Friday, January 21, 2011

Obamacare will not decrease the deficit:
How, then, does the ACA magically convert $1 trillion in new spending into painless deficit reduction?

For starters, that $1 trillion price is a low-ball estimate, covering only six – not ten – years of subsidies that don't begin until 2014. The uninsured were clearly less of a priority than the deception of making the law look less expensive than it really is over its first decade. Over ten years of full implementation, it's more like $2.3 trillion.

Next up is the CLASS Act (for the Community Living Assistance Services and Supports Act) providing a new long-term care insurance entitlement. CLASS hitched a ride on the ACA for one reason only: premiums are collected in the first ten years, but no benefits are provided. Voila, it creates the perception of $70 billion in deficit reduction. In fact, CLASS is a bailout waiting to happen, as it will attract mainly sick enrollees...

In addition, a central CBO assumption could be disastrously off the mark. Today there are about 111 million Americans who could qualify for help to buy insurance through the exchanges, if they weren't eligible for an employer plan. CBO assumes that only 19 million of them would be getting new premium assistance in 2019 even though the new subsidies are so generous that low- and moderate-income workers come out way ahead if they get paid in cash, not benefits, and move to the new entitlement.

With such a large financial incentive, eventually those who would be better off in the exchanges will end up there, and costs will soar. If only the 35 million lowest wage-workers leave their job-based plans, federal spending will rise by another $1 trillion in just the first decade.

And this does not even count the costs that Congress has left off the books by shifting them to the states, well in excess of $150 Billion.
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