamacare-and-the-budget-playing-games-with-numbers

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