Obamacare became law amid promises of lower costs, expanded coverage, and an overall better health care system. But those predictions are built on assumptions regarding consumer behavior and economic theories that economists, journalists, and policy experts already have been challenging.
The Congressional Budget Office (CBO) is the federal agency charged with calculating the legislation’s impact. It’s an unenviable task given the limitations involved, and CBO’s track record includes seriously misjudging costs of past health legislation. For example, the agency’s projected cost of the Medicare drug benefit doubled within 12 months. With Obamacare, the CBO has already revised its estimate upwards, adding $115 billion to the 10-year cost of the new health reform law.
If the current CBO estimates turn out to be “off” as well, what happens to health care costs, insurance coverage, taxes, or the nation’s debt?
The Obamacare Impact Calculator demonstrates how even slight changes in any of CBO’s nine economic or behavioral assumptions regarding Obamacare will transform a rosy scenario into one often having increased costs, limited health care choice, higher taxes, and more government control.
Frequently Asked Questions
What is the purpose of the Obamacare Impact Calculator?
This calculator created by The Heritage Foundation allows you to see how Obamacare would affect important issues — like insurance premiums, government health spending, deficits and health coverage — if CBO projections don’t materialize.The Obamacare Impact Calculator demonstrates how sensitive the Congressional Budget Office (CBO) estimates are in determining the overall impact of the new health reform law. Many members of Congress relied heavily on CBO projections during the run-up to passing a major overhaul of the health care sector.
How were the questions chosen?
Heritage analysts selected these questions based on major provisions in Obamacare. All of the questions are important to consider because the CBO examined each provision at its face value to estimate the effects of the new health reform law. If one provision does not go as planned, CBO’s forecast of the cost and health coverage impact would be incorrect.
How were the choices for the questions chosen?
Heritage put together the available options in each question based on findings from prominent economists and organizations about the impact of Obamacare. Our analysts provided a range of assumptions you could make after drawing from the best research from private and public institutions, as well as health care experts with differing views on the new health reform law.
How do I know which option to choose?
You decide which options most accurately reflect how Obamacare will actually work. There is no right or wrong answer. Each option provides a different assumption that economic experts have used in the health care debate. The calculator gives you the opportunity to see how Obamacare would impact health insurance coverage, premiums, and government health spending and deficits, based on the predictions you make. We encourage you to go back and change your answers to see how the outcomes would differ.
How did the Heritage Obamacare Impact Calculator produce the results I received?
The calculator uses current data from government sources including the Census Bureau, the Congressional Budget Office, the Bureau of Labor Statistics and the Centers for Medicare & Medicaid Services. For more detailed information, please see the online appendix: The Uncertainty of Health Care Projections.
Why do my estimates of the effects of Obamacare differ from the CBO’s?
The results you received may differ from CBO estimates because the agency must score any legislation based on its face value — without taking into account possible legislative changes. Choosing various assumptions of how Obamacare will perform shows the fragility of the CBO projections. In fact, every aspect of implementing the new health care law must go according to plan for the CBO to be right.
While it’s important to remember that any forecast is subject to error, this calculator shows how dramatically Obamacare costs and coverage could vary, and what that could mean for the American economy and health care sector.
How could the individual mandate be ruled unconstitutional?
What could happen if the mandate is ruled unconstitutional or repealed?
Since the mandate is designed to force younger, healthier Americans to buy insurance (when they might not otherwise) the number of uninsured will likely increase without the threat of a mandate. This could result in an initial dip in deficit spending because consumers would bypass federal subsidies for health insurance.
However, the Heritage calculator can’t foresee the secondary effects that could happen if healthy young adults don’t buy insurance. For example, if these consumers (who are relatively cheap to insure) stay out of the health insurance market, average premiums would increase. Since federal subsidies would be determined by income and the insurance rates, the size of the federal subsidies also would increase. The end result could be more uninsured Americans and a higher national deficit.
Why would the government not collect a required tax on high-cost, or “Cadillac,” health plans?
The 40% excise tax on “Cadillac” plans does not go into effect until 2018. This delay in collection came largely from political pressure by union groups that are opposed to any tax increase on generous health care benefits. Before 2018, it is entirely possible that Congress would repeal this provision. However, the CBO is not allowed to take this political possibility into consideration, and must assume the tax will be collected beginning in 2018, as mandated in the health reform law. This calculator allows you to see what would happen if the Cadillac tax isn’t collected, and what that would mean for the overall cost of Obamacare.
If Americans lose their job-based health coverage because of Obamacare, how will this impact overall coverage?
Employer-sponsored insurance is the largest source for health insurance, providing coverage to 163 million workers and their families. In response to Obamacare requirements, many employers could drop their health insurance coverage as part of their compensation packages.
Several health care experts predict that tens of millions of those with job-based health plans would lose them, because businesses and employees could find it mutually advantageous. Businesses would benefit because they would only be responsible for paying a fine equal to $2,000 per employee rather than their contribution toward employees’ health insurance premiums, which could costs thousands of dollars more. Workers could benefit because their wages would rise because they are not paying for a work-based health plan. Many employees could qualify for federal subsidies to buy insurance through exchanges. But this might not result in the best coverage options for workers.
What is health information technology (HIT)?
This technology includes any software or devices that help insurers, government agencies and health care providers generate and process patient and health information. Obamacare and the economic stimulus bill invested a substantial amount of taxpayer dollars into improving HIT. Some analysts suggested that successful HIT implementation would significantly reduce health care costs. However, others contended the cost of implementing and maintaining these technologies would outweigh any efficiency or operation savings.
What are administrative costs?
Today, administrative costs, such as medical underwriting, billing, marketing, and wading through complex benefit packages, account for approximately 13 percent of insurance premiums. These costs are passed onto consumers, so lowering administrative costs could lower premium rates. Some experts believe Obamacare will lower administrative costs by replacing the individual insurance market (which tends to have high administrative costs) with highly regulated insurance exchanges. Others proposed that digitalizing medical records would reduce administrative costs. But there are skeptics who note that required investments by insurers to modernize their health technologies will not pay for themselves, and that consumers will be left to pick up the tab for the costs.