Charles Blahous details what he calls the “unfolding fiscal disaster” of the ACA:
No sooner was the ink dry on the ACA than the law’s various “pay-fors” began to be tossed overboard, one after the other. The ACA’s CLASS Act (Community Living Assistance Services and Supports, a long-term care program) was financially unsound from the beginning, had to be suspended a little over one year later, and was eventually repealed. The original CBO score had assumed that CLASS would provide $86 billion of net financing for the ACA over the first 10 years.
Roughly $100 billion of financing in that first decade was also to come from penalties on individuals (for failing to carry health insurance) and employers (for failing to offer it). But the Obama administration has repeatedly postponed enforcement. Unsurprisingly, there is now a campaign to abandon the individual mandate penalty altogether, despite advocates having previously touted it as essential to the workings of the ACA. The administration has also been dropping cuts to Medicare Advantage required under the ACA, with the costs of these decisions still unknown.
Also unclear is whether the ACA’s reinsurance and “risk corridor” provisions will produce unexpected federal budget costs; these provisions were included in the ACA to protect insurers from financial losses if their exchange plan participants prove to be sicker and costlier than initially presumed. CBO assumes that the ACA’s risk corridor provisions will have net positive budget effects, based on previous experience with Medicare Part D. But Part D involved a very different incentive structure and participant pool; there is no telling whether the ACA’s exchanges will line up with that experience.
It’s almost as if those of us who have said for four years that you can’t enact a massive and Byzantine entitlement program without dramatically increasing the deficit were right all along.
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