GAO: Health law will increase deficit if cost-cutting steps stop

The Affordable Care Act's long-term deficit impact depends on the law's cost-cutting measures and whether they survive over the next several decades, government auditors said Tuesday.

In a new report, the nonpartisan Government Accountability Office (GAO) found that President Obama's signature law could increase or decrease the deficit over the next 75 years depending on whether its cost-saving provisions survive.

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In addition to creating certain healthcare benefits and requiring most people to carry insurance, the Affordable Care Act includes measures aimed at curbing the projected growth in U.S. healthcare costs.

Among these measures are Medicare productivity adjustments and the Independent Payment Advisory Board (IPAB), the panel Republicans believe unfairly wrests legislative authority from Congress in its charge to cut Medicare payments when the program's spending grows too quickly.

The GAO said Tuesday that the success of these provisions will determine whether the Affordable Care Act affects the deficit for good or ill.

Assuming the law is enforced as-is, the U.S. deficit will decline 1.5 percent as a share of the economy over the next 75 years, according to the GAO. Auditors attributed 1.2 percent of this improvement to the Affordable Care Act.

Under a different set of assumptions, the law has the opposite effect over time, the GAO said — the deficit will increase by 0.7 percent of gross domestic product (GDP) if the law's cost-containment measures are phased out.

The report attributed this potential increase in part to the law's most expensive features — the Medicaid expansion and the provision of insurance subsidies.

The report was requested by Sen. Jeff Sessions (Ala.), the top Republican on the Senate Budget Committee. On Tuesday, he and his office jumped on the figures to say that the healthcare law will increase the deficit by $6.2 trillion over 75 years.

To arrive at this figure, Sessions's office assumed the second scenario, in which the law's cost-containment measures end, and added up 75 year's worth of deficits using GDP projections from the Centers for Medicare and Medicaid Services.

Republicans have argued since the law's passage that it will prove a major liability for the federal budget.

"The big tax increases in the bill come nowhere close to covering the bill's spending," Sessions said Tuesday during a Budget Committee hearing.

"The big-government crowd in Washington manipulated the numbers to get the financial score they wanted, to get their bill passed and to increase their power and influence," Sessions said.

In its 59-page report, the GAO said there remain "significant uncertainties" surrounding the law's effect on U.S healthcare spending, which in turn impacts the national deficit.

The "development and deployment of medical technology, future policy decisions, and cost and availability of insurance" all contribute to the state of total healthcare costs, the GAO said.