Last year, the disastrous launch of the Obama Care website filled the news for months. In the end, the fiasco of government inefficiency cost taxpayers some $840 million (including $150 million in cost over-runs arising from delays in the initial launch) according to the GAO (Government Accountability Office). Now comes news that the IRS -- the government agency responsible for enforcing the Affordable Care Act (ACA) -- sent inaccurate tax information to some 800,000 enrollees in the federal health exchanges. The IRS advises these people to hold off filing their 2015 returns until they have the correct information. While these examples show the ACA is failing to fulfill expectations that it would have "lower administrative costs" than private insurance plans, other surprises are showing the ACA failing in other important ways. I doubt this is what Nancy Pelosi had in mind when she said we must pass the law to find out what's in it.
It should surprise no one that laws as complex and convoluted as one that targets nearly one-fifth of the economy inevitably produce effects that are neither intended nor foreseen. For instance, many of the Congressional Budget Office (CBO) forecasts that played a key in passing the ACA are proving to be woefully off the mark. The ACA’s architects intended to finance part of the costs of covering the uninsured with a hefty “excise tax on high premium insurance plans” and CBO scoring of early drafts of the legislation showed such a tax would garner nearly $150 billion in extra revenues by 2019. Although the final bill delay the start date for this tax until 2018, the CBO estimated in March 2010 that this tax on the wealthy (or at least well-insured) would still generate $32 billion in extra revenue during fiscal years 2018-2019. By 2013, however, the CBO had scaled back its estimates to $27 billion for those two fiscal years but continued to estimate that tax would yield a substantial $137 billion through fiscal year 2023. Fast forward to January 2015 and the CBO has reset its estimates once again to show the excise tax would produce only $15 billon through FY 2019 and $86 billion through FY 2023 (a full $51 billion or 37% less than it calculated in 2013). Although the CBO estimates since the ACA’s enactment also show that overall net and gross costs are running lower than expected, it is largely because the ACA has failed to attract the participation that the CBO had forecast would produce a 49% decline in the non-elderly uninsured by 2015. New estimates of program participation from the CBO, which are still well above actual experience, optimistically show a 35% reduction in the number uninsured. Such large deviations of costs, revenues and participation from forecast are inevitable when of complex changes in law alter behavior in myriad unforeseeable ways. The ACA proves anew the “law of unintended consequences.”
It should surprise no one that laws as complex and convoluted as one that targets nearly one-fifth of the economy inevitably produce effects that are neither intended nor foreseen. For instance, many of the Congressional Budget Office (CBO) forecasts that played a key in passing the ACA are proving to be woefully off the mark. The ACA’s architects intended to finance part of the costs of covering the uninsured with a hefty “excise tax on high premium insurance plans” and CBO scoring of early drafts of the legislation showed such a tax would garner nearly $150 billion in extra revenues by 2019. Although the final bill delay the start date for this tax until 2018, the CBO estimated in March 2010 that this tax on the wealthy (or at least well-insured) would still generate $32 billion in extra revenue during fiscal years 2018-2019. By 2013, however, the CBO had scaled back its estimates to $27 billion for those two fiscal years but continued to estimate that tax would yield a substantial $137 billion through fiscal year 2023. Fast forward to January 2015 and the CBO has reset its estimates once again to show the excise tax would produce only $15 billon through FY 2019 and $86 billion through FY 2023 (a full $51 billion or 37% less than it calculated in 2013). Although the CBO estimates since the ACA’s enactment also show that overall net and gross costs are running lower than expected, it is largely because the ACA has failed to attract the participation that the CBO had forecast would produce a 49% decline in the non-elderly uninsured by 2015. New estimates of program participation from the CBO, which are still well above actual experience, optimistically show a 35% reduction in the number uninsured. Such large deviations of costs, revenues and participation from forecast are inevitable when of complex changes in law alter behavior in myriad unforeseeable ways. The ACA proves anew the “law of unintended consequences.”