How the passing of the Patient Protection and Affordable Care Act will exacerbate America’s fiscal woes

by Colin Fuess

Economist Laurence J. Kotlikoff has been saying it for years: America is bankrupt, whether or not the government is willing to admit it.  His most recent evaluation of its fiscal condition is terrifying: “Based on the [Congressional Budget Office’s] data, I calculate a fiscal gap of $202 trillion, which is 15 times the official debt.”  That, says Kotlikoff, means America is in worse fiscal shape than Greece.

The reason for America’s fiscal train wreck is Congress’ deceptive accounting practices.  In order to pass the Patient Protection and Affordable Care Act (or “the Act”), Congress fudged their numbers through tried-and-true methods.

The fate of the Act lied in reports from the Congressional Budget Office.  If the CBO predicted that the Act would reduce the deficit, the Act would pass.  On March 11, 2010, the CBO issued its projections: the Act would reduce the deficit $132 billion by 2019, and another $1.2 trillion in the decade following.

However, the CBO issued a far less favorable report on March 19.  At the request of Rep. Paul Ryan (R-WI), the CBO analyzed the combined impact of the Act, the Health Care and Education Reconciliation Act of 2010 (HCERA), and the Medicare Physician Payment Reform Act of 2009 (MPPRA): “CBO estimates that enacting all three pieces of legislation would add $59 billion to budget deficits over the 2010-2019 period.”

The CBO’s second report was ignored.  On March 21, the House passed both the Act and the HCERA, both of which Obama signed into law shortly thereafter.  By cherry-picking favorable numbers, Speaker Nancy Pelosi ramrodded the Act through the House and to Obama’s desk.

Another one of Congress’ fiscal gimmicks was delaying the bulk of the Act’s expenses until 2014.  The CBO’s ten-year analysis, therefore, only accounts for six years of spending, making the Act’s costs far more palatable.

The purpose of reforms is to save money by eliminating waste in health care spending, yet the Act will make health care so complicated that this is laughably quixotic.  The Department of Health and Human Services “doesn’t know how to do any of this,” says Edmund Haislmaier, a Senior Research Fellow at the Heritage Foundation.  “The federal government doesn’t have any experience running insurance regulations.”  Already the HHS has missed many self-imposed deadlines.

Furthermore, between now and 2014, the burden falls on the states to run complex high-risk health coverage pools.  States must spend millions to research how to run them (itself an unprecedented undertaking).  Washington has allocated $5 billion for the 7 million Americans who qualify, but according to a report by the National Institute for Health Care Reform, there will be only enough money to cover 200,000 of them.

One of Kotlikoff’s refrains is that if America is save itself from bankruptcy, it must “radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess.”  Congress did the exact opposite, and it did so through self-serving gimmicks.  They passed the Act without reading it, preparing for it, or considering the big financial picture.  The Act is a thousand pages of unforeseen consequences, all of which will add to waste.  This, combined with unrealistic or fudged fiscal projections, will drive us further into debt.

Soon, Washington might envy Greece.