Op-Ed: ObamaCare’s Costs Are Soaring

We already know the rosy budget estimates used to sell the law were wrong.

One year after the passage of ObamaCare, this paper published an op-ed I wrote (“ObamaCare and Carey’s Heart”) about how America’s health-care system saved my daughter’s life, and describing how implementing this law will limit innovation, lead to rationing, and lower the quality of care. Now, two years out, I would like to focus on the budgetary disaster.

As a candidate, Barack Obama repeatedly claimed that his health-care plan would lower annual family health-insurance premiums by $2,500 before the end of his first term as president. But the Kaiser Family Foundation recently reported that the average family premium has increased $2,200 since the start of this administration.

Then there is the higher cost to taxpayers. The CBO’s initial estimate in March 2010 of ObamaCare’s budget impact showed it saving money, reducing the federal deficit by $143 billion in the first 10 years. But that positive estimate was largely the product of gimmicks inserted into the bill by Democratic leaders to hide the law’s true cost.

Sure enough, the administration last October announced it would not implement one of those gimmicks, a long-term care program called the Class Act, because it was financially unworkable. The loss of the premiums that would be collected to finance the Class Act wiped out $70 billion of the supposed deficit reduction projected by CBO. And last month the administration’s proposed fiscal 2013 budget included $111 billion in additional spending for the premium subsidies in the health law’s insurance exchanges—further eroding any confidence in the original ObamaCare projections.

This would not be the first time a government program exceeded its projected cost. When Medicare was passed in 1965, for example, the federal government estimated it would cost $12 billion in 1990. Medicare actually cost $110 billion in 1990.

In the case of ObamaCare, one of the principal sources of the lowball estimate used to justify the law is related to the insurance exchanges. The CBO originally estimated that one million Americans would lose their employer-sponsored care and be forced into the exchanges.

But a McKinsey & Co. study in June 2011 showed that 30%-50% of employers plan to stop offering health insurance to their employees once the health law is implemented in 2014. Last week the CBO breezily dismissed this and other studies on the ground that “it is doubtful that any survey conducted today could provide very accurate predictions of employers’ future decisions.”

As someone who purchased group health insurance for over 31 years, I fully understand why the McKinsey study is more credible than the CBO.

Why? Because the decision employers face under ObamaCare is straightforward: Do they pay $20,000 per year for family coverage, or do they pay the $2,000 penalty to the government?

It is not as if dropping health coverage will expose their employees to financial risk. They will thereby make employees eligible for huge subsidies in the health-care exchanges—$10,000 if their household income is $64,000 per year. In a competitive environment, ObamaCare provides the incentive for employers to drop coverage.

According to the CBO, 154 million Americans are covered under employer-sponsored plans. What would be the cost to taxpayers if 50% of those individuals lost their coverage and became eligible for subsidies? The answer is difficult to calculate, but CBO’s answer is basically: Don’t worry, revenues will increase automatically to cover those costs (for example, employees’ taxable incomes will increase when they lose employer-provided coverage).

In reality, as government assumes a greater share of health-care costs, pressure to cut payments to providers will be enormous. Reduced government reimbursements to providers will cause massive cost-shifting to those remaining in the private health-insurance market. More employees will lose coverage. Before long, we will have what the left has long sought—a single payer health-care system modeled after Medicaid.

In recent testimony before the Senate Appropriations Committee, Health and Human Services Secretary Kathleen Sebelius told me that America’s health insurance system is in a “death spiral.” She failed to acknowledge that implementation of ObamaCare will be the cause of that death spiral, and American taxpayers will be left to pick up the tab.

In a June 2009 speech to the American Medical Association, Mr. Obama promised: “If you like your health-care plan, you’ll be able to keep your health-care plan. Period. No one will take it away, no matter what.” I’m not sure what you would call that statement, but whatever you call it, it was a doozy.

Mr. Johnson, a Republican, is a senator from Wisconsin.

Published in Wall Street Journal.