By Rea Hederman (The Heritage Foundation). On March 13, the Congressional Budget Office (CBO) updated its score of Obamacare, announcing that the program is $48 billion cheaper than in its previous 2011 score.
The primary reason for this change is that more individuals will lose their employer-provided coverage than originally anticipated, and the government will collect $99 billion more in taxes and penalties. CBO also finds that there are more uninsured individuals.
In short, this new CBO update continues the trend of Obamacare becoming increasingly expensive and decreasingly effective with each new scoring update.
In this round, CBO announced that the individual mandate penalties will increase by one-third, or $11 billion, as more individuals choose not to purchase insurance. This is especially surprising since CBO also estimates that health insurance premiums will be cheaper in the next decade. Thus, even with cheaper premiums, fewer people will choose to acquire insurance.
CBO also finds that more employers will choose not to offer coverage. The mandate penalties on firms will increase by 18.5 percent, or $15 billion, as these firms find it more efficient to pay a penalty. The CBO also realized that small businesses have no interest in offering health care by the government’s rules. The take-up rate for the small businesses offering health care tax credits has been abysmal so far, and as a consequence CBO halved the effect of this provision.
President Obama has also recognized this failure—by doubling down and offering an expansion of this tax credit. As the CBO update shows, not only will small businesses not take up the credit, but more and more businesses will not offer health insurance at all.
Another reason that the CBO score is less is because in the CBO model when businesses no longer offer insurance, they pay employees more in wages. As a consequence, these wages are then taxed, whereas employer provided health insurance is an untaxed benefit. CBO and the Joint Tax Committee almost doubled the amount of revenue collected by the change of compensation from health insurance to taxes. Since employers are no longer offering health insurance coverage or employees no longer buying it, the government is projected to collect $80 billion more in income taxes over the next 10 years.
Higher tax receipts are only half of this story. It also costs more to cover individuals who receive subsidized insurance from the government. CBO says that because the Obama Administration is forcing insurers to cover more provisions—such as birth control—the initial per capita cost of coverage for people on the exchanges will increase.
CBO finds that overall, there are 3 million fewer people receiving employer-provided coverage, as many of these individuals and companies will choose to pay the tax penalties. There will also be 2 million fewer individuals in the exchange as some of these individuals will be covered by Medicaid or CHIP or go uninsured. The slow economic recovery will make more people eligible for Medicaid than originally anticipated.
This new scoring is simply the latest litany in the broken promises of Obamacare. So far, almost every prediction has been worse than originally estimated. Fewer people have signed up for high-risk pools, the CLASS Act was a new unfunded entitlement, and now fewer people will be covered. The legislation needs to be repealed before things get any worse.