Bloomberg News

Health Overhaul to Add to Deficit, Medicare Trustee Says

April 10, 2012

President Barack Obama’s health- care overhaul will add as much as $530 billion to the U.S. budget deficit over the next decade, according to a report by a member of the Medicare board of trustees.

The analysis by Charles Blahous rejected estimates by the Congressional Budget Office that the 2010 law will improve the government’s finances. He said lawmakers are unlikely to enforce many of its cost-saving provisions such as a tax on “Cadillac” health-care plans that will begin taking effect in 2018.

The report also said lawmakers are double-counting savings used to finance expanded coverage to the uninsured that would be needed to shore up Medicare even without the health-care law, known as the Patient Protection and Affordable Care Act.

“Despite the fondest hopes of its supporters, the passage of the ACA unambiguously darkens a dim fiscal picture,” said Blahous, a former Bush administration economic adviser and now a senior research fellow at the Mercatus Center at George Mason University.

The Obama administration rejected the analysis, saying it relies on “new math” that ignores rules used to decide how much legislation probably will cost.

‘Refight the Battles’

“In another attempt to refight the battles of the past, one former Bush administration official is claiming that some of the savings in the Affordable Care Act are ‘double counted’ and that the law actually increases the deficit,” Jeanne Lambrew, deputy assistant to the president for health policy, wrote on a White House blog. “This new math fits the old pattern of mischaracterizations.”

Blahous urged lawmakers to repeal most of the health-care overhaul, saying, “Its cost-increasing provisions must be scaled back considerably” to avoid “severe damage to future federal finances.”

The law, now being challenged in the Supreme Court, would expand health-care coverage to almost all of the nation’s uninsured. It would be financed through a combination of new taxes and reduced federal payments to Medicare providers. In addition, a special committee would be charged with finding more savings in the program.

The nonpartisan CBO said last month it expects the expanded coverage to cost about $50 billion less than anticipated in part because health-care costs are growing more slowly than forecast.

Blahous said many more people may qualify for federal assistance than CBO anticipates, driving up costs. At the same time, he said Congress may decide to weaken a new 3.8 percent surcharge on couples earning more than $250,000 and a 40 percent tax on high-end insurance plans.

“There is comparatively little likelihood, by contrast, that these tax provisions will ultimately produce more revenue than now projected,” the report said.

To contact the reporter on this story: Brian Faler in Washington at +1-

bfaler@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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