CBO ON ACA - An Expensive Half-Loaf

Bruce Krasting's picture

The Congressional Budget Office produced two reports on Obama Care yesterday. The first (A - Link) did an analysis of what the cost would be if we just junked the Affordable Care Act (ACA). The second (B - Link) looked at the consequences to ACA as a result of the recent Supreme Court decision. .



The House has recently put forward a bill to scrap almost all of ACA. This legislation is not going anywhere, it’s just a “show pony” for Republicans, so they can say they voted to repeal an unpopular law. The CBO is required to review all legislation, even if if it has not a ghost of a chance of passing The CBO concluded that repeal would cost (increase deficit) by$109Bn over ten-years. This number assumes that government spending would actually decline by $890Bn, but the government would collect $1Trillion less in revenue.




When Justice Roberts made his now famous opinion that affirmed the constitutionality of ACA, he also made two important changes. He said that the government could not force a citizen to pay a penalty, but it could levy a tax, and he said that States could not be forced to provide Medicaid to those who did not have health care insurance.

The decision by Roberts does change the economics of ACA. The CBO concluded that 4 million people would not have access to health coverage as a result of the Medicaid “opt out” that the States now have. The reduction in the number of people covered translate to “savings” that amount to $84Bn over ten years.

Of course this is not really saving anyone a dime. ACA is going to cost a bundle. Post the Supremes decision, the CBO has concluded that ACA will cost a net of $1,168Bn over ten years. ACA will have expenses of 1,683Bn but will generate revenues of $514Bn to produce that net cost of $1.2 Trillion.

So we are screwed if we get rid of ACA, we are screwed 10Xs worse if ACA is kept alive.

What do we get for the $1.2Tn? The answer the politicians will tell you is that the country will finally have universal health coverage for everyone. But that is not true at all. ACA does widen the access to healthcare to millions of additional people, but it falls well short of the stated goals.

The CBO has concluded that as a result of ACA, the number of people today who do not have access to healthcare will fall from 53m to 30m over the next ten years. While the 46% reduction in uninsured is admirable, it still is a far cry away from what this law has been sold as. America will still have 10% of its population uninsured.




The CBO is only allowed to review “Current Law”. ACA must be reworked to reflect the ruling by Roberts that the government can’t charge a penalty for not participating in ACA. The Supremes determined that the penalties must be in the form of a tax for it to be legal. At some point, lawmakers have to get together and rework the critical language and convert what was once a “penalty” into a tax. I suspect that this is going to be a big problem post the November election.

It’s very important to look at who will be paying these penalties/taxes. The numbers are huge. The following looks at who is going to be paying to make ACA a reality:



$172Bn (15% of the total cost) is coming from those “penalties” that somehow are going to be converted into a tax. I think the country will see just a fraction of this amount actually collected.

10% of the cost ($111Bn) will come from people who have “Cadillac” insurance plans. So if you’re working for a company that has good health plan today, get ready to pay some extra bucks.

Fully 20% ($231Bn) of the cost of ACA is coming from high-income earners. They will pay more income tax to subsidize the new law.

The bottom line on ACA is that it will increase the deficit by $1.3Tn, it results in tax increases of $514Bn and it covers less than half of the uninsured today. That is called success in Washington. Me? I call it a disaster.


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Orly's picture

Could this be the onset in the plunge of the yen crosses?

Initial downside target on EJ is 89.3.

!0-year yield to nowhere?  How can one not be amazed?


Orly's picture

Maybe not?  Ha!  What a fekkin' joke!


Bob Sacamano's picture

Please call the ACA by its proper name:  Obamacare.  Thanks.

moneymutt's picture

there are some options, continue on our path before ACA, with more an more uninsured every year and no cost controls on health care inflation

or say, do health care say, like some reasonably free and prosperous countries like Germany, UK, Canada, where they insure all, with outcomse at least as good as ours, for half the cost per GDP as we do. Both our public funded and private funded health insurance programs fail in value compared to outher developed coutnries because govt health care spending (vets, military, Medicare, Medicaid) is roughly half of spending, private spending to cover some, but far from all, working people and their kids is the other half of our health insurance spending...so both our public and private systems cover  only half the population for as much as these countries spend to cover everyone.

