Tuesday, June 5, 2012

CBO Report Exposes New Facet of Obamacare’s Unsustainable Spending

The Congressional Budget Office released its long-term budget outlook today, and the results can be summed up in two words: We’re broke.

According to CBO, federal spending on health care will reach 10.7 percent of GDP in 2037 – and 18.3 percent of GDP by 2087, up from 5.4 percent this year.  In other words, within one generation, one in ten dollars in the American economy will be devoted to federal government spending on health care programs – and that number will rise to nearly one in five dollars within the lifetimes of children born today.  These projections are based on CBO’s alternative fiscal scenario – which in many respects represents a more realistic version of long-term fiscal outcomes, as it follows Stein’s Law and assumes policies that “might be difficult to sustain over a long period” won’t be.

CBO had already assumed that several policies in Obamacare – notably, the productivity adjustments to hospitals and the payment reductions to be implemented by a board of unaccountable bureaucrats – would not be sustained over the longer term.  But in a paragraph located on page 57 of today’s report, CBO outlines yet another way Obamacare’s spending will be unsustainable:

CBO assumed that two policies that affect the number of people receiving different amounts of subsidies and that might be difficult to sustain over a long period would be altered in the extended alternative fiscal scenario.  First, CBO assumed that the eligibility thresholds would be modified after 2022 such that the shares of the population with incomes corresponding to the various ranges of subsidies remained constant.  Second, CBO assumed that the additional indexing factor described above would have no effect after 2022, so federal subsidies would cover a constant share of the premiums per enrollee over time.

To put it in plain English:  According to CBO, if Obamacare is not repealed or amended, virtually all Americans will be forced to buy health insurance – but fewer and fewer individuals will qualify for insurance subsidies over time, and those subsidies will pay a smaller and smaller share of overall insurance premiumsCBO’s alternative fiscal scenario therefore assumes that spending on Obamacare insurance subsidies will be GREATER than current law projections – because CBO presumes that policy-makers will not be able to tolerate individuals being forced to buy health insurance who will not be able to afford the premiums given the subsidy regime scheduled to take effect under current law.

In its prior writings, CBO had assumed that spending on subsidies will eventually have to rise above current law projections, because the level of subsidies themselves would prove insufficient.  However, today is the first time CBO has stated publicly that Obamacare will cause what amounts to a new form of “bracket creep” – whereby smaller and smaller shares of the population will be eligible for subsidies.  The revelation in today’s report represents just the newest way in which Obamacare’s actual level of spending has proven to be far greater than initially advertised – a fiscal “bait and switch” that will cripple future generations of taxpayers with crushing debt.