Proponents of the Affordable Care Act (ACA) have frequently pointed to official cost estimates projecting that the law will reduce federal budget deficits. Much less attention has been paid to the primary reason for this favorable outlook: the law’s heavy reliance on indexing important provisions to restrain spending and increase revenue. These components of the ACA will automatically impose perpetual, across-the-board cuts on payments to certain institutional medical providers; increase premiums for lower-income households; and raise taxes on an ever-expanding segment of taxpayers.
As the effects of these provisions become more evident, policymakers will face growing pressure to loosen them. Such policy adjustments, however, would likely transform the ACA into a major deficit-increasing law, according to a new study published by the Mercatus Center at George Mason University.
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