Why Can’t the Government Forecast Obamacare’s Financial Future?

Source: Thinkstock

Source: Thinkstock

The Congressional Budget Office has played a key role in defining the fiscal success and failures for the Affordable Care Act — at least from the perspective of the American taxpayer. Since the healthcare reform bill was passed in March of 2010, the CBO has provided lawmakers and taxpayers key projections on how the healthcare reform law would impact government spending and the federal deficit — until now. Several weeks ago, the nonpartisan government agency announced that it would no longer measure the fiscal impact of a number of provisions of the healthcare reform law because the task is too complex, partly because of difficult economic recovery, but also because of the numerous rule changes made by the Obama administration throughout the law’s implementation. This announcement means that it will be much more difficult to study the fiscal impacts of the healthcare reform since the CBO analysis is the leading authority on the subject.

Why Is Obamacare’s Financial Future Unknowable?

After considering all Obamacare’s provisions — including those that subsidize insurance coverage for lower-income Americans — the CBO and the Joint Committee on Taxation estimated in July 2012, the most recent comprehensive analysis, that the Affordable Care Act’s overall effect would be to reduce federal deficits. Upon a request from House Republicans, the agency calculated that repealing the Affordable Care Act would add $109 billion to the federal deficit over a ten-year period. That means that two years ago the agency still believed the reform law would save the government money. The CBO’s expectation for a budget reduction was largely reaffirmed in the agency’s April updated estimate of the effects of the insurance coverage provisions of Obamacare. But a footnote in the April analysis noted that, “CBO and JCT can no longer determine exactly how the provisions of the ACA that are not related to the expansion of health insurance coverage have affected their projections of direct spending and revenues.”

More specifically, the CBO can quantify the budgetary effects of provisions of the Affordable Care Act that expanded insurance coverage through the establishment of entirely new programs, like the system of insurance marketplaces, or through the enlargement of existing government programs. “In contrast, other provisions of the Affordable Care Act significantly modified existing federal programs and made changes to the Internal Revenue Code,” and “isolating the incremental effects of those provisions on previously existing programs and revenues four years after enactment of the Affordable Care Act is not possible.” Obamacare’s expansion of Medicaid is just one example of a changed program that the CBO is unable to measure.

Fault is not entirely with the Obama administration’s much-amended implementation schedule; the reform has seen 41 different delays or administrative adjustments — according to the nonprofit health and tax policy organization, Galen Institute. However, as CBO wrote in a letter to Speaker of the House John Boehner in July of 2014, which detailed the possible effects of a repeal of the Affordable Care Act, “separating the incremental effects of the provisions in the ACA that affect spending for ongoing programs and revenue streams becomes more uncertain as the time since enactment grows.” Changes in economic conditions over the past four years, as well as adjustments to the CBO’s projections of future economic conditions, have also made it more difficult to describe the fiscal impacts of the law.