What Role Does Health Reform Play in Annual Deficits, the National Debt and Today’s Debt Ceiling Debate?

Since the passage of Health Reform 13 years ago, annual deficits have added $19T+ to the national debt. America is now $31T+ in debt, in addition to significant underfunding of entitlements like Social Security and Medicare.

There is a fierce debate underway in the beltway about raising the debt ceiling. President Biden proposes a budget that the White House asserts will reduce deficits by $3T over the next ten years. However, the President’s ten-year budget proposal adds $17T, so by 2033 the national debt is projected to balloon to $50T. Some of this deficit spending is healthcare, some is attributable to Health Reform, while more than a trillion can be attributed to public health spending due to COVID (2020–2023).

After Health Reform, there has been a considerable increase in enrollment in taxpayer-subsidized coverage –Medicare enrollment increased 2.25% per year, from 47MM to 63+Mdue to demographic shifts and COVID’s “Great Retirement.” Medicaid enrollment increased 3.8% per year from 54MM to 88+MM due to Health Reform’s liberalized access and the COVID response. Finally, Health Reform added taxpayer-subsidized public exchange coverage where enrollment grew from 0 to 14+MM.

We know of no estimate that isolated the impact of Health Reform on annual deficits and additions to the national debt. Post-pandemic, federal government health care spending is now $1.9T a year, almost $1 of every $3 of federal spending. Over the past 13 years, federal government health spending has increased 7.5% per year from “only” $743B.”

Importantly, we have yet to see the full impact of the recent resurgence of inflation on health care prices. How those increases, and continued deficit spending, will ripple through the economy and employer-sponsored health coverage is unknowable at this time.

Suffice to say that health care costs will not decline in 2024.