Why Obamacare's Critics Put Budgets Before Families

President Obama's health care reform turns two this week. It's an imperfect law, but Republican alternatives cut health care spending solely by shifting expenses from government budget to family budgets

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For Mitt Romney and Rick Santorum, ObamaCare is the ultimate evil. It reduces freedom and encourages dependency. It violates the Constitution. And it busts the budget by adding a trillion dollars to federal spending over ten years.

Not so fast, Democrats say. The Affordable Care Act, signed by President Obama two years ago this week, was originally projected by the CBO to reduce deficits by $132 billion over the 2012-2019 period. In February 2011, it said that reducing health care would add $210 billion to the deficit. (At the same time, the CBO also estimated, that the ACA would reduce deficits in the following decade by about 0.5 percent of GDP.)* Repeal the ACA, as every Republican candidate has promised to do, and the national debt will only grow.

There is a bit of card-shuffling going on here. The ACA's most important provisions--the ones that get to near-universal coverage by requiring people to have health insurance, expanding Medicaid eligibility, creating exchanges, and providing subsidies to low- and middle-income families--will cost about $1.1 trillion over the next decade. The ACA offset those costs by reducing payment rates for Medicare and Medicare Advantage and by introducing some new taxes and fees.

The basis for the Republican claim that the ACA increases deficits (insofar as there is one) is that, theoretically, you could separate the deficit-reducing provisions from the coverage-increasing provisions and just have the former. But that ignores the fact that this would never happen: you could never pass a bill that only cut Medicare spending and increased taxes--not while Grover Norquist is still drawing breath.

SHIFTY, SHIFTY

At the end of the day, however, this debate about whether the ACA increases or decreases deficits is a sideshow that obscures the real nature of federal budget debates. Most people think that higher deficits are bad and lower deficits are good. That's true in most circumstances, all other things being equal. But all other things are not equal.

Take the health insurance subsidies in the ACA, for example. What happens if you repeal the individual mandate and the subsidies? Government spending and deficits will go down. But many people who receive subsidies will buy insurance anyway, so their spending will go up. Some other people will elect not to buy insurance. But when they get sick, they will get care from clinics and emergency rooms, which will increase spending by nonprofits and county governments; the need to care for the uninsured will also increase insurance premiums for everyone else.

At the end of the day, eliminating the subsidies will simply shift costs from the federal government to individuals, businesses, and local governments. Total health care consumption may go down, but that's because people will go without health insurance and forgo necessary care.

Presented by

James Kwak, an associate professor at the University of Connecticut School of Law, is co-author of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.
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James Kwak is an associate professor at the University of Connecticut School of Law and the co-author of 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. He blogs at The Baseline Scenario and tweets at @JamesYKwak.

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