The Fiscal Effects of Repealing the Affordable Care Act

61 Pages Posted: 12 Jul 2018

See all articles by Charles Blahous

Charles Blahous

Mercatus Center at George Mason University

Date Written: 04/04/2017

Abstract

Repealing the Affordable Care Act (ACA), considered separately from its possible replacement, would substantially reduce future federal budget deficits. The amount of projected deficit reduction varies greatly according to variables such as the effective dates for key repeal provisions, which provisions are repealed, assumptions for health insurance enrollment, and assumptions for legislative behavior in the absence of repeal legislation (see figure ES1 and table ES1). To date, the ACA has failed to produce its initially projected fiscal benefits, primarily because many of its financing provisions have not been implemented as initially enacted. ACA repeal will improve the federal fiscal outlook irrespective of whether the ACA’s Medicare cost-containment provisions are included among those repealed, but repealing these would accelerate Medicare Hospital Insurance trust fund depletion. Repeal, effective in 2018, of the ACA’s various spending and tax increases is expected to reduce federal deficits by a combined $586 billion through 2026, with plausible outcomes ranging from $228 billion to $1.07 trillion in net deficit reduction. The higher deficit reduction estimates arise primarily in scenarios that recognize that many of the ACA’s tax increases are not currently being implemented. Although Congressional Budget Office projections must assume these taxes will produce substantial future revenue, their implementation is highly uncertain even in the absence of ACA repeal. Replacement provisions that add as much to federal deficits as the more conservative estimates of the savings from repeal run the risk of perpetuating the fiscal damage caused by the ACA. At the same time, the fiscal benefits of repeal are reasonably likely to exceed those estimated under Congress’s current scorekeeping rules. This conclusion suggests that even repeal legislation that is scored as budget neutral could, in practical effect, achieve substantial fiscal corrections. For example, although CBO scored the American Health Care Act (AHCA) as reducing projected federal budget deficits by $337 billion from 2017 to 2026, it is plausible on the one hand that it might be approximately budget neutral (slightly reducing total deficits by $42 billion), or on the other hand that it could reduce 10-year deficits by as much as $657 billion (see figure ES2 and table ES2).

Suggested Citation

Blahous, Charles, The Fiscal Effects of Repealing the Affordable Care Act (04/04/2017). MERCATUS RESEARCH, Available at SSRN: https://ssrn.com/abstract=3211638 or http://dx.doi.org/10.2139/ssrn.3211638

Charles Blahous (Contact Author)

Mercatus Center at George Mason University ( email )

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