Does the Supreme Court decision upholding health insurance subsidies prove that Obamacare is here to stay?
With its legality settled, the longevity of the healthcare program is supposed to be politically inevitable. The millions of voters who receive subsidies from the Affordable Care Act will not tolerate the loss of this money. Insurance companies will no doubt also lobby to prevent any loss of ACA subsidies, as stockholders and employees are major beneficiaries of this program.
Political factors may well preserve the ACA in the short run. But the Court’s ruling came on the heels of a gloomy report from the Congressional Budget Office that may prove to be more decisive for the law than all of Chief Justice Roberts’ legal gymnastics.
The CBO forecasts anemic economic growth and rising public debt for decades to come. Projected revenues and projected spending indicate a growing imbalance in federal finances, driven by long-term unfunded liabilities in old entitlement programs — mainly Social Security and Medicare.
The Affordable Care Act was supposed to control health insurance costs — hence the name. Unfortunately, things are not working out that way, and insurance companies are pressing for significant rate increases.
Consumers might hope that government officials would resist pressure for rate increases, but such actions are unlikely: Stock prices for major health insurers rose sharply after the Supreme Court ruled in favor of the Obama administration. Clearly, investors expect the ACA to benefit health insurers. And in Oregon, state regulators actually raised premiums higher than insurers requested, just to keep companies in the market. Rising premiums will likely drive more subsidies, worsening the looming debt and entitlement crisis.
Politicians have ignored these issues for decades because they seemed like “long-term” problems, and political pressures from elections and lobbying force them to be shortsighted. The short-term financial situation is being shored up by the willingness of investors to buy federal debt at low rates.
The trouble is that the long term isn’t as far off as it used to be. The CBO indicates that the fiscal situation in the federal government worsened significantly over the past few years, even as the deficit was declining. Further deterioration in federal finances is expected over the next decade. How much longer will private investors continue to finance this soaring debt?
A large part of the problem with rising debt is that financing it requires steady economic growth, but large public debts can crush growth. Federal debt is a millstone on the economy, the burden of which could at some point lead to national bankruptcy. The ACA, with its enormous subsidies and regulatory compliance costs, will simply pile on an already unaffordable mass of federal spending programs.
The bottom line is that Supreme Court maintained the ACA subsidies legally,but the American people will not be able to maintain them financially.
The passage and continued defense of the Affordable Care Act is an example of the rank irrationality of public budgeting. The outcome of our political and legislative processes over the past few decades has been to create a myriad of wasteful and financially unsustainable federal programs. Meanwhile, the analytical office the legislative branch of government has been quietly raising the alarm about to the direction and sustainability of government finances. It would seem that delirium is winning out over reason.
There is, of course, nothing truly inevitable about the growth of federal spending. Federal spending developed into its present irrational state because many people pressed for this growth.
But spending can and will be curtailed. Citizens can push for real spending cuts through the electoral process. Otherwise, investors in financial markets will at some point put a sharp and sudden stop to government excesses.
D. W. MacKenzie is an assistant professor of economics at Carroll College in Helena, Montana.