The Fiscal Consequences Of The Affordable Care Act

The view that comprehensive health care reform must make a substantial positive contribution to repairing the federal fiscal outlook was one of the motivating principles underlying the March, 2010 passage of the Affordable Care Act (ACA).  The ACA as enacted falls well short of that standard and would significantly worsen the federal government’s fiscal position relative to previous law.  Over the years 2012-21 it can be expected to add at least $340 billion and perhaps as much as $530 billion cumulatively to federal deficits, while increasing federal outlays by more than $1.15 trillion over the same period (and by increasing amounts thereafter).

These adverse fiscal effects of the ACA are not everywhere understood because of widely-circulated analyses referencing prevailing scoring conventions of both the Congressional Budget Office (CBO) and the Medicare Trustees...The prevailing scoring convention is useful and appropriate for many policy evaluation purposes, but it nevertheless obscures the fact that when savings already required under law to maintain Medicare HI (or Social Security) solvency are also used to finance a new spending program, the federal government’s fiscal position is unambiguously worsened.  This is the case with the ACA.