The thing that really gutted ACA's ability to cover people was SCOTUS making Medicaid expansion optional and many states saying they will now pass on it. Shoot there are lots of people right now that qualify for Medicaid but dont even use it, that is one of reasons states dont want health exchanges, these web-sites will make it easy for folks to fing out they qualify. The expansion of Medicaid in all states, would have greatly expanded coverage amongst the working poor.

Another reason ACA doesnt cover everyone is because it does not cover illegal immigrants like Romneycare did.

SCOTUS always rules in favor of big business....when everyone doubted after oral arguments that they would uphold mandate, I predicted, as evidenced in posts on numerous blogs, that SCOTUS would both uphold mandate and strike down Medicare expansion...because mandate "stick" and subsidies "carrot" gets many more people, often young healthy ones, to buy private insurance and according to Bruce's numbers, Medicaid expansion not done in many states will mean 3 million more people (than ACA wholly untouched by SCOTUS) buying private insurance instead of getting govt insurance. This supreme court ruling was predicatble as the day was long...I just wish I had bet on it at intrade...

With the money savings from states passing on Medicaid expansion Dems should propose a single item bill to repeal mandate ...the revenue lost from mandate "tax" repeal will be more than covered by the savings from less states doing Medicaid expansion.

Another option is the Obama admin should also put a piece of information in the state exchanges that will be built by the federal govt in states that have refused to do it themselves, and that line item should say:

Dear Texas citizen, since your AGI is lower than 133 percent of poverty line, under the orignal ACA legislation you would have qualified for Medicaid coverage fully funded by govt. But since SCOTUS made this expansion optional and your state opted out on the Medicaid expansion, you do not qualify. Therefore, you must pay to buy private insurance on this market or face mandate tax penalty. Please note, your state govt would have had to only cover 5 percent of the cost of the Medicaid expansion, with federal govt covering the other 95 percent.



calgal's picture

I'm so poor, I can only pinch half a loaf......

cbxer55's picture

I may not be rich, but you should have seen the one I "pinched" this morning!  ;-0

Wile E. Coyote would have been proud. ;-)

StormShadow's picture

Also read "In the Garden of Beasts" by Erik Larson. Biography of the American Ambassador in Germany in 1933. The parallels to US today are terrifying; a preview of what is to come.

mkhs's picture

If I am sick, I do not want health insurance.   I want a doctor.

Keep it simple.

Dark Trader's picture

agreed. The whole ACA is about access to health insurance, not health care. I doubt that is simply an Orwellian "headfake" of labelling

Bee's picture

Original government estimate of Medicare cost were low by a factor 9!!  Expect similar cost explosions.

MrBoompi's picture

Without real competition in the healthcare industries (services, drugs, insurance) we won't overcome the real problem.  Our healthcare costs twice as much as it should.  You didn't think these people would just offer their services to 40 million additional Americans for free did you?


onlooker's picture


Pelosi said that her back room, secret Health Care bill would be understood when it became functional. I understand there is much more to the bill to be written.


There is still no real understanding and no realistic cost for money and the net effect on the population requiring health care.


What is apparent is that it is a new tax that will cost huge money and may decrease care for the sick and injured.

How many doctors and hospitals will be reduced is unknown but may cause even more dramatic problems.

Don Levit's picture

It seems to me that people over 400% of the poverty level who receive no subsidies will tend to stick with employer-based coverage.  Their tax exemption is higher than the subsidy, which is zero.

On the other hand, those below 400% of the poverty level will determine the tax savings via aemploer-provided insurance versus the subsidies.

If my thinking is correct, we will eventually have a 2-tiered sysytem  -  those with higher subsidies (the poor) in the exchanges; those with lower or no subsidies in employer-priovided plans.  What do you guys think?

Don Levit

RagnarDanneskjold's picture

You're assuming those 400% plus over the poverty level don't go to their employer and ask for a raise in return for cancelling their health insurance and paying the penalty. 

Eireann go Brach's picture

There is only one certain outcome...everything the Government touches turns to shit!

the not so mighty maximiza's picture

No matter if it is a 2 tierd system or not, mortailty rates will go up and quailty of life will go down.

Alea Iactaest's picture

Don, interesting analysis. I agree that there will be a two-tier system both for the economic reason you outline (although private pay participation is likely to fall over time due to increasing premiums and deductibles) and for the simple fact that there is a sizeable population of wealthy/connected individuals who will not be treated like the hoi polloi.

