Higher Deficits and Less Care the Predictable Side-Effects of Obamacare

“Our approach would bring down the deficit by as much as $1 trillion over the next two decades” – President Obama, January 2010 in the State of the Union.

Obama may have use deficit reduction as one of the primary points in his sales pitch of Obamacare, but conservatives had their doubts all along. Since the early days of the debate over the bill we highlighted the numerous budgetary gimmicks and tricks that were designed to hide the bill’s true costs.

Of course, we weren’t alone in the assessment. Even CBO Director Doug Elmendorf wrote that, “CBO’s cost estimate noted that the legislation maintains and puts into effect a number of policies that may be difficult to sustain over time.” One of the primary savings mechanisms Elmendorf is referring to is the cut to the repayment rates for providers of Medicare and Medicaid. Obamacare magically assumed that physician services would be reduced by 21 percent in the first year of implementation and then continue to fall further in later years.

That wasn’t the worst of the smoke and mirrors. Obamacare promised to cut hundreds of millions of dollars from Medicare, then use those “savings” to pay for new spending. According to the arcane budget rules used by Washington this maneuver scores as deficit reduction. The reason is long and complicated, but it essentially relies on the fiction of a Medicare trust fund. As Medicare goes into a deficit, it trades in assets to cover gap, except that because the trust fund doesn’t really exist, money has to be pulled out of the general fund to cover the deficit. If all of that sounds like a roundabout way to hide spending, congratulations, you’re now that much closer to figuring out how Washington works.

But we already knew all of that. We knew there was a better chance of John Boehner not crying during Rudy than there was of Obamacare not increasing the deficit.
And today, finally, we got some proof we were right.

A new study released today by Charles Blahous, a former trustee for Medicare and Social Security, found that President Obama’s health care bill will add more than $340 billion to the deficit over the next ten years.

“The [Affordable Care Act] unambiguously worsens federal finances,” Blahous writes in an accompanying article for economics21. “Under each optimistic, mixed-outcome, and pessimistic assumptions concerning the future implementation of ACA’s various provisions, the law would add between $340 and $530 billion to federal deficits over the next decades.”

After that things are expected to get even worse. If Congress acts in the future according to historical precedent, Blahous writes, Obamacare would add over $100 billion to the deficits annually in its second decade. That’s more than $1 trillion every 10 years!

Obamacare’s cost isn’t the only problem. A new report from Citigroup finds that not only is the government’s increasing intervention in the health care markets unlikely to reduce costs, it will also necessarily lead to rationing of care.

“Lacking significant economic incentives in either private or public insurance schemes, patients are highly unlikely to consider the impact of their spending on the public purse or program costs for other privately insured participants,” the Citigroup study concludes.

As the market continues to break down health care costs will continue to go up. The problem is that Washington, no matter how many taxes it collects, will only have finite resources to cover these deficits. That could lead to rationing of care. Or, as Citigroup says, “Government programs should be governed, and program participates must live with limits, control and intervention that comes with government budgets.”

Higher deficits and less care? Not exactly the fulfillment of the many promises President Obama made about his health care bill. But don’t expect him to tell you that out on the campaign trail.