Omnibus post on the 'gimmicks' in the CBO's score of the health-care law
By Ezra Klein
Whenever the health-care law and its CBO score comes back into the news, I get deluged with requests to respond to various Republican critiques of the bill's score. Earlier today, for instance, John asked:
Can you please respond to John Boehner and Paul Ryan's assertions that CBO was given incorrect assumptions when scoring the health care bill. Specifically cited as phony scoring is:
1) $115 billion implementation costs left out
2) Double counting of social security payroll taxes
3) Class Act premiums
4) Medicare Cuts
5) Doc Fix
1) No, the $115 billion wasn't left out. The $115 billion isn't "implementation" but "discretionary spending." And most of that spending predates the bill. As CBO Director Doug Elmendorf said, "CBO’s discretionary baseline, which assumes that 2010 appropriations are extended with adjustments for anticipated inflation, already accounts for much of the potential discretionary spending under PPACA." The exact amount it already accounts for is $86 billion. What's left is optional spending: Congress can choose to appropriate those amounts in the future, but they don't have to. If they don't take further action, that money never gets spent. CBO report here. Longer post on the subject here.
2) CBO doesn't double count. You can read Paul Ryan admitting that CBO doesn't double count in this interview. Double counting is an accusation thrown at the administration's rhetoric: When they say the bill improves Medicare's solvency by X years, the equation beneath that statement is often using money that the CBO is counting toward deficit reduction. But the CBO, which doesn't make claims on Medicare's solvency, isn't double counting that money. So no, this has no bearing on their estimate. If you want to read more on this, head here.
3) CLASS Act premiums: The CLASS Act is a program to help disabled adults without putting them in nursing homes. According to the Congressional Budget Office, it will slightly reduce deficits in years 1 through 20, and then slightly increase them starting in the third decade. So you can argue that starting in 20 years, the CLASS Act is not fiscally responsible absent reforms. But in a world in which the health-care law is unchanged in 20 years, it's also going to save trillions of dollars in the third decade, wiping out the tens of billions CLASS is projected to cost. Here's FactCheck.org's article on the subject.
4) Medicare Cuts. Yes, there are a variety of cuts made to Medicare in the bill. But I'm amused to see it on my reader's list: The Medicare cuts are a big part of the reason the bill saves money. They're fiscally responsible in the extreme. But because they're unpopular, the GOP mentions them in the same breath as the bill's supposed fiscal irresponsibility. For the Republicans, the health-care law is both much too hot and -- brrr! -- much too cold.
5) The doc fix is not part of health-care reform. This is both the most unfair of the GOP's arguments, and the most annoying to rebut, as it's fairly complicated. But here's the short version: In 1997, the Republican Chairman of the Ways and Means Committee, Rep. Bill Thomas, added a provision to Medicare that cut doctor pay if growth exceeded a certain formula. The formula was flawed and the provision, which was expected to require modest cuts, suddenly began requiring huge cuts that would've sent doctors fleeing. So the Republican Congress began passing bills that kept the automatic cuts from going into place. When the Democrats took power, in 2006, they did the same thing. None of these bills were ever paid for, on either side.
The reason they were never paid for was that under the rules of the budget process, you would've had to find offsets for these hundreds of billions of dollars in cuts that you had never intended to make. And no one wanted to do that. Nor did anyone want to repeal the provision without offsets, because that would make them look fiscally irresponsible, as CBO's deficit estimates would rise sharply. So Congress kept passing one-year patches to SGR. When health-care reform was starting, House Democrats broached a permanent fix, but the GOP, in a sudden and opportunistic outbreak of fiscal responsibility, wouldn't let them undo the GOP's mistake unless they also offset the cost of the GOP's mistake. So House Democrats dropped it from health-care reform, because there was no need to add more problems and costs to the ones they were already dealing with.
Republicans then decided that this meant the doc fix was part of the cost of health-care reform, but this was transparently false: The problem predated the health-care reform bill, and needed to be fixed whether or not there was a health-care reform bill. The argument was the same as saying that America has $2.2 trillion in needed infrastructure upgrades, and those should be added to the cost of the bill. Incidentally, the GOP repeal bill doesn't include a word on the doc fix. If you follow their logic, this means that the cost of the doc fix should be added to their repeal bill, and in that case, their bill increases the deficit by $540 billion, not $240 billion. But they don't actually believe the argument they're making on this subject and neither do I, so I'm not going to try to get you to believe that. If you're a glutton for punishment and want to read more about this, head here.
6) Fine, the bill does pay for itself, but the parts that pay for the bill will never happen. John didn't mention this in his e-mail, but it's worth addressing in this post, as it comes up a lot. The argument goes like this: Sure, the bill does cut Medicare and cut other programs and raises taxes and impose cost controls such that it pays for itself if everything get implemented. But what's going to happen is that the spending will get implemented and the cost controls won't.
This is a very strange argument, and people rarely face up to its implications. If Congress can't implement cost controls or taxes or spending cuts, then the country goes bankrupt. Full stop. No other options save, maybe, hyperinflation. Otherwise, autopilot means insolvency. But most people don't really believe Congress can't get spending under control. Almost every prominent critic of the health-care law, for instance, is a big fan of Rep. Paul Ryan's Roadmap. But the Roadmap's savings begin much later than health-care reform's savings -- 2030 or so, as opposed to 2018 or so -- and they're much more radical and disruptive to the system. So you can argue that Congress is too feckless to ever do anything, but you can't argue that Congress is simply too feckless to do things that weren't your original preference. In that case, you're arguing that you don't like the bill by pretending you believe that America is headed towards an inevitable fiscal catastrophe and there's nothing anyone can do about it.