ObamaCare's going to reduce the deficit? Really?

The question of whether the ACA will increase or reduce the deficit turns on an ever-decreasing margin. In February 2011, the CBO estimated that repealing the ACA would add $210 billion to the deficit over ten years. (Because of the complex nature of the law, the impact of ACA on the budget and the impact of repealing ACA are not, as the CBO notes, the same number with the signs reversed. But repeal is what the CBO is estimating.) In May of this year, Representative Paul Ryan asked the CBO to estimate the deficit impact of repealing ACA, and the answer he got was that repeal would add only $109 billion to the deficit over the period from 2013 to 2022, a considerably smaller number that reflects the moving-target character of these projections. That $109 billion figure has to be taken in the context of the CBO’s projection of a cumulative deficit of $6.1 trillion during that period. The CBO’s best-case scenario, which assumes full and effective implementation of both cost-controlling and tax-increasing aspects of ACA, achieves a 1.8 percent reduction in the deficit over the coming decade. Not nothing, to be sure, but not a figure that leaves a lot of room for small political concessions, such as failing to hold the line on the cost of exchange subsidies or softening up on unpopular Medicare cuts, that would make this deficit-reducing bill into a deficit-increasing one…

The problem is that oldsters vote, and we’re getting more of them every year. Medicare and Medicaid cuts that leave doctors and hospitals collecting less than 40 percent of what they would collect from private insurers are going to have significant effects on the availability and quality of health care, especially with the number of Medicare recipients swelling. Keeping in mind the “daunting” task with which IPAB is charged, the GAO ran another simulation, a more realistic one, which “assumed that cost-containment mechanisms described previously are fully implemented and then begin to phase out; Medicare spending resumes its pre-PPACA growth rate by 2035. [The simulation] also assumed that spending on exchange subsidies is not constrained by a provision in current law that would otherwise limit growth of exchange subsidies.” The effect of those changes is enough to overwhelm the expected reduction in deficits.

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