January 6, 2011
The House of Representatives is planning to consider a bill (H.R. 2) to repeal the major health care legislation enacted last Marchthat is, the Patient Protection and Affordable Care Act (PPACA) and the provisions of the Health Care and Education Reconciliation Act of 2010 that are related to health care. CBO has not yet developed a detailed estimate of the budgetary impact of repealing that legislation, although it is working with the staff of the Joint Committee on Taxation (JCT) to complete such an estimate in the near future. Because Congressional deliberations on H.R. 2 are beginning, CBO today issued a less-detailed preliminary analysis of that legislation.
Because CBO and JCT estimated that the March 2010 health care legislation would reduce budget deficits over the 20102019 period and in subsequent years, we expect that repealing that legislation would increase budget deficits. The resulting increase in deficits projected for fiscal years 2012 through 2019 is likely to be similar in size tobut not exactly the same asthe reduction in deficits that was originally estimated to result from the enacted legislation.
The forthcoming detailed estimate will reflect a number of developments that have occurred since CBO and JCT produced the cost estimate for the March 2010 legislation, including changes in the economic outlook, technical revisions to CBOs projections of program spending, the initial steps that have been taken to implement the new laws, and enactment of legislation that modified those laws. Those developments will probably not have a major effect on the overall budgetary impact of repealing the legislation. In addition, CBO has seen no evidence to date that the steps that will be taken to implement the March legislationor the ways in which participants in the health care and health financing systems will respond to that legislationwill yield overall budgetary effects that differ significantly from the ones that CBO and JCT projected earlier. We cannot predict whether the various changes that will be incorporated in the detailed estimate will increase or decrease the estimated impact of H.R. 2 on federal deficits through 2019.
The estimate for H.R. 2 will differ in one significant way from the estimate for the enacted health care legislation. The original estimate covered the period from 2010 through 2019, the period used for Congressional budget enforcement procedures when the legislation was being considered; new estimates will span the period from 2012 to 2021.
Todays letter describesin broad terms and on a preliminary basisCBOs assessment of the effects that repealing PPACA and the relevant provisions of the Reconciliation Act would have on federal budget deficits, the federal governments budgetary commitment to health care, the number of people with health insurance, and health insurance premiums in the private market. (Repealing the provisions of that legislation would also have a variety of other effects on the health care and health insurance systems that this letter, like previous CBO cost estimates, does not address.)
Impact on the Federal Budget in the First Decade
As a result of changes in direct spending and revenues, CBO expects that enacting H.R. 2 would probably increase federal budget deficits over the 20122019 period by a total of roughly $145 billion (on the basis of the original estimate), plus or minus the effects of technical and economic changes that CBO and JCT will include in the forthcoming estimate. Adding two more years (through 2021) brings the projected increase in deficits to something in the vicinity of $230 billion, plus or minus the effects of technical and economic changes.
Those projections do not include any potential savings in discretionary spending, which is governed by annual appropriation acts. By CBOs estimates, repeal of the health care legislation would probably reduce the appropriations needed by the Internal Revenue Service by between $5 billion and $10 billion over 10 years. Similar savings would accrue to the Department of Health and Human Services.
There is no clear basis for projecting other effects of H.R. 2 on discretionary spending. PPACA contained a number of authorizations for future appropriations, which, if left in place, might or might not result in additional appropriations. For example, most of the authorizations were for activities that were already being carried out under current law or that were previously authorized and that PPACA authorized for future years. Thus, repeal of the PPACA authorizations might or might not result in discretionary savings associated with those authorizations.
Impact on the Federal Budget Beyond the First 10 Years
CBO estimates that enacting H.R. 2 would increase federal deficits in the decade after 2019 by an amount that is in a broad range around one-half percent of GDP, plus or minus the effects of technical and economic changes that CBO and JCT will include in the forthcoming estimate. For the decade beginning after 2021, the effect of H.R. 2 on federal deficits as a share of the economy would probably be somewhat larger.
As with all of CBOs cost estimates, these estimatesboth for the first 10 years and beyondreflect an assumption that the provisions of current law would otherwise remain unchanged throughout the projection period and that the legislation being considered would be enacted and implemented in its current form. CBOs responsibility to the Congress is to estimate the effects of proposals as written and not to forecast future legislation. However, current law now includes a number of policies that might be difficult to sustain over a long period of time. If those policies or other key aspects of the original legislation would have subsequently been modified or implemented incompletely, then the budgetary effects of repealing PPACA and the relevant provisions of the Reconciliation Act could be quite differentbut CBO cannot forecast future changes in law or assume such changes in its estimates.
Effects on the Federal Budgetary Commitment to Health Care
CBO uses the term federal budgetary commitment to health care to describe the sum of net federal outlays for health programs and tax preferences for health care. H.R. 2 would roughly reverse the outcome projected for the original legislation, diminishing the federal budgetary commitment to health care over the next decade and increasing it in subsequent years.
Effects on the Number of People with Health Insurance
Under H.R. 2, about 32 million fewer nonelderly people would have health insurance in 2019, leaving a total of about 54 million nonelderly people uninsured. The share of legal nonelderly residents with insurance coverage in 2019 would be about 83 percent, compared with a projected share of 94 percent under current law (and 83 percent currently).
Effects on Health Insurance Premiums
If H.R. 2 was enacted, premiums for health insurance in the individual market would be somewhat lower than under current law, mostly because the average insurance policy in this market would cover a smaller share of enrollees costs for health care and a slightly narrower range of benefits. Although premiums in the individual market would be lower, on average, under H.R. 2 than under current law, many people would end up paying more for health insurancebecause under current law, the majority of enrollees purchasing coverage in that market would receive subsidies via the insurance exchanges, and H.R. 2 would eliminate those subsidies.
Premiums for employment-based coverage obtained through large employers would be slightly higher under H.R. 2 than under current law. Premiums for employment-based coverage obtained through small employers might be slightly higher or slightly lower (reflecting uncertainty about the impact of the enacted legislation on premiums in that market).