Health Care Reform Check-Up

Today, the House Budget Committee is holding a hearing about the fiscal impacts of the Affordable Care Act (ACA), which the President signed into law last year and has already given Americans new freedoms and protections. It’s important to get the facts straight about what impact the Affordable Care Act has on our deficits and long-range fiscal situation.

Rising health care costs are the biggest driver of our long-term deficits, and getting them under control is crucial if we want to grow the economy, create jobs, compete in the world economy and win the future. The Affordable Care Act helps us achieve that goal.

As the Congressional Budget Office (CBO) made clear in a letter sent earlier this month to the Speaker of the House, repealing the Affordable Care Act would increase the budget deficit by hundreds of billions of dollars over the next decade. The CBO letter notes that “over the 2012–2021 period, the effect of H.R. 2 [the repeal of ACA] on federal deficits … is likely to be an increase in the vicinity of $230 billion.”  And in the decade after that, we will save more than $1 trillion thanks to the new law.

There are those who are skeptical about the impact of Affordable Care Act  on the deficit and argue that the Affordable Care Act hides costs in future years. If that were the case, we would expect to see a deficit in the first decade and growing deficits in the second decade.

Instead, the opposite is true. According to the independent, non-partisan experts at the Congressional Budget Office, the law’s savings grow faster than the costs over time, generating progressively greater deficit reduction -- more than $1 trillion in the second decade. This is based in  part on policies that will reward doctors who provide high quality care, investments and research into what works and an Independent Payment Advisory Board that will help strengthen Medicare.

These critics also contend that none of the provisions that reduce our deficit will actually happen since Congress will never allow them to take effect. Yet history suggests otherwise. Past Medicare payment modifications of an even larger magnitude, such as those enacted in the Balanced Budget Act of 1997 (BBA) were largely sustained.  Moreover, if a future Congress tries to repeal cost-containment provisions, it would violate statutory PAYGO unless Congress finds hundreds of billions of dollars in offsets or chooses to waive PAYGO rules.  In today’s fiscal environment this would be both difficult and irresponsible.

Finally, contrary to what some critics claim, the CBO score of the bill when it was enacted does not double count  savings in the Affordable Care Act. Health reform will both help Medicare solvency and the Federal deficit. The Affordable Care Act will reduce the national deficit, and part of the deficit reduction will come from reducing wasteful spending, and fraud and abuse in Medicare. These savings will be credited to the Medicare trust fund and will extend the life of the trust fund. Each of these is a worthy—though distinct—end, and the CBO analysis confirms that both are true. The first is about improving the financial position of the federal government.  The second is about ensuring that Medicare continues to be a source of security for America’s senior citizens.
 
The Affordable Care Act represents a very big change, and has generated robust debate since introduced. That’s a good thing, and a healthy part of our democracy. As the President said last night, we are open to any ideas about how “to improve this law by making care better or more affordable.” I hope the hearings on Capitol Hill and around the country will lead to good ideas that further this goal.

Jack Lew is the Director of the Office of Management and Budget.