From the start the president’s health care cost estimates were much too modest. Here’s why:
First, the administration’s accountants left off the books nearly a quarter-trillion dollars in what’s called the “Doc Fix”. Originally, the formula was designed to prevent total Medicare physician spending from growing faster than the Medicare population, the economy, and the amount necessary to implement changes in benefit coverage. The problem is, every year since 2002 physician groups have successfully lobbied to delay the cuts so that we now face a 10-year $247 billion measure to block a planned 20 percent cut in Medicare reimbursement fees to doctors mandated by a 1997 federal law. Obamacare advocates point out that it’s unfair to include this measure in the cost analysis, because, they contend, the Doc Fix will happen irrespective of whether or not the current health-care reform passes. But the Doc Fix was included in early versions of Obamacare and was only dropped when the left couldn’t find a way to pay for it. If left unaddressed it is entirely appropriate to include its costs in health reform cost estimates. And when this measure is taken into account, costs hit $1.15 trillion.
Second, some scrupulous tactics were used to calculate the 10-year cost projections. The key provisions in the health care bill don’t go into effect until 2014. Meanwhile Medicare cuts and tax increases would go into effect immediately. So the money raised through taxes and spending cuts in the first four years of the 10-year projection would offset the expenditures in the subsequent six years. Consequently, when the true ten year window (2014-2023) is examined, and the costs of the “Doc Fix” are taken into account, the cost rises to $2.3 trillion.
Most notably, however, is the CLASS Act (Community Living Assistance Services and Supports Act) provision. This is where the real cost waits. Another long-term entitlement program (Even though we have two that are going broke) that the CBO recently calculated will reduce the federal deficit by $72.5 billion in the first decade. Still, this does not mean the cost curve will bend downward or that it won’t add to the deficit.
The CBO’s estimate is based on sleight-of-hand accounting. The trick is that CLASS Act doesn’t pay benefits until 5 years from now, but collects payments immediately. In other words, it builds up a nice sum of money (through $72 billion worth of taxes, bringing the cost of the 10-year projection to $2.5 billion) for ten years, but pays benefits only for the last 5 years, and therefore appears to lower the deficit in the near term.
But regardless, deficit reduction is not what the CBO says about the subsequent decades:
CBO estimates that both the House and Senate versions of the CLASS program would reduce the federal budget deficit in the second decade following enactment of the legislation (2020-2029), but by smaller amounts than in the initial decade. By the third decade, the sum of benefit payments and administrative costs would probably exceed premium income and savings to the Medicaid program. Therefore, the programs would add to budget deficits in the third decade—and in succeeding decades—by amounts on the order of tens of billions of dollars for each 10-year period.
A new entitlement program will assuredly send costs soaring. If you’re not buying the CBO analysis, consider the historical record for two public health plans. When Medicare was first introduced in 1965 it was projected to cost $12 billion by 1990. However, the actual cost in 1990 was $112 billion. Off by nearly factor of 10. Imagine that the current bill turns out to cost 10 times as much as its projection. That’s more than $25 trillion — almost twice the value of everything produced within the United States. Would this proposal even be considered if that were the case?
Additionally, Medicaid projections turned out to be too low, much too low. It started virtually unnoticed as an optional program, but quickly took hold and grew at an unprecedented rate. Although small at its inception in 1965 (relative to Medicare), according to stateline.org, the program grew to account for eight percent of state budgets by 1985. Just 20 years later, Medicaid consumed 22 percent of state’s budgets, and that, combined with federal spending, amounted to $330 billion. Today, the program continues to devour state budgets while 57 percent of the tab is picked up by the federal government.
The historical record coupled with the CBO analysis make it crystal clear that this bill will not lower costs, bring down the deficit or reduce health care spending. The truth is just the opposite.
The doctors in lab coats surrounding President Barack Obama as he gave his latest health care speech yesterday were not there to give the President a physical; that happened Sunday. No, these doctors were props, dressed to impress for what the White House claims is their “final push” for the President’s government take-over of the health care industry. The President again repeated the same old tired claims he has been making for months: “The proposal I’ve put forward gives Americans more control over their health care,” “our proposal is paid for,” and “my proposal would bring down the cost of health care for millions.” We, and plenty of others, have refuted all these claims before, but this time they are particularly easy to expose as patently false. President Obama gave away the game when he said:
Our cost-cutting measures mirror most of the proposals in the current Senate bill, which reduces most people’s premiums and brings down our deficit by up to $1 trillion over the next two decades. And those aren’t my numbers – they are the savings determined by the CBO, which is the Washington acronym for the nonpartisan, independent referee of Congress.
