Be wary of the supposed price tag on ObamaCare Repeal. The rough estimate by the Congressional Budget Office, projecting the costs of ObamaCare Repeal through the foregone money-saving and revenue-raising provisions in the new healthcare law at $230 billion in the next 10 years, is just that: rough.

Very rough indeed, when one considers the complexities and uncertainties that affect not only the healthcare sector in general, but also the political and economic spheres, neither of which are accounted for in the CBO report.  

This week, my colleague Hadley Heath reported on the accounting tricks used to arrive at the supposedly $230 billion price tag on ObamaCare Repeal. In addition to overestimating the savings to be expected from ObamaCare, Hadley also points to the less visible and less quantifiable costs that would arise were the new healthcare law to go into effect as it is currently written: the negative impacts on the quality of our health care, American jobs, and personal liberty.  

Megan McArdle has another good post at the Atlantic discussing the complexities and uncertainties that affect the CBO estimates on the costs to repealing ObamaCare.    

McArdle cites Ruth Marcus who offers a critical take on the CBO estimates in the Washington Post

Of all the cost estimates that the CBO produces, the most complex and least reliable involve health care. This is in no way a criticism of CBO. No matter how sophisticated the economic model, the multi-layered assumptions about the future cost of health spending make the $230 billion projection closer to an educated guess (albeit a guess made by very educated economists) than a take-it-to-the-bank certainty.   

[…]don’t bet on that $230 billion. The health-care law will require billions in new spending. It relies on the expectation of billions in savings from slowing the growth of health-care costs and assorted cuts and taxes — all guaranteed to produce howls of outrage, and a burst of lobbying, from the affected interests.

[…] the costs of the new law are far more certain than the savings. Anyone who’s spent any time in Washington knows better than to assume that health-care reform will end up as a money saver.  

McArdle also offers her own critical analysis of another argument made that “employee-dumping” onto the new government-subsidized healthcare exchanges, by employers currently offering health insurance to their employees, wouldn’t end up costing the government much more money in subsidies. Employer cuts in benefits are expected to be offset by higher wages which would create tax revenue for the government, Ezra Klein tries to assure us. Here is McArdle’s counter-argument:

The minor problem with this argument is that it’s conceivable that employers could find a way to transfer at least some of this compensation into other tax-advantaged forms, such as life insurance, plusher offices, etc.  This doesn’t strike me as very likely, but since it is possible, it needs to be considered.

The larger problem is that the workers who are eligible for subsidies don’t pay much in the way of income taxes.  The effective tax rate for the bottom two income quintiles is negative–workers get more back in refundable tax credits like the EITC, than they pay in federal taxes. Those workers are the ones who qualify for the biggest subsidies.

Ah, you will say, but they do pay payroll taxes!  Absolutely correct.  Unfortunately, the vast majority of payroll taxes are social security “contributions”.  And social security contributions differ from the income tax in one crucial respect: they obligate the government to pay more benefits in the future. 

The main take-away is that there are too many uncertain variables that would need to be considered to arrive at an accurate estimate of the true cost of ObamaCare or its repeal. When the good intentions of saving on healthcare costs by cutting fraud and waste don’t end up playing out the way that President Obama and other proponents of the healthcare law have promised, taxpayers are the ones who will end up footing the bill. Unfortunately, this seems to be the most likely scenario if ObamaCare continues to move forward as scheduled.