Late last month, the Congressional Budget Office reported that the provisions within Obamacare expanding access to insurance coverage would cost 20% less than the agency estimated in 2010, when the law passed.
The White House was ecstatic. “The estimates released today by CBO once again confirm the progress we’ve made,” said deputy press secretary Eric Schultz.
Taxpayers, however, should worry. A closer look at the CBO’s numbers shows that Obamacare is growing much more expensive – and disruptive.
The CBO now expects Obamacare to cover far fewer uninsured than it previously thought. In a March 2011 report, the nonpartisan agency predicted that Obamacare would extend coverage to 34 million uninsured by 2021. It has since downgraded that number to 27 million – and concluded that Obamacare will leave 31 million Americans without insurance.
So the law’s overall price tag has declined only because it’s covering fewer people.
Left unsaid is the fact that Obamacare is set to spend more per person. If the law is not repealed, Obamacare will shell out $7,740 in subsidies for every person who gains coverage in 2021. That’s a 7% increase over the agency’s per-person estimate in 2011.
The CBO now projects that the law will cost nearly $2 trillion over the next ten years. Obamacare’s subsidies alone will cost $1.1 trillion. In 2010, the agency put the cost of the entire law at $940 billion over its first decade.
Obamacare hasn’t just failed to expand coverage as projected – it’s caused more people to lose their insurance than its architects intended. The CBO now estimates that 10 million people will lose their employer-provided health benefits by 2021. That’s a tenfold increase over the agency’s 2011 projections.
Indeed, the CBO originally predicted that Obamacare would boost employer-based health coverage by several million from 2011 to 2015.
This latest round of CBO projections could look downright rosy if health costs rise in the future.
That seems likely. National health spending shot up 5.6% last year. The agency predicts that it will climb 6% a year for the foreseeable future. That’s a 50% uptick from the average annual health inflation rate over the past six years.
Meanwhile, by offering subsidies for the purchase of insurance on state or federal exchanges, Obamacare will increase demand for it. That will fuel further price inflation.
Obamacare architect Jonathan Gruber admitted as much in a January 2014 interview, saying, “The law isn’t designed to save money. It’s designed to improve health, and that’s going to cost money.” The president, of course, promised otherwise.
The law’s costs could rise even faster if companies dodge the employer mandate, which require firms with at least 100 full-time employees to offer health plans or pay a fine starting this year. Those with at least 50 full-timers must do the same beginning in 2016.
Employers might cut back on their workers’ hours so that they’re considered part-time — or stop hiring workers. Some firms may dump their health plans altogether, thanks to Obamacare’s many other cost-inflating mandates and regulations. The fine may be cheaper than the cost of coverage.
That may be good for their bottom line. But workers would suddenly have to pay for their own coverage on the exchanges. Taxpayers would have to pick up a share of the tab for those that qualify for subsidies.
These possibilities are becoming reality. A recent survey of small companies in southwestern Michigan found that one-quarter planned to drop their health plans this year because of Obamacare. Another quarter expect to do so next year.
Dr. Ezekiel Emanuel, another of Obamacare’s architects, believes these mass exoduses will continue. He predicts that Obamacare will bring about “the end of employer-sponsored insurance.”
It doesn’t have to be this way. Our healthcare system can deliver better quality care at lower cost – but only if the federal government repeals the Affordable Care Act and replaces it with a healthcare law based on market-friendly reforms.
Consider the market for senior care – dominated, of course, by Medicare. Lawmakers should replace the current, open-ended, fee-for-service system with means-tested vouchers available to beneficiaries at age 67, just as Social Security is. Under such a system, seniors would be able to pick from a variety of privately administered health plans. Competition can do the job of reducing costs and improving quality.
It’s already done so in the Medicare Part D drug benefit, which allows seniors to choose from among prescription drug plans offered by competing insurance companies. According to the CBO, Part D’s cost between 2004 and 2013 was 45% lower than the agency predicted at the outset.
Lawmakers should adopt a similar approach to reforming Medicaid, the joint state-federal health plan for the poor. A fixed block grant for each state – and private options for Medicaid enrollees – would empower states to experiment with their programs to determine how to deliver the best care at the lowest cost.
There’s evidence that this approach can save money and improve care. In 2011, Oregon convinced the Obama administration to give it a block grant of sorts. The results have been impressive. Emergency-room visits declined 17%. From 2011 to 2014, costs fell 19%.
If Oregon’s approach were adopted nationwide, Medicaid spending could decline by more than $900 billion over the next decade, according to CMS.
Obamacare is failing to reduce our nation’s health costs and to expand access to insurance as promised. Congress’s own budget watchdog now admits as much.
Congressional Republicans have finally begun to do something about that reality, with their vote to repeal Obamacare last week and their reinvigorated drive to formulate a replacement. They must complete the job.