McKinsey Report: Obamacare Will Cost Taxpayers Additional $400 Billion

Saturday, 18 Jun 2011 06:00 AM

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A new report from McKinsey & Company, which says the Patient Protection and Affordable Care Act — a.k.a. Obamacare — will cost at least $400 billion more than expected over the next 10 years, has created controversy since its release earlier this month.
 
According to the report, the implementation of the plan will cause employers to shift away from providing health insurance to a vastly greater degree than expected. “Our research suggests that when employers become more aware of the new economic and social incentives embedded in the law and of the option to restructure benefits beyond dropping or keeping them, many will make dramatic changes,” the report says.
 
Though the Congressional Budget Office has estimated that only about 7 percent of employees currently covered by employer-sponsored insurance (ESI) will have to switch to subsidized-exchange policies in 2014, McKinsey says its early-2011 survey of more than 1,300 employers across industries, geographies, and employer sizes found that “45 to 50 percent of employers say they will definitely or probably pursue alternatives to ESI in the years after 2014.
 
“Those alternatives include dropping coverage, offering it through a defined-contribution model, or in effect offering it only to certain employees.”
 
Obamacare proponents and some members of the press, however, point out that McKinsey has thus far refused to release details on how the study was conducted.
 
“It’s hard to escape the conclusion that the study was embarrassingly bad — maybe it was a skewed sample, maybe the questions were leading, maybe there was no real data at all,” economist Paul Krugman writes in The New York Times.
 
“The important thing is that this must not stand,” Krugman continues. “You can’t enter the political debate with strong claims about what the evidence says, then refuse to produce that evidence.”
 
On the other side of the debate, former senior advisor to President George W. Bush, Karl Rove, wrote in The Wall Street Journal, “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.”

For our earlier coverage on this story, click here.

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