Policy Documents

The Fiscal Consequences of the Affordable Care Act

Charles Blahous –
April 10, 2012

In this paper from Mercatus, the center examinea PPACA.  The Patient Protection and Affordable Care Act (ACA) signed into law by President Obama in 2010 will significantly worsen the federal government’s fiscal position relative to previous law. Supporters argued that this comprehensive health care reform would deliver a much-needed correction to the government’s unsustainable fiscal outlook and would benefit the country’s overall fiscal situation. However, between now and 2021, the ACA is expected to add as much as $530 billion to federal deficits while increasing spending by more than $1.15 trillion. Despite the fondest hopes from its supporters, the passage of the ACA unambiguously darkens a dim fiscal picture. 

The federal government promised the health care law would finance two different activities-increasing Medicare solvency and extending health care coverage, but with only enough savings to pay for one. Thus, the ACA’s total new spending well exceeds its cost-savings provisions. In 2014, the benefits will kick in and as history shows, it is nearly impossible to take benefits away after they are given. To ensure the ACA does not worsen the federal fiscal outlook, fully two-thirds of the ACA’s new health-exchange subsidies must be repealed, or financing offsets must be found before 2014.