CBO: Repealing Obamacare would be bad for the deficit, good for the wealthy

CBO: Repealing Obamacare would be bad for the deficit, good for the wealthy
Be careful what you wish for: House Ways and Means Committee Chairman Paul Ryan (R-Wis.) is still talking about "replacing" Obamacare. But with what? (Chip Somodevilla / Getty Images)

Five years after its enactment, repealing the Affordable Care Act remains a Republican pipe dream and a litmus test of GOP orthodoxy. But it would cut deeply into the GOP's ostensible commitment to fiscal responsibility.

That's the latest finding by the Congressional Budget Office, even after the numbers are massaged in a manner the Republican congressional majority demands. The calculations by the CBO and Joint Committee on Taxation show that repeal would increase the federal deficit by as much as $353 billion over the next decade. Including the effects of "macroeconomic feedback"--that's the "dynamic scoring" Republicans advocate as a way of accommodating the supposed changes in the economy that result from fiscal policy actions--still results in larger deficits, totaling $137 billion in the 2016-25 period.


By the way, repeal would increase the ranks of America's uninsured by as much as 24 million people in that time frame, the CBO says. It adds that repealing the law would be hellishly complex.

The CBO does estimate that repeal might increase gross domestic product by about 0.7% over the 10 years it studied by "boosting the supply of labor." But it's uncertain that this would be considered a boon by millions of Americans; much of the "supply of labor" in question comes from workers who have been able to leave the workforce, whether to retire early or care for children or other family members, because their health coverage is no longer tied to employment.

Repeal would save the government money, on the one hand, by eliminating $1.16 trillion in subsidies for middle- and low-income buyers of insurance on Obamacare exchanges.

But it would also eliminate numerous sources of government revenue, such as penalties on employers and individuals who fail to meet insurance requirements, excise taxes on health plans, and increased taxes on high-income taxpayers. Because repeal might drive more workers into employer-sponsored insurance plans, the government would lose out because premiums for that coverage are tax-exempt. Provisions reducing federal outlays for hospitals would also be eliminated.

Those losses come to an estimated $1.5 trillion over the 10 years, putting repeal in the red. The CBO study figures that the deficits would continue to grow after 2025, though its estimates become more uncertain as the time frame lengthens.

Among the limited beneficiaries of repeal would be the wealthy, who would escape ACA-related tax increases. These are a 0.9% increase in the Medicare payroll tax on wages over $250,000 for married couples ($200,000 for singles) and a 3.8% surtax on net investment income for taxpayers in the same range. These are taxpayers, as it happens, least likely to benefit from the ACA's consumer-protection provisions and improved access to health insurance.

Beyond the cold figures, the CBO observes that Obamacare already is so deeply ingrained in our healthcare system that undoing it would be "quite complicated.....The budgetary effects of a repeal would not simply be the opposite of the budgetary effects of the ACA itself."

Provisions and policies that would disappear in outright repeal have improved the health and household budgets of millions of Americans and been worked into the business models of insurers, employers and entrepreneurs nationwide. Changes in physician and hospital practices are either irreversible, or can be dropped only at great expense and a return to the greater dysfunction in U.S. healthcare that prevailed before the law's passage.

The CBO's report underscores that the Republican position on repealing the Affordable Care Act is almost entirely rhetorical. It survives largely as a feature of GOP proposals to counteract a possible Supreme Court ruling invalidating insurance premium subsidies in three dozen states, many of them with Republican legislatures and governors.

The court's decision in the case, King v. Burwell, is expected before the end of this month. Some Republican proposals tie a temporary extension of those subsidies for an estimated 6.5 million people to rollbacks of key ACA provisions. But the party's congressional caucus hasn't been able to coalesce around a single specific plan.

Keep up to date with the Economy Hub. Follow @hiltzikm on Twitter, see our Facebook page, or email