I always got a laugh out of David Rockefeller voting for gov't sponsored health care because we all know there is absolutely no chance he or his family will ever wait in line to see a physician nor will he ever worry about being denied a procedure.

In this case what's good for the goose is not what's good fhe gander.

divide_by_zero's picture

Rockefeller's support for govt sponsored health care was only for NWO purposes, control of the population and nothing more.

dumbfound's picture

With a Two tier system new procedures and drug therapies will not be invented so even if you think your rich and will not affect you it will. But we will all ,Rich and Poor, by therapies and procedures not invented.

mkhs's picture

Yeah, it will be a four-tier system. Poor, everyone, rich, and federal employee.

the not so mighty maximiza's picture

Health care mandate is just a money laundering operation like social security.

NEOSERF's picture

What has happened to capitalism, self-determination and self-reliance...Thoreau is turing over in his grave...

Winston of Oceania's picture

Might I suggest you read The Vampire Economy by Gunter Reimann avaiable at www.mises.org. Written during the thirties it outlined the difficulties of doing business under National Socialism, the parallels to Americas overregulated economy are astounding.

Bee's picture

Good book.  I also recommend it.  Under the NAZI's German citizens had to get government permission before they could change jobs.

CrimsonAvenger's picture

Those words sound so familiar, yet so foreign - it's like trying to read Canterbury Tales in the original old English.

partimer1's picture

Its written by the ones getting all the bonuses at the end of the year, and someone has to pay for those bonuses.   Where do you think the money comes from ? from tree? 

Bicycle Repairman's picture

ACA is designed to fail.  The reform is Hillary's mandatory single payer health insurance.  But only after we've wasted enough taxpayer money and lives.

Gromit's picture

The Grand Plan is to create a mess so unimaginable thta Americans will embrace single payer with relief.

It's really not very hard, just decide what % of GDP we can afford as a nation to pay for healthcare then figure out how to spend it to help the most people.


Joe Davola's picture

So you're saying Sarah Palin was right about those who won't fall in the "most" category?

francis_the_wonder_hamster's picture

For the luv of gawd.....how can you call something the "Affordable" Care Act and then do absolutely nothing to address what is causing healthcare to be so unaffordable?

Widowmaker's picture

Rob from the poor, give to the rich - makes bankers like Krasting filthy-enriched.

DOT's picture

Whose taxes go up under the ACA ? 


You may be needing reading glasses.

Bruce Krasting's picture

In the end, everyone will pay.

Moe Howard's picture

Very true, even the freeloaders will pay in reduced or rationed "healthcare services".

John_Coltrane's picture

"Free" services are always the worst kind.  You get what you pay for.  Patients need to cover their regular medical expenses out of savings and carry at most a catastrophic policy for large amounts, say $20-50K.  Doctors are "retiring" in droves and the best ones won't see medicaid or medicare insured patients.  Whenever big government or big insurance gets involved people pay more.  We need more competition not less in both education and medicine-and cartels discourage competition.  People need to have an incentive to stay healthy by excercising and thus lowering their health care costs to what I have averaged over the last 5 years:  $0/year.  Now that's really free! 

Flakmeister's picture

As long as the US has a predominately private health insurance industry you will have  a clusterfuck... A close look at  Medicare and the way employers provide insurance reveals it to be nothing but a corporate welfare...

You cannot have a system where a person will pay in ~$15,000 and recieve $200,000 in lifetime benefits....

The politicos need to buck up and have the balls to tell the American people  that you are on own to fend with the Heatlh Cos. or you pay for what you get through higher taxes...This especially goes for the Tea Partiers that want Tax cuts and fully funded Medicare coverage....

My B-I-L is is the process of dying from a degenerative disease (CP)... they have spent over $100,000 over the past three months to keep him going with near zero quality of life and are now encouraging additional procedures....

Moe Howard's picture

Bruce, you are telling a fib in your blog here. 

Not having health insurance does not equal not having health care.

Tell the truth, don't distort. Clean up your blog.

Rusty_Shackleford's picture

Thank you.  You beat me to it.  

I think it goes to show you how successful the newspeak/propaganda campaign has been when very few see the difference between the two.  Even people as savvy and sincere as Bruce.

