Congressional Budget Office
Letter to the Honorable John Boehner providing an
estimate for H.R. 6079, the Repeal of Obamacare Act
July 24,
2012
CBO and the staff of the Joint Committee on Taxation (JCT) have estimated the
direct spending and revenue effects of H.R. 6079, the Repeal of Obamacare Act,
as passed by the House of Representatives on July 11, 2012. H.R. 6079 would
repeal the Affordable Care Act (ACA), with the exception of one subsection that
has no budgetary effect. This estimate reflects the spending and revenue
projections in CBOfs March 2012 baseline as adjusted to take into account the
effects of the recent Supreme Court decision regarding the ACA.
For various reasons discussed in the report, the estimated budgetary effects
of repealing the ACA by enacting H.R. 6079 are close to, but not equivalent to,
an estimate of the budgetary effects of the ACA with the signs reversed.
What Is the Impact of Repealing the ACA on the Federal Budget?
Assuming that H.R. 6079 is enacted near the beginning of fiscal year 2013,
CBO and JCT estimate that, on balance, the direct spending and revenue effects
of enacting that legislation would cause a net increase in federal budget
deficits of $109 billion over the 2013–2022 period. Specifically, we estimate
that H.R. 6079 would reduce direct spending by $890 billion and reduce revenues
by $1 trillion between 2013 and 2022, thus adding $109 billion to federal budget
deficits over that period.
What Major Components Result in the Net Increase in Deficits?
Deficits would be increased under H.R. 6079 because the net savings from
eliminating the insurance coverage provisions would be more than offset by the
combination of other spending increases and revenue reductions:
- The ACA contains a set of provisions designed to expand health insurance
coverage, which, on net, are projected to cost the government money. The costs
of those coverage expansions—which include the cost of the subsidies to be
provided through the exchanges, increased outlays for Medicaid and the
Childrenfs Health Insurance Program (CHIP), and tax credits for certain small
employers—will be partially offset by penalty payments from employers and
uninsured individuals, revenues from the excise tax on high-premium insurance
plans, and net savings from other coverage-related effects. By repealing those
coverage provisions of the ACA, over the 2013–2022 period, H.R. 6079 would
yield gross savings of an estimated $1,677 billion and net savings (after
accounting for the offsets just mentioned) of $1,171 billion.
- The ACA also includes a number of other provisions related to health care
that are estimated to reduce net federal outlays (primarily for Medicare). By
repealing those provisions, H.R. 6079 would increase other direct spending in
the next decade by an estimated $711 billion.
- The ACA includes a number of provisions that are estimated to increase
federal revenues (apart from the effect of provisions related to insurance
coverage), mostly by increasing the Hospital Insurance (HI) payroll tax and
extending it to net investment income for high- income taxpayers, and imposing
fees or excise taxes on certain manufacturers and insurers. Repealing those
provisions would reduce revenues by an estimated $569 billion over the
2013–2022 period.
What Would be the Effect of Repealing the ACA on Discretionary
Spending?
In addition to those effects on direct spending and revenues, by CBOfs
estimates, repeal of the ACA would reduce the need for appropriations to the
Internal Revenue Service by between $5 billion and $10 billion over 10 years.
Repealing the ACA would also reduce the need for appropriations to the
Department of Health and Human Services by between $5 billion and $10 billion
over 10 years, CBO estimates. Such savings might be reflected in reductions in
total discretionary spending, or they might free up room for additional spending
for other purposes under the caps on discretionary appropriations that were
established by the Budget Control Act of 2011. H.R. 6079 would also repeal a
number of authorizations for appropriations, which, if left in place, might or
might not result in additional appropriations.
Why Are These Estimates Uncertain?
Projections of the budgetary impact of H.R. 6079 are quite uncertain because
they are based, in large part, on projections of the effects of the ACA, which
are themselves highly uncertain. Assessing the effects of making broad changes
in the nationfs health care and health insurance systems requires estimates of a
broad array of technical, behavioral, and economic factors. Separating the
incremental effects of the provisions in the ACA that affect spending for
ongoing programs and revenue streams becomes more uncertain as the time since
enactment grows. The recent Supreme Court decision that essentially made the
expansion of the Medicaid program a state option has also increased the
uncertainty of the estimates. However, CBO and JCT, in consultation with outside
experts, have devoted a great deal of care and effort to the analysis of health
care legislation in the past few years, and the agencies have strived to develop
estimates that are in the middle of the distribution of possible
outcomes.