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U.S. Rep. Dave Brat is backing a federal budget plan recently proposed by his fellow House Republicans -- in no small part because it would end Obamacare.
"This budget fulfills Republicans’’ pledge to voters to repeal Obamacare in its entirety -- including all of the tax increases, job-killing regulations and mandates -- saving our nation more than $2 trillion," Brat, R-7th, said in a written statement. He tweeted a similar message.
We wondered whether the death of Obamacare -- formally known as the Affordable Care Act -- really would save the U.S. more than $2 trillion.
Brian Gottstein, Brat’s director of communications, told us the figure -- which is cited in the GOP proposal -- came from a Jan. 26 report by the nonpartisan Congressional Budget Office. It estimated that mandatory federal spending provisions in the ACA would cost $2.03 trillion over the next 10 years.
But an immediate problem arises from Brat’s use of the figure: The estimate was out of date when the congressman made his statement on March 17. Eight days earlier, the CBO issued a new report dropping the 10-year price tag to $1.75 trillion.
The agency reduced its estimate because it concluded that spending on health care during the next 10 years will not be as high as previously predicted. As a result, the CBO said insurers are not expected to charge as much as once expected for health plans and the government will save on subsidies to cover low- and moderate-income families. Also, savings are being generated because fewer companies than expected are cancelling their insurance plans and fewer people, therefore, are turning to the ACA for coverage.
All of this begs a question: Would Brat have been accurate if he had cited the latest CBO report and said repealing Obamacare would save the U.S. more than $1.7 trillion?
The answer is no. The reason is that the ACA was set up to be self supporting, with a series of new taxes and health care efficiencies balancing the costs. Brat’s statement focuses on the expenses of Obamacare but ignores the revenue and saving sides of the program, which also would be wiped out by the repeal.
The CBO examined the bottom line in 2012 at the request of House Speaker John Boehner, who wanted to know what effect abolishing Obamacare would have on the national debt. In such a case, the agency concluded, deficits would increase by $109 billion over 10 years. That figure has not been updated.
The agency concluded that the ACA would more than pay for itself by generating almost $1.79 trillion in revenues and savings over 10 years. Of that amount:
*$711 billion would come from efficiencies built into the ACA that would slow the projected growth in Medicare spending. The bulk of those savings would come from lower federal reimbursements to hospitals and reduced payments to Medicare Advantage -- an HMO program offered by private companies that contract with Medicare. These savings would disappear with the repeal of Obamacare.
*Almost $1.08 trillion would come from an assortment of ACA taxes. Under Obamacare, for example, companies with at least 50 full-time employees face fines for not providing health coverage and so do individuals who can afford policies but don’t buy them. The ACA also increases payroll and capital gains taxes on individuals earning more than $200,000 and married couples earning more than $250,000.
Some might say that the repeal of Obamacare -- even if it doesn’t lower deficits --would at least save taxpayers more than $1 trillion in new levies. But this contention does not hold up under the Republican budget proposal that Brat endorses.
That’s because the House plan, while abolishing the Obamacare taxes, counts their revenues in its long-term bottom line. In addition to ending ACA levies, the plan also calls for lowering individual, family and corporate income tax rates. House Republicans say they would completely fill the revenue holes by closing unidentified "special interest" tax loopholes.
Brat says the repeal of Obamacare, as envisioned in the House GOP budget proposal, would save "our nation more than $2 trillion." The congressman, an economist, gets his figure from an outdated CBO estimate of 10-year ACA costs. An updated analysis, published eight days before Brat’s statement, put the cost at $1.75 trillion.
But there’s a much larger problem: Brat’s claim only deals with the expense side of Obamacare and ignores a series of built-in special taxes and health care efficiencies that the CBO has said more than enables the program to pay for itself. Brat describes the repeal of the ACA as the death of its mandates, regulations and "all of the the tax increases." The CBO has estimated such a repeal -- instead of saving the nation money -- would wind up increasing federal deficits by $109 billion over 10 years.
We rate Brat’s statement False.
U.S. Rep. Dave Brat, "Statement on the House Republican budget resolution," March 17, 2015.
Email from Brian Gottstein, spokesman for Brat, March 27, 2015.
House Budget Committee, "House Republicans Fiscal Year 2016 Budget Proposal," March 17, 2015.
Congressional Budget Office, "The Budget and Economic Outlook: 2015 to 2025," Table B-1, Jan. 26, 2015.
Congressional Budget Office, "Letter to the Honorable John Boehner providing an estimated for H.R. 6079, the repeal of the Obamacare Act," July 24, 2012.
Congressional Budget Office: "Effects of the Affordable Care Act on Health Insurance Coverage - Baseline Projections," March 9, 2015.
Interview and emails with Steve Ellis, vice-president of Taxpayers for Common Sense," April 1, 2015.
Interview with Christine Eibner, senior economist at RAND Corp., April 1, 2015.
Interview and emails with David Marron, director of economic policy initiatives for the Urban Institute, April 1, 2015.
The New York Times, "New Taxes to Take Effect to Fund Health Care Law," Dec. 8, 2012.
The Washington Post: "Landmark: The Inside Story of America’s New Health-Care Law and What It Means for Us All," 2010.
Kaiser Health News: "FAQ: Decoding the $716 Billion in Medicare Reductions," Aug. 17, 2012.
Interview with Joshua Gordon, policy director for the Concord Coalition, April 7, 2015.
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