The Affordable Care Act still reduces the deficit. Yesterday the Congressional Budget Office released an estimate for the effects of delaying the employer mandate provision in the law. Anecdotally I’ve seen several quips to the effect of “yet another sign the Affordable Care Act isn’t so affordable.” Zing!
Yet here’s (some of) what the CBO actually thinks:
Following its usual procedures for incorporating new information in its estimates, CBO now assumes that penalties on employers and certain reporting requirements will not be enforced in 2014. In its May 2013 baseline projections, CBO projected that the insurance coverage provisions of the Affordable Care Act would have a net cost to the federal government of $1,363 billion over the 10-year period from 2014 to 2023. (The ACA includes many other provisions that, on net, will reduce federal budget deficits. Taking the coverage provisions and other provisions together, CBO and JCT estimated that the ACA will reduce deficits over the next decade.) As a result of the Administration’s announcement and recently issued final rules, the net cost is now estimated to be $1,375 billion—$12 billion more than previously estimated. The largest change is a $10 billion reduction in penalty payments by employers that would have been collected in 2015. (Penalties assessed for 2014 would have been collected in 2015.) Costs for exchange subsidies are expected to increase by $3 billion. Other small changes, including an increase in taxable compensation resulting from fewer people enrolling in employment-based coverage, will offset those increases by about $1 billion, CBO and JCT estimate.
Shorter version of the major headline changes:
- The delay will cost the federal government $12 billion dollars.
- 1 million fewer Americans will have employer-provided health insurance (not included in the quote above).
So why the jeers on affordability? It’s probably motivated reasoning, or perhaps the technical fulfillment of derp. So why the jeers on affordability? It’s probably motivated reasoning, or perhaps the technical fulfillment of derp. Either way there’s a simple explanation to clear things up.
There’s this straightforward thing that happens when you collect less money in a law that also spends money — the cost of the law goes up. Yet don’t be confused by the usage of “net cost” by the CBO. This only reflects the cost side of the ledger in the legislation concerning insurance coverage provisions. Which is to say, that part doesn’t include other provisions that include other revenues. For what it’s worth, sort to speak, that $12 billion is less than one percent of the total cost over the next ten years. As it stands the language in the parenthesis in the above quote tells you what you need to know about the net budgetary effect of the ACA; “The ACA includes many other provisions that, on net, will reduce federal budget deficits. Taking the coverage provisions and other provisions together, CBO and JCT estimated that the ACA will reduce deficits over the next decade.”
Addendum: The CBO also reminds us that it’s letter to John Boehner on the budgetary consequences of repealing the ACA still stands. If you’ll remember they told him it would increase the deficit.