The only thing required for access to healthcare in the US is a pulse.   Hospitals are required by law to treat you as if you were someone who actually intended to pay them for their services, even when you are not.  They are forced, at gunpoint, to provide a service whenever someone decides that they need/want it.  I would tend to think this is the very definition of "Universal Access".

Conversely, socialized medical systems MUST systematically deny access to health care services through rationing, or else costs become infinite. 

War is Peace

Freedom is Slavery

Rationing is Access

goodrich4bk's picture

Rusty, can you please tell me where I can get this free care?  The last time I checked, my doctor doesn't accept patients without insurance and I have yet to find any that do.  Nor does any hospital accept a non-emergency patient without insurance.

Just as health insurance is not healthcare, emergency treatment is not healthcare.

If you have any doubt about this, please ask somebody with cancer what the difference is.  Or diabetes, tuberculosis, endometiosis, AIDS or any number of other chronic diseases.  Or ask that uninsured fellow in Aurora whose eye was shot.   There will be a time when he is asked to leave the hospital, and unless he raises the money, that time will be long before he is well.

DCFusor's picture

While I've not gotten free care, I've never had insurance when I needed care, yet always gotten it.

I have this thing called savings, you know?  And I bargain hard on the pricing, you bet.  They charge those who simply pay a lot more than the insurance companies pay if you let them do it to ya -

A typical hospital stay will get you bills from every doctor and intern who has ever worked there - even if they never touched your case, it's pretty eggregious.  You can even see bills for X rays and scans you never got - multiple ones.

It's my belief that med insurance is the *cause* of the problems.  If more people had seen what I have, they'd have to reform or go out of business.  Being insulated from the theivery and dishonesty makes people accept substandard care (they know no other) for higher prices than it should be (since they don't see the bill).  Bring back competition, and you'll see those tests that take 10 min and 25c worth of chemistry come down from $200 to $20 in a heartbeat.

Give us tort reform, and malpractice insurance that costs tens of dollars an HOUR will go away or be vastly reduced - and it will show in the bills if there is competition.

All other solutions, aren't.

francis_the_wonder_hamster's picture

I'm 100% in agreement with you here, DC, and will take it a step further.

I left the corporate world 3 years ago to start my own business.  When I priced what it would cost me to get health insurance (assurance), I chose not to spend the $1200/month.  Instead, I've pocketed the difference and consider myself self-insured....at least for now.

One of the side benefits of assuming that responsibility is that I made damn sure I would see a doctor as infrequently as possible.  I work out daily and eat organic foods.  The result is I haven't seen a doctor in 3 years and am $40,000+ richer.  If more Americans had to worry about medical costs, they'd take better care of themselves and the entire healthcare cost paradigm would shift downwards. 

cbxer55's picture

Totally agree on the working out and taking care of yourself. I am 51, and until last month had not seen a doctor since 1986. I only went because I had a high blood pressure reading at a company physical, and they made me go OR ELSE! It was just a one-time event, probably due to that cigar I smoked before hand. ;-)  Blood pressure has been perfectly normal ever since (shrug).

I'll probably not go again until, once again, I am forced to, OR ELSE!

Back to your regularly scheduled heart attack.

Dr. No's picture

In Brazil, if you offer to pay cash, they will see you right away with a discount.  If you are using insurance, they will see you next week.  The US is backawards in this sense.

sangell's picture

And having health insurance does not equal having health care either. A lot of people with health 'insurance' can't afford to use it due to co-pays and deductibles.

Rusty_Shackleford's picture

Then why are they paying for it?

Do you contend that there are rational human beings, voluntarily shelling out thousands of dollars (even tens of thousands) for a product that they know they can not use or benefit them in any way. 

That's like saying that there are people who go out and buy a Ferrari but then can't drive it because they don't have gas money.

sangell's picture

What are you, a 17year old kid on summer vacation? Employers are where most people get health insurance except for the parasite class who get Medicaid. Employers buy the insurance they can afford and to keep costs down insurers offer plans with high co-pays and or deductibles. Yeah people will use it... if they've got cancer or break their legs but will they pay $250 for a colonoscopy? Go to the emergency room if it costs them a $1000?

DCFusor's picture

You must be talking copay.  My last colonoscopy was closer to $6k.