By Glenn Kessler
"I do not believe that repealing the job-killing health care law will increase the deficit. CBO [Congressional Budget Office] is entitled to their opinion, but they're locked within constraints of the 1974 Budget Act. Listen, even the actuaries at the Centers for Medicare and Medicaid have made clear that this bill will not save the kind of money that was predicted earlier. ....CBO can only provide a score based on the assumptions that are given to them. And if you go back and look at the health-care bill and the assumptions that were given to them, you see all of the double-counting that went on. You see the fact that the "doc fix" wasn't even part of the bill."
--House Speaker John Boehner (R-Ohio), January 6, 2011
"They're going to repeal the health care bill which cost the Treasury $1.2 trillion, they've got irresponsible policies."
--Rep. Anthony Weiner (D-N.Y.), January 6, 2011
The new leader of the House of Representatives, speaking to reporters at his maiden news conference last week, resorted to a lot of inside-the-Beltway language that might have left even devoted watchers of C-SPAN scratching their heads. But he's talking about a critical question--whether the health care overhaul passed last year will actually reduce the deficit or not. Republicans contend that it does not, and that is one of the main reasons they cite for wanting to repeal it. But the problem, for the GOP, is that the CBO is the official scorekeeper for Congress. By the CBO's math, the bill does reduce the deficit--and that repealing the bill would increase the deficit. Some of Boehner's assertions have a basis in fact, but you can't dismiss the umpire in the middle of the game when you don't like the calls he makes.
Meanwhile, many Democrats are playing their own games with the numbers. Weiner's statement is typical--he takes a very hazy forecast 20 years down the road and treats it as the gospel truth.
We're going to take a relatively detailed tour through these conflicting claims, and try to sort them out. Hang on, the issue's important--if a bit complicated.
The Facts
The Congressional Budget Office is a nonpartisan arm of Congress, established in 1974, that estimates the spending associated with bills proposed in the Congress. (The Joint Committee on Taxation deals with revenues.) The CBO estimates may differ from projections made by the White House or other executive branch agencies, but its conclusions carry significant weight. The CBO's judgments become the bottom line that Congress considers when it is debating a bill. The numbers are actually a mid-range of possible outcomes and are often well-grounded estimates, but even CBO Budget Director Douglas W. Elmendorf saysthe "actual outcomes will surely differ from our estimates in one direction or another." Still, lawmakers and reporters treat them as if they are etched on stone tablets.
President Obama had promised that his health care plan would not increase the deficit, so the White House last year was on pins and needles waiting for the official CBO score. The final verdict: in the first ten years the health care bill would reduce the deficit by $143 billion. The CBO did not even try to offer a deficit-reduction number for the second decade, but gave a vague response that Democrats have translated into a hard figure of $1.2 trillion.
In many ways, the focus on the numbers is silly. The CBO has a respectable track record, but CBO's numbers are based on models, and models can be flawed. No one really knows exactly what the impact of legislative changes will be ten years from now, let alone how population growth, economic growth or other factors ultimately will affect the bottom line. It would be more logical to offer a range, but CBO is expected to produce an actual number.
Here's where it gets complicated. Let's look at the GOP charge that this number was cooked through "double-counting," questionable assumptions and the like. Boehner has a point here. CBO has to evaluate the bill as it stands. There were education provisions in the bill that had little to do with health care. Those changes to the law acount for $19 billion of the supposed deficit reduction, so let's put that aside.
That leaves $124 billion of deficit reduction related to health care. But that is pretty iffy too.
When Boehner refers to the "doc fix," he's talking about a never-implemented cut in Medicare to doctors passed in 1997--when the Republicans were in control, and Boehner was in a leadership post. Except for one year, Congress has repeatedly waived that provision but has never repealed it. Because the provision remains in law, the CBO had to assume the revenue--some $200 billion over ten years--would keep flowing even though no one in Congress supports implementing those cuts.
Now, if you add back the "doc fix," the supposed deficit reduction has disappeared. But there's more. Because of federal budget practices, the law also results in a theoretical $400 billion improvement in the cash flow of the Medicare insurance trust fund even though it does not actually enhance the ability of the government to pay those benefits. So many would argue that that $400 billion is also illusionary.
