A kerfuffle was stirred up last week by a devastating McKinsey & Company study that concluded up to 78 million Americans would lose their current health coverage as employers stopped offering insurance because of President Obama's Patient Protection and Affordable Care Act.
The report contradicted Mr. Obama's frequent pledge that under his reform, "if you like your health-care plan, you can keep your health-care plan." And McKinsey's was at least the fourth such analysis calling the president's promise into question.
Pulitzer Prize-winner Joseph Rago tracks the White House effort to prevent the impact of its policies.
In May 2010, former Congressional Budget Office (CBO) Director Douglas Holtz-Eakin concluded that employers would drop coverage for about 35 million Americans because of ObamaCare. A month later, in June 2010, the National Center for Policy Analysis (NCPA) pegged the number between 87 million to 117 million. And last November, Allisa Meade, a McKinsey analyst, told health-insurance company executives that 80 million to 100 million people might lose their employer-provided health insurance.
Simple economics is the reason. According to the Kaiser Family Foundation's Employer Health Benefits 2010 Annual Survey, the annual premium for an average policy last year was $5,049 for a single worker, with the company picking up roughly $4,150 and the employee the rest. For a family of four, the total cost was $13,770, with the company picking up $9,773.
Yet under ObamaCare, businesses can stop providing health-care coverage, paying a $2,000 per-worker fine instead. For small businesses, the trade-off is even more attractive: They are given a pass on the first 50 workers.
Workers losing coverage will be moved into the "exchange," a government-run marketplace to buy health plans. Those whose insurance costs were more than a specified share of their income (9.5% in 2014) could get subsidies. The exchange starts in 2014 and is fully operational by 2016.
Perversely, ObamaCare both drives up the cost of insurance with mandates and rules while making it attractive for companies to dump the increasingly more expensive coverage and pay a lesser fine. There will be huge ramifications for the country's finances if more workers lose coverage than was estimated.
When Mr. Obama's health-care bill passed in March 2010, the CBO and the congressional Joint Committee on Taxation predicted that 24 million workers would be covered by the exchange. Of these, nine million to 11 million would lose their employer-provided coverage, offset by six million to seven million who would be getting employer-provided insurance, for a net of three million workers losing company-sponsored coverage. The CBO said the exchanges would cost $511 billion over ObamaCare's first decade.
But what if more people are dumped into the exchange than originally estimated? Costs from the increased subsidies will explode.
If Mr. Holtz-Eakin is correct that there will be 11 million more people in the exchange, then costs could be nearly 40% higher than the $511 billion price tag. If between 78 million and 87 million people are moved into the exchange, the tab could more than triple. And if NCPA's upper-range estimate is right and 117 million people were dumped into the exchange, ObamaCare would cost nearly $2 trillion more than expected in the first decade alone. Much of this extra expense would come from workers losing their employer-sponsored insurance.
Mr. Obama's health-care law has already put the country in bad financial shape. He claimed it reduced the deficit by $143 billion—but that was before the CBO added $115 billion to administer the legislation, including the hiring of bureaucrats and thousands of IRS agents to enforce the new mandates. This reduced Mr. Obama's claimed savings to $28 billion.
The deficit-reduction claim also came before House Budget Committee Chairman Paul Ryan drew attention to the law's Ponzi scheme. It's funded by borrowing $521 billion from the Social Security Trust Fund, Medicare, and new long-term care insurance premiums, and by ignoring the $300 billion cost over 10 years of the annual inflation increases in reimbursements to hospitals and doctors. These gimmicks hide the fact that ObamaCare is really $701 billion in the red in its first decade.
ObamaCare's deficits in its second decade (2020 to 2029) will be even more horrendous as it continues borrowing from Social Security, Medicare and the long-term care insurance program to meet its much larger than anticipated expenses, including a much higher number of people who end up in the exchange.
On March 9, 2010, then-Speaker of the House Nancy Pelosi famously told a meeting of county officials that "we have to pass the bill so that you can find out what is in it, away from the fog of the controversy."
We are now, to our horror, finding out how harmful this measure is. More Americans are realizing that unless repealed, ObamaCare will sink America in a sea of red ink. This helps explain why the nation has turned so hard against it—and against its author whose slippery pledges so misled us.
This article originally appeared on WSJ.com on Wednesday, June 15, 2011.