March 31,2011

Press Contact:

Julia Lawless, Antonia Ferrier (Hatch) 202.224.4515
Charles Chamberlayne (Cornyn) 202.224.0703

Hatch, Cornyn Release Obama Administration Actuary Analysis Demonstrating Uncertainty, True Cost of New Health Law

WASHINGTON – On the heels of a House Energy & Commerce Health Subcommittee hearing examining the true cost of the health care law, U.S. Senators Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, and John Cornyn (R-Texas) released an analysis today by the Center for Medicare and Medicaid Services’ (CMS) Office of the Actuary (OACT) that found the price tag of the new health law is on track to cost substantially more than initially estimated.

“Instead of listening to American job creators during the health debate and addressing the problem of unsustainable health care costs, the White House opted to run roughshod over the American people and enacted a bill without knowing the full extent of its impact,” said Hatch. “This analysis highlights the fiscal uncertainty involved with the law and its threat on our economic future. With the national debt standing at an astonishing $14 trillion it is imperative we get the facts and fully understand all possible costs of ObamaCare. Forcing taxpayers to foot the bill for what is clearly an unaffordable, flawed health care law is just plain, bad policy.”

“There is no doubt that Republicans are listening to the American people—and heard their message in November. The people have spoken, the courts have spoken, Republicans have spoken, but unfortunately the White House still refuses to listen,” said Cornyn. “The best thing we could do to stimulate job growth would be to repeal this onerous, misguided bill and replace it with common sense reforms that increase access, lower costs and unleash the burdens it places on private-sector job creators.”

Since the enactment of ObamaCare, employers have been examining their economic options regarding the offering of employer sponsored health care. Any action by employers will affect taxpayer spending on the subsidies for the insurance exchanges and the OACT study demonstrates the uncertainty involving the true cost of the health law. 

OACT analyzed a series of possible scenarios and their price tags.  Under OACT’s original assumptions of how many employers would drop coverage, the cost of just the exchange subsidies would be $593.3 billion through 2021.  If half of employers drop coverage for certain employees, the cost jumps to $823 billion through 2021.  And according to a former CBO director’s analysis, the cost of the exchange subsidies alone could be as high as $1.4 trillion. 

When combined with the new Medicaid spending, OACT found that the total costs of the new health law could reach $1.56 trillion just through 2021.

Additionally, OACT’s sensitivity analysis found that:

• If just 50 percent of employers drop coverage, an additional 13.9 million Americans would lose their employer sponsored insurance, despite the President’s repeated promises that Americans could “keep what they have.”
• Under OACT’s original estimates, taxpayers would spend $45 billion for benefits that employers were already providing on their own.
• Additionally, OACT found Medicaid spending will be far higher than initially estimated: $410.3 billion (2010-2019) to $725.3 billion (2010-2021).  

Cornyn and Hatch requested this sensitivity analysis last fall to better understand the law’s potential risks to taxpayers.  If more employers drop coverage than OACT originally assumed, the health law’s costs to taxpayers could increase substantially. 

Evidence from the private and public employers, to date, indicates exactly that may happen:

  • Caterpillar has estimated it could save 70 percent of employee health care costs by dropping coverage and paying penalties while AT&T has said it could save $1.8 billion by eliminating its coverage. 
  • Just this week, a senior Administration official acknowledged employers may drop coverage, “If it plays out the exchanges work pretty well, then the employer can say ‘This is a great thing. I can now dump my people into the exchange and it would be good for them, good for me…’”
  • The HR Policy Association, representing senior human resource executive in more than 300 of the largest U.S. corporations, has stated “we believe…Congress may have significantly underestimated the shift to Exchange-based care that will result from the new law.”
  • Last fall, former Governor Phil Bredesen (D-TN) noted in a Wall Street Journal editorial that states may drop coverage of their core employees, a move that could save Tennessee almost 50 percent of its spending on health benefits for core state employees.