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Repealing Health Law Under Dynamic Scoring Increases Deficit, CBO Says

By Melissa Attias and Paul M. Krawzak, CQ Roll Call

June 19, 2015 – Last week, the Congressional Budget Office (CBO) estimated that repealing the health care law would increase the federal deficit by $137 billion from fiscal 2016 to 2025 using a dynamic score, compared to $353 billion under traditional scoring practices.

The $216 billion difference is a result of the economic growth that is expected to follow a repeal of the 2010 overhaul largely because the number of hours that people work would increase. The nation’s economic output is projected to grow by about 0.7 percent on average between fiscal 2021 and 2025.

The projection is the first dynamic cost estimate produced by the CBO and the Joint Committee on Taxation (JCT) since new congressional rules requiring scoring took effect last month. The fiscal 2016 budget resolution (S Con Res 11) requires CBO and the JCT to incorporate dynamic analysis into the official cost estimates of major legislation.

If a dynamic score had shown that repealing the law would save money, Republicans would have had new ammunition in their push for full repeal, which they’re expected to attempt through the budget reconciliation process.

But the finding that repeal would increase the deficit even under dynamic scoring raises the question of the feasibility of using reconciliation to repeal the health care law, since the GOP-written reconciliation instructions require legislation that would reduce the deficit by at least $2 billion to $3 billion over the next decade.

In their report, CBO and the JCT said the $137 billion cost was their best estimate under the new method, even as they cautioned that projections could shift substantially in either direction.

“The uncertainty is sufficiently great that repealing the ACA could reduce deficits over the 2016–2025 period—or could increase deficits by a substantially larger margin than the agencies have estimated,” the scorekeepers wrote.

Scrapping the law would increase the number of nonelderly people without health insurance by about 19 million in fiscal 2016 compared with the number of people who would be uninsured if the health law stays intact. The number of people without insurance would grow to 22 million more than under current law in fiscal 2017, and gradually rise to about 24 million more uninsured Americans from fiscal 2020 through 2025.

The estimate is the first estimate of the health law produced by newly installed CBO director Keith M. Hall, who served in the George W. Bush administration.

The estimate comes as the Supreme Court is poised to determine whether the law’s subsidies to help low- and middle-income Americans afford coverage should be available in the 34 states that use the federal insurance exchange.

The scorekeepers noted that their estimates assume that subsidies are available in every state. If the justices rule in King v. Burwell that subsidies are not legal in states that didn’t build their own exchange, that calculus could change. “The magnitude of such changes would depend on the specifics of the court’s ruling,” they said.

Repealing the law would increase GDP by .7 percent between fiscal 2021 and 2025 in part because under the law, people would no longer feel compelled to work in order to gain health coverage or afford coverage.

The health law provides subsidized coverage for lower-income and middle-class people.

"Those subsidies, along with expanded eligibility for Medicaid, generally make it easier for some people to work less or to stop working without losing health insurance coverage," the report said.

Because more people would need to work if the law was repealed, the higher employment would result in more taxable income, and more taxes paid to the government, which would reduce the deficit.

The CBO said a repeal "would probably" increase deficits in subsequent decades as well.

Enzi, who requested the report, stressed that a repeal would expand the economy. "While CBO’s report notes that the deficit impact of repealing the law is highly uncertain, and could even reduce the deficit, it does show that repealing this law will boost nationwide employment and grow the economy," he said in a statement.

But in a separate statement, House Minority Leader Nancy Pelosi, D-Calif., said the report is "very clear."

"Any way you slice it, repealing the Affordable Care Act (ACA) will add hundreds of billions of dollars to the deficit."

The report found that repealing the health care law "would cause federal budget deficits to increase by growing amounts after 2025, whether or not the budgetary effects of macroeconomic feedback are included." That would occur because the savings from repealing the law's insurance coverage provisions would grow more slowly than the costs of repealing the ACA's other provisions—in particular the cuts to Medicare payments that help pay for coverage.

The agency added that the "estimated effects on deficits of repealing the ACA are so large in the decade after fiscal 2025 as to make it unlikely that a repeal would reduce deficits during that period, even after considering the great uncertainties involved."

Sources of health coverage are also projected to shift under repeal. If the health law were repealed, in most years in the budget window the number of people who receive their insurance through an employer would rise by about 8 million while the number with coverage through Medicaid or who buy it individually would drop by a net 30 million to 32 million.

In July 2012, CBO and JCT estimated that similar repeal legislation would boost the deficit by $109 billion over 10 years under traditional scoring practices. They attributed the significantly higher deficit estimate mostly to a shift in the budget window that brings in later years when repeal would sharply increase budget deficits.

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