General Question

iamthemob's avatar

Is it a good idea to repeal the new health care act at this point, when the CBO predicts repeal will result in a huge deficit increase?

Asked by iamthemob (17123 points ) January 28th, 2011

Reserving judgment on whether the predictions are completely accurate, the Congressional Budget Office has said that the “Job Killing” health care repeal bill currently being debated will increase the deficit by 230 billion dollars, and result in an increase of 23 million in uninsured individuals. All of the estimates are here, as well as a letter to John Boehner.

Republican spokespeople have rebuked the estimate and intend to push forward. To me, this sounds more like politics than it does like budget reform.

What do people think? Doesn’t this news warrant a call from all members of the government to halt any repeal action until at least more detailed studies are performed?

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26 Answers

zenvelo's avatar

No, it is not a good idea to repeal. And repeal would not address the problem of people not having and not able to get insurance. There are millions and millions of people waiting for the reform to kick in so they don’t have to worry about their health coverage.

bkcunningham's avatar

@zenvelo with all due respect, these “millions and millions of people waiting…” for health insurance, under the current plan, how do you think they will all of a sudden get insurance? I mean, explain to me how it works if you would please. So for instance, how will it work for someone working and uninsured, or someone not working and drawing unemployment insurance, or someone who just isn’t working and not drawing unemployment insurance or whatever the case may be. How will it work that they all of a sudden get health insurance.

Michael's avatar

@bkcunningham There are basically three mechanisms included in the bill that will extend health coverage to people who are currently uninsured:

1). Expanded Medicaid. Right now, only people below 100% of the federal poverty limit are eligible for Medicaid (there are exceptions, but I’ll ignore them for simplicity’s sake). With the passage of the Affordable Care Act, people up to 133% of poverty will be eligible.

2). Small business tax credits. The federal government will give tax credits to small businesses who offer health care to their employees (this has already kicked in).

3. Direct subsidies to purchase private health insurance on newly set-up exchanges. Starting in 2014, the federal government will provide subsidies for uninsured people to use to purchase private coverage. The subsidies will be based on income. People will then be able to buy their health coverage on an open exchange where they can see all the premiums, deductibles, co-pays, etc. in one place.

Additionally, health insurance providers will no longer be allowed to turn anyone down for “preexisting conditions.” They have to take all comers.

zenvelo's avatar

@bkcunningham if you go to healthcare.gov., there are a series of questions to help you find affordable care. And some will not be available until 2014. But it will be a mechanism for those not insured to get covered.

BarnacleBill's avatar

Gearing up for health care reform has cost my company several years of work, and millions of dollars in costs that would be passed along in the form of increased premiums, meaning that more small businesses will not be able to afford coverage for their employees.

What you will lose if health care reform is repealed in the form of benefits, if you have group health insurance:
Preventive care covered at 100% for in-network
Mental health benefits covered “same as any other illness” – a return to limits on visits
Coverage for dependents through age 26 regardless of student dependent status
Caps on premium increases

Those are the ones that I can think of off the top of my head, because those are the ones that I’ve worked on.

Part of what drives health care costs up is each state that an insurance company does business in had different state laws. This adds layers and layers of complexity to how health plans are administered, and drives up overhead costs.

bkcunningham's avatar

@BarnacleBill the question to me is what will Obamacare do to existing health insurance clients like myself who has excellent coverage through my husband’s employer now that the added costs will be passed to his employee owned company?

People are still going to have to pay for their insurance under Obamacare. I’m surprised how many people I encounter who don’t realize this. Health insurance isn’t being given out free. Even when you add your “child” upto age 26 on your insurance. You have to pay for this addition.

@Michael Medicaid more people getting on Medicaid. So the eligibility for Medicaid goes from an income level of $10,830 for an individual to around $14,403. For a family of two, before Obamacare, eligibility for Medicaid was $14,570 annually. Now it goes to some $19,378 for a family of two to get Medicaid.

iamthemob's avatar

Guys – none of this is about whether it’s smart to repeal now – no one is commenting on the CBO or move to repeal despite this report. Please – it’s in general.

bkcunningham's avatar

@iamthemob sorry about that. With the Senate and the Obama administration blocking a repeal, which I’m in favor of doing, the next best thing to do, IMO, is to dismantle and defund the 2,700-plus page mess a piece at a time.

iamthemob's avatar

@bkcunningham – But would that not end up increasing the deficit as well? The projected deficit, I believe, was because of repeal…so if it just was run as is, it would be 240 billion dollars cheaper in the ten year projection.

Doesn’t that merit backing off?

bkcunningham's avatar

@iamthemob how can repealing increase the deficit?

