Healthcare Math Is Enough To Cause Vertigo

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Win McNamee / Getty Images Everyone should be much more cautious when spinning the cost estimate for the Democrats’ bill. Former CBO acting director Donald B. Marron on the variables and asterisks involved. Plus, Benjamin Sarlin talks to more past CBO chiefs about the agency’s accuracy.

The name of the game in Washington Thursday was spinning the latest budget numbers from the Congressional Budget Office. As a CBO alum, I’m pleased that the agency’s hard work is getting such deserved attention. However, I’m also frustrated that policymakers and the media so often mischaracterize CBO’s findings.

For example, everyone is reporting that health-care reform will cost $940 billion over the next ten years. Unfortunately, that’s not true. The $940 billion price tag applies to the parts of the legislation that would expand health insurance coverage. As important as those provisions are, they are not the whole story of health reform. For example, the legislation would also fill in the infamous “doughnut hole” in Medicare’s prescription drug program at a ten-year cost of $38 billion. A new fund for prevention and public health efforts would cost $13 billion. Another fund for community health centers would tack on another $12 billion. And so on through dozens of smaller programs.

The CBO is clear that the legislative package, as a whole, would reduce the deficit not only over the next ten years, but even more substantially in the second decade if the legislation executes as written. Of course, that’s an enormous “if.”

The CBO is clear that the legislative package, as a whole, would reduce the deficit not only over the next ten years, but even more substantially in the second decade if the legislation executes as written. Of course, that’s an enormous “if.”

These provisions may well be worthy, but they aren’t free. Indeed, if you add them all up, their price tag comes to $132 billion in new spending and $2 billion in new tax cuts. The total cost of health reform is thus $1,072 billion, about one-seventh higher than the $940 billion figure grabbing all the headlines.

Similar problems afflict the other prominent claim: that health reform will reduce the federal budget deficit by $138 billion over the next ten years. That’s not true either. The entire legislative package—combining both the Senate bill and the reconciliation adjustment—now reforms the government’s student loan program in addition to the changes to health care. The student loan reforms account for $19 billion of the deficit reduction in the legislation. Thus at best health-care reform will reduce the deficit by $119 billion over the next decade.

But that’s not the only problem. The health-care reform also includes a budget gimmick that exaggerates the potential budget savings. The ingeniously-named CLASS Act would create a new federal insurance program for financing long-term care. Because premiums would start flowing faster than benefit payments, the program scores as reducing the deficit by $70 billion over the next decade. But those savings are temporary. In future years, benefit payments will accelerate and eventually consume the initial surpluses in the program. For that reason, most budget experts believe that the CLASS Act should not be counted as real deficit reduction. After netting that out, health-care reform reduces federal deficits by only $49 billion over the next decade, almost two-thirds less than the headline figure.

• Benjamin Sarlin: Do the CBO’s Numbers Add Up?Even that figure overstates what the reform part of health reform actually accomplishes. Over the next decade, health reform will expand the government’s commitment to health care, not reduce it. The only reason the health reform scores as reducing the deficit is that it is packaged with significant tax increases, most notably a $210 billion expansion in Medicare taxes. Those taxes have traditionally been considered payroll taxes, but the legislation would change that: for the first time ever, the Medicare tax would also apply to the investment income of upper-income taxpayers.

Of course, proponents are not the only ones taking liberties with the numbers. Opponents of the legislation have also employed some spin of their own. For example, a common allegation is that the legislation reduces the deficit only because it combines six years of new benefits with ten years of new taxes. That’s not true either.

View as Single Page 12 Back to Top March 19, 2010 | 12:03pm Facebook | Twitter | Digg | Share | Emails | print var OutbrainPermaLink=document.location.href.replace(document.location.search, '').replace(//d+/$/,'/').replace(document.location.host, 'thedailybeast.com'); var OB_Template = "The Daily Beast"; var OB_demoMode = false; var OBITm = "1255455386150"; var OB_langJS ='http://widgets.outbrain.com/lang_en.js'; if ( typeof(OB_Script)!='undefined' ) OutbrainStart(); else { var OB_Script = true; var str = ''; document.write(str); } Politics, Health Care, Democrats, House, Health Care Reform, Cbo, Congressional Budget Office, Budget, Health Care Costs, Cbo Alum, Cbo Estimate  (–) Show Replies Collapse Replies Sort Up Sort Down sort by date: HollyK64

I feel slimed by the Democrats and their lies.

Flag It | Permalink | Reply 1:08 pm, Mar 19, 2010 Chicago48

It won't even happen for another 5 years! Geez!

Flag It | Permalink | Reply 2:51 pm, Mar 19, 2010 mrgreb

I have come to assume anytime a politician, Republican or Democrat, is talking numbers he is not telling the truth.

Flag It | Permalink | Reply 3:35 pm, Mar 19, 2010 wareagle82

the problem is that numbers are presented in a vacuum, which is anathema to politics. No bill costs what its proponents claim, fraud and waste are never dealth with, legislation is always subject to expansion. The CBO kicks out numbers based on the information it is given; the agency gets no wiggle room to factor in anything beyond that.

Flag It | Permalink | Reply 4:01 pm, Mar 19, 2010 SharnCedar

Pelosi and Obama have the look of desperate hysteria about them - like an insane man nearing the end of his shooting spree or something. For the president whose most prominent campaign lie was something about being post-partisan and less divisive, this is really insane. Instead this is the most partisan, the most divisive figure we have ever endured on recent history. These fake numbers from the CBO - it is another tragedy, another degradation of honesty, another reason future Americans will disbelieve in their own government. Obama and Pelosi have already invoked the "nuclear option" - they are immolating America in an orgy of suicidal political destruction that we may never recover from. The CBO is just the latest victim of their insane, scorched-earth, Hell-bent, Pyrrhic march.

Flag It | Permalink | Reply 8:49 pm, Mar 19, 2010 $('#c_total span').html('5'); $('#c_total').show(); Share this comment on Facebook

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