This morning the Mercatus Center is publishing my study, "The Fiscal Consequences of the Affordable Care Act," which evaluates the comprehensive health care reform law (the ACA) enacted in 2010. In this study, I project that the ACA will add over $1.15 trillion to net federal spending and more than $340 billion to federal deficits over the next ten years, and far more thereafter.
That this law on which so many high hopes were placed will significantly worsen federal finances is an unfortunate but unambiguous result. The finding is based upon analyses published by the Congressional Budget Office (CBO) and CMS Medicare Actuary, and it reflects an optimistic fiscal scenario in which all of the law's cost-saving provisions work as currently envisioned.
Quantifying the Fiscal Consequences of Health Care Reform
The fiscal stakes of health care reform are high. Prior to the law's passage its proponents and opponents disagreed on many things but they agreed on one: rising health care cost commitments were a key driver of an unsustainable federal fiscal outlook. Motivations and goals for the 2010 legislation were various, but among the most prominent was the view that such action was necessary to correct the course of federal finances. For this landmark legislation to actually worsen the fiscal situation would represent a substantial failure of governance, and it threatens disastrous consequences if the law is not corrected before its provisions become fully effective.
The ACA unambiguously worsens federal finances. As the accompanying graph shows, under a variety of possible assumptions (all based on the analyses of CBO and CMS), our annual deficits will be much larger because of the ACA than they would have been under prior law. As visually represented in this picture, up is good and down is bad from a budgetary perspective.