Michael's avatar

@bkcunningham Re: medicaid, that’s approximately right. The Congressional Budget Office estimates that approximately 15 million more people will get health insurance because of expanded Medicaid eligibility.

Now on to your question “how can repealing increase the deficit?” The answer is because the the Affordable Care Act raises more revenue than it spends. In other words, each dollar of additional spending that results from the ACA is paid for by increased revenue. Overall, over the next ten years, the ACA will result in $240 billion in deficit reduction because of this. If you repeal the entire bill, you will end up with lower spending but even lower revenues, thereby increasing the deficit (which is, after all, the difference between total spending and total revenue).

bkcunningham's avatar

@Michael Obamacare raises revenue because, you say, each dollar of additional spending is paid for by increased revenue. Huh?

Michael's avatar

@bkcunningham Yes. The ACA does increase spending (after all, it’s not free to expand health coverage to more than 30 million additional people). But it pays for this increased spending in two ways: with some offsetting spending cuts and by raising more revenue.

The spending cuts came mostly out of a specific portion of Medicare called Medicare Advantage. The revenue comes from several places. The ACA imposes fees on some big health care industries (like drug companies and health insurance companies), extends the current medicare tax to all forms of income (not just wage income), and imposes an excise tax on so-called “cadillac” health plans (plans that are worth more than about $18,000 a year), among other things. All together, the bill will raise total spending by about $380 billion from 2010 through 2019, and it will raise about $525 billion over that same period. What that means is that the overall budget deficit will decrease because the government will take in more revenue than in spends.

Response moderated (Unhelpful)
bkcunningham's avatar

@Michael it is just a matter of playing a numbers game. The CBO estimates that Obamacare will cut projected deficits by $124 billion during the period of 2010 to 2019. Obamacare cuts $575 billion to Medicare and other also makes cuts in payments to physicians under a formula they call the “sustainable growth rate.”

Even the director of the CBO and Medicare’s Chief Actuary voiced concerns about the estimated projected savings from just this one scenerio if legislational changes occur to stop these reduced payments to doctors. There is already a bipartisan agreement to stop the scheduled cuts from happening.

Also, the new health exchanges are projected to benefit 1 million Americans in this entitlement program at a cost of $460 billion by 2019. What happens when employers drop the existing coverage and employee purchase the subsidized plans instead? Many employers will come out ahead paying the penalty for not offering health insurance and raising employees’ pay.

These are just a couple of examples of the juggling and twisting numbers to make it appear anyway they want it to appear. Read it closely.

iamthemob's avatar

@bkcunningham

Again – “Reserving judgment about whether the numbers are completely accurate.” Also, did you read the full report, or the news article with the Republican argument criticizing it?

Michael's avatar

@bkcunningham I am sorry to say that you confusing several different things. The Sustainable Growth Rate formula is not part of the ACA. It was enacted in 1997 to try and hold down federal health care costs. It was poorly designed from the start and has had to be “patched” most years to prevent massive cuts to doctor’s payments. It has nothing to do with the Affordable Care Act.

The new exchanges are estimated to provide health care coverage to 25 million people, not 1 million.

If employers decide not to offer health insurance, and instead just raise people’s pay, that would be alright. People can use the extra money to pay for private health care coverage on the exchanges.

@Russell_D_SpacePoet It’s true that the CBO could be wrong. But it’s worth noting that they could be wrong in either direction. They could be underestimating the costs of the bill, but they could also be underestimating the savings from the cost-containment provisions of the bill. Harvard Professor David Cutler, for example, thinks the bill is likely to reduce the deficit far more than CBO says because it will end up reducing health care costs for everyone (including the federal government).

bkcunningham's avatar

@iamthemob yes, I read the full report. Yes, I read the letter from Elmendorf to Boehner.

bkcunningham's avatar

@Michael yeah, sorry about that typo. It is actually predicted to cover 19 million Americans. My keyboard is full of crumbs and my keys aren’t going down all the way. Anyway, if they use the exchanges, which is a subsidy program, the added costs aren’t in the CBO’s projections.

The sustainable growth rate formula is absolutely considered in the CBO’s estimates as in consideration of the costs of Obamacare. Did you see the Jan. 6, 2011, letter to Boehner from Elmendorf? ...“Current law now includes a number of policies that might be difficult to sustain over a long period of time. For example, PPACA and the Reconciliation Act reduced payments to many Medicare providers relative to what the government would have paid under prior law. On the basis of those cuts in payment rates and the existing “sustainable growth rate” [SGR] mechanism that governs Medicare’s payments to physicians, CBO projects that Medicare spending (per beneficiary, adjusted for overall inflation) will increase significantly more slowly during the next two decades than it has increased during the past two decades. If those provisions would have subsequently been modified or implemented incompletely, then the budgetary effects of repealing PPACA and the relevant provisions of the Reconciliation Act could be quite different—but CBO cannot forecast future changes in law or assume such changes in its estimates.”

