Health care law repeal: Why would it increase the deficit?

House Republican leaders are pressing forward with their top priority: a vote to repeal President Obama’s health care reforms. But Democrats say that in doing so the GOP is abandoning its pledge to exercise fiscal restraint. They claim that rolling back the health reform law would actually add hundreds of billions of dollars to the federal deficit over the next decade.

Why might that be the case?

First off, it must be noted that Republicans think this is hooey. Getting rid of big government programs doesn’t cost money, they say.

“I do not believe that repealing the job-killing health care law will increase the deficit,” said House Speaker John Boehner of Ohio on Thursday.

However, Democrats have the bean-counters at the Congressional Budget Office on their side. For the most part. (More on that later.)

In a preliminary analysis released Thursday [PDF], the CBO estimated that health care repeal would add $145 billion to the deficit from 2012 to 2019, and $230 billion from 2012 to 2021.

Two main side effects of repeal would cause this gusher of red ink, said CBO.

First, getting rid of health-care reform would mean rescinding planned cuts in federal spending on health care, largely for Medicare.

Under the terms of Obama’s health bill, government payments to Medicare Advantage – plans run by private insurers that are an alternative to traditional Medicare – are supposed to be reduced by $132 billion over a decade, for instance. (Those plans now get around 14 percent more per person than traditional Medicare does.) Payments for Medicare home health care would also be slashed by around $40 billion over ten years.

Second, repealing health-care reform would also entail rolling back scheduled tax increases and fees.

For example, individuals making over $200,000, and couples making over $250,000, face higher Medicare Part A (that’s hospital insurance) taxes under Obama’s health reforms. Their Part A tax rate is supposed to go up 0.9 percent on January 1, 2013. That’s a big money raiser, estimated to bring in $210 billion between 2013 and 2019. And it would be eliminated if the health care reform law is repealed. So would planned fees levied on insurers, medical device manufacturers, and others.

Of course, reform repeal would also eliminate Uncle Sam’s need to pay new subsidies to help low- and middle-income workers buy health insurance. That would save a lot of cash, too.

But crunch all these numbers and repeal still comes out a net money-loser, according to the CBO.

“We expect that repealing [the] legislation would increase budget deficits,” writes CBO director Douglas Elmendorf on his blog.

There’s a big “but” attached to the CBO estimates, however. As Elmendorf notes, his organization can only analyze the pieces of paper it has been given. And pieces of paper don’t also reflect what will happen in the real world.

Obama’s health care reforms include “a number of policies that might be difficult to sustain over a long period of time,” writes Elmendorf.

The White House may project cuts in Medicare, for example, but that does not mean they will occur. Congress has reversed agreed-upon Medicare cuts in the past due to pressure from seniors.

So in the end, due to this and other reasons, “the projections of [health care repeal’s] budgetary impact are quite uncertain,” concludes CBO’s analysis.