We know the feeling ...

Obamacare's $73 Billion Question

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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It’s hard to get a good accounting of what we’ve spent on the Affordable Care Act so far.

The Barack Obama administration has never really tried to count the cost of all the different elements and put them in one place. The Congressional Budget Office, meanwhile, has pretty much given up. Luckily, we have Bloomberg Government, my employer’s government intelligence service, which has thoughtfully totted up all the data it can glean from public records and come up with a figure for spending to date: $73 billion.

This number is both more and less than projected. BGOV puts spending on the enrollment website, for example, at around $2 billion, more than twice the cost offered by the administration. The difference comes from several factors:

  1. Timing (the administration's figure stops at February, before a substantial outpouring of funds was made into cleanup work for the malfunctioning exchanges);
  2. Inclusion of spending to get the IRS and other agencies ready for Obamacare;
  3. Inclusion of the paper backup system, which proved so necessary during the rollout; and
  4. Which contracts it chose to define as Obamacare-related.

On the other hand, the IRS has spent much less than it was projected to need (possibly because the work isn’t finished yet), and premium subsidies are, the report notes, off to a “slower than predicted start.”

Medicaid spending isn’t included in this estimate at all, because reliable data are not yet available. But if that comes in at around the $20 billion that has been predicted, the total price tag for the Affordable Care Act in its first years will end up approaching $100 billion.

What can we take away from this? I think the first, most obvious thing is that forecasting is hard. During the debate over this law, CBO forecasts were treated by the bill’s supporters as if they were handed down from Mount Sinai on stone tablets rather than prepared by analysts who lacked so much as a crystal ball. Indeed, people continue to cite old deficit-reduction estimates as if they were established facts rather than educated guesses about a very uncertain future. The CBO's staff are smart, hard-working people who did the best they could with a hard problem, but it was never likely that their forecasts would neatly match reality.

The second thing to point out is that data on this law continue to be frustratingly hard to come by. Obamacare made changes in so many parts of government that the costs are hidden in the nooks and crannies of any number of departmental budgets. The administration has not exactly been in a hurry to rectify this situation; its releases are highly strategic and almost always missing lots of information we’d like to have. My colleagues have done fine work in assembling these data, but it shouldn’t be so hard for the public to figure out what we’re spending on this law.

The third thing to note is that this estimate covers spending, not net costs. We may never have a reasonable approximation of the actual effect on the deficit; the law is so complex that it may simply be impossible to assess the collective effect of all the different moving parts. That’s a shame.

Though I wish there were even more numbers available, I’m certainly proud of my colleagues for the hard work they’ve done and the fact that my organization has produced the most complete data so far on what Obamacare is costing.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Megan McArdle at mmcardle3@bloomberg.net

To contact the editor on this story:
Brooke Sample at bsample1@bloomberg.net