The CBO also did not estimate the cost of annual spending bills needed to implement the new law, because such actions were not detailed in the legislation. In a later estimate, the CBO suggested the cost of implementing the bill over ten years would be $115 billion. But pay-as-you-go rules would require such money to be offset, so it's unclear whether those costs would add to the deficit. House GOP leaders swear they will not fund the implementation of the bill, but the CBO more recently said that more than $86 billion in discretionary spending is for activities already authorized or being carried out, so perhaps that's a moot point.
Adding all that up--already we are adding back more than half a trillion dollars--the predicted deficit reduction of $143 billion begins to look pretty shaky, if not fictitious. But the focus on the numbers obscures a broader point made by the CBO estimate last year: Over time, the CBO experts believe, the health care law would greatly reduce the number of uninsured and begin to slow the growth of health care costs in the federal budget, especially in its second decade.
Elmendorf, however, has warned that some of policies designed to reduce health spending may be difficult to sustain--and that it isn't even clear what specific policies would actually result in real cost savings. Richard S. Foster, the chief actuary of the Medicare and Medicaid, alsocast serious doubt on whether the Medicare savings claimed in the second decade could be achieved without significant pain for many hospitals, nursing facilities and other providers.
This is why Weiner's assertion that repealing the health care bill would cost the Treasury $1.2 trillion is misleading. It's bad enough to cite a ten-year figure. But to claim a 20-year figure is absurd. There are too many uncertainties to be precise, and the CBO itself merely offered a tentative guess of a "broad range of around one-half percent of GDP," with significant caveats. Democrats simply took that percentage, multiplied it against the predicted size of the GDP 20 years from now (itself a pretty fuzzy figure) and presto, they had a number. But it's a fairly meaningless one.
Boehner and other GOP leaders repeatedly label the bill a "job-killer"--so much so the phrase is actually in the name of the repeal bill that will be considered on the floor of the House this week--but both sides can cite studies making their case. (Click here for a counter view to the job-killer moniker.) The use of the term "job-killer" is over-the-top political rhetoric, and the folks at factcheck.org have done a good job of debunking some of the claims behind that label.
Finally, the GOP's decrying that the law was crafted to reach a favorable ruling from budget scorekeepers is simply hypocritical. One of the most egregious manipulations of such assumptions in recent years was the passage of George W. Bush's tax cut in 2001. The administration and its Republican allies wanted to pass a tax cut that would reduce revenues by $1.6 trillion over ten years but were constrained by the budget rules in place at the time to just a cut of $1.35 trillion. So they simply ended the tax cuts in the ninth year (allowing them to count all the revenue springing forth in the tenth year from the return of the estate tax, higher tax brackets and the like).
In other words, they effectively stuffed a $1.6 trillion tax cut in the bill, even though the estimators were required to say it "cost" only $1.35 trillion. That ticking time bomb fell in Obama's lap this winter, forcing him to cut the deal last month that extended the Bush cuts for two more years.
The Pinocchio Test
Dig beneath the numbers and Boehner and his Republican co-horts have a point that the figures are suspect. But this is a game that both parties have played, and crocodile tears now should not obscure the many times Republicans have resorted to the same tactics in the past. The CBO number is the playing field that both sides use. And Democrats (of whom Weiner is just one example) should not be perfoming such tricks with the numbers either. In theory the claim of $1.2 trillion in deficit reduction rests on an actual estimate by a respected organization. But it's not really a CBO figure. The tenuous nature of these estimates makes it silly and counter productive to assert that the health care legislation ever was considered a deficit-reduction bill in the first place. It was a law designed to reduce the number of uninsured Americans and (with a little luck) rein in medical costs. Politicians should not pretend otherwise.
Three Pinocchios each.
UPDATE, January 17:
Some readers have criticized me for lumping the "doc fix" into these calculations. I thought I had made it clear that this problem predated health care overhaul--Congress passed an ill-conceived formula for doctor payments in 1997--but it is a problem that needs to be fixed. The Democrats recognized this when they tried to include a fix in early versions of the health care legislation. But they they dropped it, partly because the fix was so expensive. It is a fair point that because the "doc fix" is not part of the health care bill, it should not be included in deficit calculations. In this column, however, I was trying to demonstrate how the CBO is constrained by the language of the legislation it is given to evaluate. One reason why the "doc fix" was not included in the bill is because it would have wiped out the perception of deficit reduction. If CBO scoring would have indicated sizeable deficit reduction even with a "doc fix," my guess is that a "doc fix" would have been in the bill. Ultimately, Congress will have to address this issue--and any solution will have a negative impact on federal budget projections.
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