Jan 20, 2011 1:22 PM GMT
The deepest spending cuts in the ACA are in Medicare. Let us be very clear: Medicare needs real reform that generates genuine budget savings. Sadly, the ACA's cuts are illusory. Medicare's payments to health care providers would fall below those of Medicaid. The network of hospitals and physicians willing to care for Medicaid patients is notoriously constrained. About 15 percent of the nation's hospitals would have to stop seeing Medicare patients in just a few years to stem their losses. The idea that Medicare could pay less than Medicaid is such sheer folly that Congress will rapidly reverse course. What's worse, ACA's advocates are double-counting this fictional savings, claiming it can pay both for the ACA's entitlements and Medicare solvency too. The truth is, these cuts cannot be relied upon to pay for anything.
The fantasy of deficit reduction from the ACA is also built on a $410 billion tax increase over the coming decade, and a flood of revenue in the years after built on cynically replicating the flawed AMT-style revenue creep. New Medicare taxes initially apply only to individuals with incomes over $200,000 and couples with incomes above $250,000. But those income thresholds do not rise with inflation, so more and more families will pay them each year. Similarly, the new "Cadillac tax" on expensive insurance applies to premiums for family coverage above $27,500 in 2018, but that threshold will rise with general inflation, not medical costs. It's particularly noteworthy that this tax is instrumental to the claim of deficit reduction in the second decade, but it is so controversial that Barack Obama was never willing to collect it himself. Overall, CBO says the ACA's tax hikes will reach 1.2 percent of GDP in 2035, or a whopping $180 billion annually in today's terms.