The Congressional Budget Office report on the Budgetary and Economic Effects of Repealing the Affordable Care Act has been widely reported and by now its themes are well known. I add just a few observations.
The report was the first since 2012 analyzing the likely results of a repeal of the law. Indeed, in 2013 the CBO declined a request that it again estimate the results of a repeal as too difficult and unnecessary. The report was also the first time the CBO applied “dynamic scoring,” to its repeal estimate, a change that had been required by the new Republican majorities in the House and Senate. The CBO, that is, for the first time looked not only at the direct effects of repeal on changes in revenues and expenditures in the federal budget, it also considered the broader macroeconomic consequences of repeal on the economy, and the indirect effects of these consequences on the federal budget.
2015 And 2012: Very Different Routes To Similar Results
The bottom line of the estimate was not radically different from 2012. In 2012 the CBO had estimated that repeal would add $109 billion to the deficit over 10 years. In 2015, it estimated the net addition to the deficit would be $137 billion over 10 years. How the CBO got to that number, however, was quite different.
To begin, CBO estimated that repealing the ACA coverage provisions would reduce spending for the exchange subsidies, Medicaid and CHIP outlays, and small-employer tax credit by $1,658 trillion. Repeal would also, however, end collections of individual and employer mandate penalties, the Cadillac tax, and reduce other revenues at total of $502 billion. Thus the net effect of repealing the coverage expansion provisions would be a savings of $1.156 trillion.
Repealing the ACA, however, would also mean the loss of $879 billion in other savings accomplished through the ACA, mainly in the Medicare and Medicaid programs. It would also mean the loss of $631 in other increased revenues, mainly taxes on high-income Americans and on certain health care providers and insurers. On balance, repeal would result in an increase in the deficit of $353 billion before considering the macroeconomic effects. This number is much larger than the corresponding number from the 2012 report.
Macroeconomic Effects Of Repeal
The CBO then turns to the macroeconomic effects of repeal, which it believes to be considerable. According to the agency, repeal would increase the GDP would increase by .7 percent over the 2021 to 2025 period, reducing federal deficits by $216 billion over the 2016 to 2025 period. This effect would be driven primarily by more Americans entering the workforce as they lose coverage through Medicaid or the exchanges, thus increasing taxable compensation.
The CBO estimates that repeal would increase the number of hours worked by 1.5 percent. The increased labor supply and termination of taxes on capital income would also, the CBO projects, result in greater capital investment and productivity. Considering the macroeconomic effects, the net effect of repeal, therefore, would be a reduction in the deficit of only $137 billion.
The report states over and over again that these estimates are very uncertain. The CBO noted, for example, that if HHS adjusted Medicare payment levels retroactively to eliminate decreased payments attributable to baseline reductions already in place, the deficit would climb another $160 billion as a result of repealing the ACA. The effects of repeal also depend very much on what else is happening in the economy and in the health care system at the same time, and could come out very differently.
Coverage Effects Of Repeal
The report also estimates the effect of repeal on insurance coverage. Medicaid enrollment would decline by 14 million. Nongroup coverage would on net shrink by 18 million as the exchanges shut down. Employer coverage, on the other hand, would grow by 8 million. On net, 24 million more Americans would be uninsured over the 2021-2025 period.
All of these estimates are based on a total repeal of the ACA. This is, of course, impossible. The ACA has been irrevocably baked into our health care system. Current Medicare payment rules, for example, are based in large part on the ACA, as is increasingly the structure of providers and of insurance coverage. It might be possible to end the insurance coverage expansion programs and the taxes and mandates imposed by the ACA, but changing other provisions of the law would be much harder. And as the CBO report dramatically demonstrates, repeal would not only increase the deficit but would eliminate coverage for millions of Americans as well.
The Human Factor
Indeed, one of the main questions one is left with in reading the report is the wisdom, indeed the possibility, of reducing all of the effects of a law to its effect on the budget and the economy. Assuming the hours worked by Americans increase by 1.5 percent because individuals fear losing health coverage if the do not find employment with benefits, or work more hours, what will those Americans be losing instead? How many of the Americans who would rejoin the labor force are early retirees–utterly exhausted from a life of manual labor—who had enough money to live on but could not retire because they could not afford health insurance? How many would have to return to dead-end jobs in which they had been held by health insurance job lock but from which they had been released by health care reform to find more creative and satisfying—but less remunerative–work?
And how can we measure the increased insecurity and poorer health, indeed the shorter lifespans, that would be the experience of the 24 million who would lose coverage?
No comments:
Post a Comment