But there is one huge difference between the Senate bill and what the President kept referring to as my/our proposal: the Senate bill actually exists. For all the talk in Washington about Democrats in the Senate using reconciliation to pass a final version of Obamacare, one key fact has been overlooked: no reconciliation bill exists. Not in the House. Not in the Senate. Nowhere. It simply has not yet been written, and there are plenty of reasons to believe it never will.
The White House is telling the public they expect the House to pass the Senate bill, and then both the House and Senate would pass the yet-to-be-drafted reconciliation, all before Easter recess. But Speaker Nancy Pelosi (D-CA) simply does not have the votes to pass the Senate bill. If she did, it would already be law. To convince her fellow wayward Democrats to vote for the Senate bill, the yet-to-be-drafted reconciliation bill is expected to: 1) scale back the tax on high-end health insurance policies (decreases revenue); 2) close the Medicare D loophole (costs money); 3) boost insurance subsidies (costs money); and 4) increase Medicaid payments (costs a ton of money). Where exactly do House and Senate aides writing this new bill expect to come up with the money to pay for all these new goodies? And they have to find that cash because all reconciliation bills must be certified by the Congressional Budget Office (CBO) to reduce the deficit by $1 billion over five years. And that CBO score will take at least a week, or possibly two to complete.
So when will the public get to see this reconciliation bill? The Wall Street Journal reports that “Democrats have started writing the formal reconciliation bill” and “intend to send it to the Congressional Budget Office for evaluation by the end of the week.” But The Los Angeles Times reports that: “Senior Democrats on Capitol Hill will not finish writing the reconciliation package until next week at the earliest.” Our advice: don’t hold your breath.
In the meantime Speaker Pelosi is bleeding the votes she needs to first pass the Senate bill, by an up or down vote, in the House. Just 220 members of the House voted for their version of Obamacare in November. Since that time, Reps. Robert Wexler (D-FL) and Neil Abercrombie (D-HI) have left the House; Rep. John Murtha (D-PA) has passed away; and Joseph Cao (R-LA) has said he will vote against the bill. That leaves Pelosi 216 votes, which would be exactly enough to pass the Senate bill. But then there is Rep. Bart Stupak (D-MI) who will not vote for the Senate bill since it uses taxpayer money to fund abortion. And Stupak says he has a dozen other members that will switch from yes to no with him. And Rep. Michael Acuri (D-NY) now says he is likely to switch his vote from yes to no. And Rep. Shelly Berkley (D-NV), who voted yes the first time, says she is “not inclined to support the Senate” bill. And Rep. Gerry Connolly says he could “absolutely” switch his vote from yes to no. And now Congressional Progressive Caucus Rep. Raúl Grijalva, (D-AZ) says he’s less likely to vote for the final health care reform bill if the reconciliation bill contains the ideas President Obama outlined yesterday.
One House Democrat tells the LA Times why the White House is facing such a tough sell: “It’s a no-win situation for those of us in moderate districts. If you vote no, your base is upset. If you vote yes, everyone else is upset. You almost couldn’t design a legislative vise more damaging to moderate Democrats — or that puts our majority more at risk.” But don’t worry House Democrats, the Senate is going to do everything it can to convince you that you aren’t going to walk the plank alone again. Sen. Dick Durbin (D-IL) tells Politico that Senate Democrats are planning a gesture some time next week that will guarantee to House Democrats the Senate will act: “I don’t know what the gesture will be but it will be a convincing gesture.” Kabuki theater indeed.
Quick Hits:
- According to Rasmussen Reports, (42%) of American adults now expect the U.S. economy to be weaker in one year’s time, the highest number at any time since President Obama took office.
- A group of four Democrats (Sens. Chuck Schumer (NY), Sherrod Brown (OH), Jon Tester (MT) and Robert Casey (PA)) called Wednesday for the Obama administration to halt a federal stimulus program aimed at building wind farms and other clean-energy projects.
- A FOIA request from the Competitive Enterprise Institute has revealed that the Department of Energy – specifically the office headed by Al Gore’s company’s former CEO, Cathy Zoi – recruited wind industry lobbyists to help push Obama’s wind energy proposals.
- Environmental Protection Agency (EPA) Administrator Lisa Jackson told a Senate Appropriations panel yesterday that any effort to restrict EPA’s authority to regulate carbon emissions pursuant to the Clean Air Act would be an “enormous step backward for science”.
- Guest Blogger: Rep. Henry Cuellar (D-TX) on Free Trade