The Unraveling of ObamaCare

Advocates marketed the Affordable Care Act (ACA or “ObamaCare”) to the American public as a way to “bend the cost curve” of soaring health care costs downward. But despite its supporters’ hopes, the 2010 legislation was fiscally reckless, markedly increasing the government’s already-unsustainable health spending commitments at a time of record deficits. Three years later, the fiscal harm stemming from the ACA is as bad as — and even worse than — many experts predicted. The problem lies with the nature of the law itself, promising trillions in new government benefits while relying on dubious financing mechanisms. These problems were not only foreseeable, they were indeed widely foreseen, says Charles Blahous, a senior research fellow at the Mercatus Center at George Mason University.

Even before the president signed the ACA into law, non-partisan analysts demonstrated that the belief it would reduce federal deficits was based on a misunderstanding of government accounting.

The reality was always likely to be worse than that estimate. The positive case for the ACA’s financial integrity hung on two improbable outcomes: that all of its cost-savings provisions would work exactly as hoped, while none of its spending provisions would cost more than envisioned. Yet CBO warned at the time that many of the law’s cost-saving provisions “might be difficult to sustain,” while the Medicare Chief Actuary also warned that projected savings “may be unrealistic.” No sooner was the ink dry on the ACA before these warnings began to prove correct.

The problematic nature of the ACA’s finances is such that CBO’s latest long-term budget outlook singled out its implementation as one of the biggest sources of future fiscal strains.

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