President Obama asserts that 8 million people have signed up for Obamacare, as though that were something to be proud of. In fact, Obamacare has always been a fiasco from a fiscal perspective–a black hole of subsidies and expanded Medicaid, with largely fictitious mechanisms in place to pay for it. As the number of subsidized participants grows, the disaster gets worse. Charles Blahous explains:
Our national discussion…is missing the truly significant story here; what is unfolding before our eyes is a colossal fiscal disaster, poised to haunt legislators and taxpayers for decades to come.
It is quite possible that the ACA is shaping up as the greatest act of fiscal irresponsibility ever committed by federal legislators. … [T]he ACA is a commitment to permanently subsidize comprehensive health insurance for millions who could not otherwise afford it, which the federal government has no viable plan to finance. Moreover, experience shows that it is very difficult to scale back such spending once large numbers of Americans have been made dependent on it.
Assuming that all of its provisions were enforced, Obamacare stood to add $340 billion to the U.S. deficit over its first 10 years. But as we all know, the administration has “amended” the law on the fly, and Congress, too, has backed away from some of its provisions. As a result, the intended financing scheme to support a vast expansion of subsidized health care has largely been dismantled:
Where will the money come from to finance the ACA’s health exchange subsidies and Medicaid expansion? No one knows. We do know that the ACA’s financing mechanisms are already falling apart. The ACA’s much-reported website glitches and enrollment shortfalls had actually suggested an upside; if enrollment continued to fall short of previous projections, it was possible that some of the fiscal damage could be contained. But if enrollment has picked up as the law’s financing mechanisms disintegrate, the fiscal damage will be worse than anticipated. Consider the following:
CLASS: The ACA’s “CLASS” long-term care provisions were originally projected to generate $37 billion in net premiums through 2015 ($86 billion over ten years). CLASS was later suspended due to its long-term financial unworkability, meaning these revenues have not materialized and will not.
Employer/individual mandate penalties: These were supposed to have brought in $12 billion through 2015, $101 billion over the first ten years. Because the Obama Administration has repeatedly delayed their enforcement, to date they haven’t brought in much of anything. Some ACA advocates are even beginning to downplay the significance of possibly ditching these mandates altogether, though they were central to the law’s financing scheme.
Medicare Advantage: The ACA was supposed to be financed in part by cuts to Medicare Advantage (MA) totaling $31 billion through FY2015, $128 billion over the first ten years. The White House recently announced that planned MA cuts will not go into effect after all.
Other controversial provisions: The ACA’s most controversial savings provisions – among them its ambitious Medicare provider payment reductions, the tax on so-called “Cadillac” health plans, and cost-saving decisions of the Independent Payment Advisory Board–have yet to be tested. Given that less-controversial provisions have failed to meet their savings targets, there is little basis for confidence that these more controversial ones will do so.
When new enrollment figures were released last week, the national discussion focused on whether the ACA is fulfilling its coverage expansion goals. The largely unwritten and more important story, however, is that the ACA is rapidly becoming a colossal fiscal disaster as enrollment proceeds heedless of the concurrent collapse of the law’s financing structure.
It is deeply ironic that the White House has embarked on its ACA spending spree at the same time it assures its press auxiliary that the federal deficit is no longer an issue. We are $17 trillion in debt and counting, and the Democrats have no plan other than to spend the nation in to bankruptcy.