Repeal of Affordable Care Act Would Inflate Deficit, Cause Health Insurance Costs to Rise

The planned vote to repeal last year’s Patient Protection and Affordable Care Act [pdf], if successful, would increase the federal budget deficit by $230 billion over the next ten years, would leave 32 million Americans with no access to affordable healthcare insurance, would strip small businesses of tax credits they get to help cover employee health costs, and would increase the cost per insuree across the nation. The Congressional Budget Office has released a study showing the negative impact repeal would have on the federal budget, the welfare of average Americans and the economy more broadly.

Republicans favoring repeal have rejected the report, and say there is no way they will recognize to count the costs of repeal. No economic calculations are provided by the repeal effort’s backers, but the insistence that the legislation will “kill jobs” and “expand the role of government” appear to be the basis for much of their argument about the need to repeal the deficit-reducing law in order to reduce the deficit.

The Republican majority, determined to force the issue, has released a political report, with very little solid economic data sourcing or analysis, which was given the title “Obama-care: A budget-busting, job-killing health care law” and emblazoned with a chain and padlock. The Washington Post describes the report as “filled with the incendiary language the GOP has adopted to discuss the law”. Critics are urging the Republican leadership to desist in the relentless smear campaign brought to this issue and to examine specific provisions, as written (not as spun by strategists), and take seriously the meaning of the non-partisan budget analysis.

In at least one call to Speaker Boehner’s office, this reporter made the very revealing (if startling) discovery that the young staffer answering the phone had never heard of the Affordable Care Act. She knew the law only by one of two terms: “the healthcare law” or “Obamacare”. While anecdotal, and not true of all staffers at the new speaker’s office, that revelation would seem to confirm that an intensely partisan and ideological view has been taken of the law as a whole, with relatively little specific focus placed on the substance of the reforms.

David Cutler, a prominent health-focused economist from Harvard University, who advised Pres. Obama’s 2008 campaign, is scheduled to release a study Friday detailing the harmful impact repeal of the Affordable Care Act would have both on the cost of health insurance and on job-creation.

The repeal would, importantly, strip small businesses of major new tax breaks that allow them to cover employees, a cost-saving measure that, coupled with the projected long-term slowing of cost increases relating to healthcare insurance, will help small businesses better reinvest their revenues, cultivate a productive base of personnel and expand their operations, including with new hiring.

Republicans have insisted this cannot be the case, mostly making reference to vague ideological aspirations, which include the notion that only by reducing regulation, taxes AND “the size and scope of government” can any and/or all businesses in the United States prosper and grow, and only then can they hire. This philosophy is deeply ingrained in the Republican party’s ideological bent, but runs contrary to much of what market economics has actually demonstrated in practice.

In situations where a market is broken, as with the healthcare insurance market —private insurers provide full coverage to less than 40% of the American population, and actively seek ways to reject payment for treatment covered under the policies their own clients have purchased—, tax incentives and improved regulation are required to assist consumers and businesses, so that the overall economy can cope with the deficiencies of the market in question.

This is the logic of the Affordable Care Act, a bewilderingly complex law, with many imperfections. But the new CBO analysis shows how effective many of those measures are for slowing the expansion of healthcare costs and allowing the private market to expand its reach in a way that makes coverage more affordable and care more accessible for everyone.

Over the long term, those costs are expected to decrease significantly as a percentage of overall GDP, to levels that might become manageable if certain core inefficiencies in the health insurance marketplace are dealt with. Repeal would force prices higher, strip millions of coverage, put the long-term stability of Medicare at risk, make Medicaid more difficult for states to fund, and deny to small businesses across the country needed tax credits that will help them deal with the cost inefficiencies in the health insurance marketplace.

These effects, combined with a rapid escalation of the federal budget deficit burden ($230 billion over ten years, and accelerating after that), could lead to more than $1 trillion added to the federal budget deficit by 2031, and a significant slowing of the nation’s ongoing economic recovery. The budgetary impact would be severe enough that most of the Republicans’ planned spending cuts would actually result in no reduction in the budget deficit.

The Republican party has made a lot of promises, among them the pledge not to increase taxes and the promise to never increase the federal budget deficit, cutting as they go. Now, the first major legislative proposal of the House of Representatives, in the 112th Congress, is to inflate the budget deficit by at least $230 billion over 10 years and possibly more than $1 trillion over 2 decades. Their repeal will raise taxes on small businesses (their way of describing the lapse or repeal of tax cuts), and put millions of Americans under the most severe cost pressure possible in a troubled economic and jobs climate.

Ideology can help people to organize their thoughts in the midst of the complexity and adversity of the political sphere, but it is not sufficient to justify the kind of recklessness that is currently being undertaken. Pres. Obama is arranging his agenda for 2011-2012 with a mind to negotiating and working constructively in a bipartisan fashion, and the Republicans in the House are fighting last year’s battle, with a promise to do immediate economic harm to millions of their fellow citizens. We should hope they learn to see the folly in this, before they waste still more taxpayer money in a fool’s errand that will cost so much.