Michael's avatar

@bkcunningham Subsidies are based on a person’s income. If medium and high income people end up in the exchanges, it won’t cost the federal government anything. And if companies decide to withdraw health plans, and instead pay their employees more in normal wages, then overall income tax revenues will go up (right now, health benefits are not taxed). So the effect on the deficit will be the same either way.

Also, the key word in the paragraph you quote is existing. “On the basis of those cuts in payment rates and the existing “sustainable growth rate mechanism…” The SGR predated the Affordable Care Act by 13 years.

(By the way, note that the whole point of that paragraph is that the Affordable Care Act, if left as it is, will reduce the growth rate of federal spending on health care).

bkcunningham's avatar

@Michael the whole point of the paragraph I quoted is, ”...If those provisions would have subsequently been modified or implemented incompletely, then the budgetary effects of repealing PPACA and the relevant provisions of the Reconciliation Act could be quite different—but CBO cannot forecast future changes in law or assume such changes in its estimates.” There will most likely be changes.

You can’t say, neither can the CB say , how many employees or the income level of potential employees going into the pool if they are dropped. What does it do to the finances of a medium or high income family if they are forced to purchase their own health insurance?

Michael's avatar

@bkcunningham Yes, there may be changes. But it’s very tough to discuss hypothetical potential changes in the future (Elmendorf even says, “CBO cannot forecast future changes in law or assume such changes in its estimates). The law, as it currently exists, will most likely have effects in the range of what CBO has estimated.

Also true that we don’t know for sure how many businesses will opt to stop offering health insurance and simply pay their employees more. But here’s the thing…between an employee who receives a $10,000 a year benefit in the form of health insurance and an employee who receives an additional $10,000 in income, who would you say is better off? I’d probably go with the second employee. She can probably find (with the new health care exchanges) a health plan that better serves her needs for less than $10,000, and then she has some money left over.

gondwanalon's avatar

Oh like goning ahead with ObamaCare as is will NOT result in a huge deficit increase? HA!

BarnacleBill's avatar

@bkcunningham, it will do nothing to your existing coverage, unless your employer decides to downgrade your benefit coverage. In group situations, employers select the coverage they offer their employees. They could upgrade or downgrade what’s offered at any time in order to reduce costs.

If you work at a company with 100+ employees, your health care expenditures are paid by the pool of premiums that the people in your company pay in. If you have a $20 copay for a doctor’s visit, or a $50 copay for a doctor’s visit, that’s entirely dependent on what your HR department has selected for your company. That does not change.

I work for a health insurance compay. According to the plan that they purchased for us, I have to pay the first $1500 of my expenses out of a health savings account that is $500 company match money as $1000 payroll pretax payroll contributions. I get network contracted pricing from providers. My first trip to the doctor cost me $156, and the lab fees were $186. The prescriptions have been $2 for a generic, and $60 each for two drugs that did not have generics available. After I met the $1500 deductible, my expenses were covered at 80%; I still had to pay the 20%. My company has 22,000 employees and they chose this plan design to control costs.

My neighbor works for the state and goes to the same doctor. She pays a $10 copay each visit. The most she pays for a prescription is $15.

Jaxk's avatar

Ok this has been a wonderful read. But I’m left with the question that nobody wants to address. What about the changes that are prosed to replace this monstrosity.

We are spending a trillion dollars on this bill. Half they want to take from Medicare and half they are getting from raising taxes. So what they are saying is that they raised taxes more than the cost of health care. Therefore if you eliminate health care and the associated taxes, you lose the revenue from the excess taxes. That’s all assuming you believe these estimates. I don’t for a wide variety of reasons but the question clearly states we should set aside whether they are accurate, so I will.

It becomes a simple function of taxes. Obama has already admitted that the 1099 part of the legislation is a bad idea. Hell, even the Democrats in Congress admit it. That’s a $19 billion piece.

Overall we are stuck arguing the same restricted way. Either, Obama care or nothing. Just once it would be nice to have a real discussion of the middle ground. If Obama Care is repealed the plan is, and always has been, to replace it with a more reasonable piece of legislation that keeps some of the good points and adds some cost savings. There is no way this monstrosity can be modified to become reasonable. So repeal and replace is the only option (in my opinion).

Yetanotheruser's avatar

Well, it hasn’t been repealed. In fact, it was upheld today, 6/28/12, by the a 5–4 decision of the Supreme Court.

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