About half of ObamaCare’s first-decade cost was
supposed to be funded via cuts to Medicare and fees on specific
segments of the health industry. Republicans responded by
complaining that those cuts would decimate care for seniors, but
the real problem was that those cuts, along with some of the other
revenue raisers built into the law, were never likely to occur.
ObamaCare’s budget, and the deficit reduction it was alleged to
achieve, was in many ways an exercise in wishful thinking:
If Congress and Medicare’s administrators allowed the cuts
and fees to go through as planned, and if the spending
provisions stayed on target, then the law might raise enough
revenue to break even, or possibly reduce the deficit somewhat.
Well, sure. If. But the smart money was always on many of
the cuts and fees and other revenue raisers being wiped from the
books just before or shortly after they went into effect. It wasn’t
that the various revenue raisers built into the bill were
impossible, exactly; it was that they weren’t politically
sustainable.
Three years after the law passed, we’re starting to see fairly
strong indications that many of ObamaCare’s revenue raisers won’t
pan out. Just yesterday, for example, the Department of Health and
Human Services bowed to pressure from the insurance industry and
reversed its plan to cut payments to privately run Medicare
Advantage (MA) plans. Instead of taking a 2.2 percent cut, those
plans will instead be given a 3 percent increase.
Nor is this the first time that Medicare Advantage has escaped
planned cuts. Prior to the election, the administration delayed a
series of MA cuts built into the health care overhaul, replacing it
with an unusual, and extremely expensive, pilot program that it
said would help test the effect of quality bonuses. The problem was
that the pilot program extended to every MA provider in the nation,
and rewarded providers that didn’t score high on quality. It was a
pretty nakedly transparent attempt to avoid some of the cuts; the
Government Accountability Office stated flatly that the pilot
program
couldn’t possibly test the effect of quality bonuses as the
administration said it would, and called for the administration to
end the pilot.
What makes this even more revealing is that these are cuts that
ought to be relatively easy to achieve: The administration, along
with many Democrats, has long argued that Medicare Advantage
providers are
overpaid. Yet we’ve now seen it backtrack on multiple
occasions.
ObamaCare’s Medicare Advantage cuts aren’t the only revenue
raisers that didn’t survive. A tax reporting provision that was
supposed to raise $17 billion but would have resulted in big
paperwork headaches for small businesses was repealed.
So was the CLASS Act, a long-term care initiative that was
responsible for about $70 billion of the deficit reduction that was
projected to occur in ObamaCare’s first 10 years.
More recently, a bipartisan majority in the Senate voted to
repeal the law’s medical device tax. That vote was nonbinding,
and the House hasn’t followed suit. But most observers I’ve spoken
with think that the device tax isn’t long for this world.
The critics who warned that the law's
cuts and revenue projections might not be sustainable are looking
increasingly prescient. I suspect that what we're seeing now is
only the beginning. Health insurers will continue to push to
repeal the fee on their industry, and if implementation of the
law coincides with higher premiums for a large enough number of
individual, they may well have some success. In 2018, the “Cadillac
tax”—a tax on expensive health insurance plans—will kick in. Union
lobbying
already delayed the start date for that provision by several,
and it’s likely that they will renew their opposition in a few
years.
The revenue mechanisms built into the law are starting to fall
apart. The spending, of course, remains.
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