WaPo Story Claiming Deficit Increase From Obamacare Not As Advertised
I don’t think anyone would call me the health care law’s biggest fan. But it’s undeniable that, when you reduce Medicare Advantage overpayments, when you start taxing so-called “Cadillac” insurance plans, and when you add up all the other taxes and levies and cost savings, that outweighs the cost of exchange subsidies and Medicaid expansion and the other costs in the law. The numbers parcel out. If there’s anything that the policymakers paid attention to in the law, perhaps to the detriment of the law overall, it’s the total costs, which were backed up by the CBO.
I should say that this is all undeniable unless you’re a movement conservative activist. One such fellow, Charles Blahous of the Koch-funded Mercatus Center at George Mason University, ran his own set of numbers and found that the health care law would add to the deficit.
The 2010 law does generate both savings and revenue. But much of that money will flow into the Medicare hospitalization trust fund — and, under law, the money must be used to pay years of additional benefits to those who are already insured. That means those savings would not be available to pay for expanding coverage for the uninsured.
“Does the health-care act worsen the deficit? The answer, I think, is clearly that it does,” Blahous, a senior research fellow at George Mason University’s Mercatus Center, said in an interview. “If one asserts that this law extends the solvency of Medicare, then one is affirming that this law adds to the deficit. Because the expansion of the Medicare trust fund and the creation of the new subsidies together create more spending than existed under prior law.”
Administration officials dismissed the study, arguing that it departs from bipartisan budget rules used to measure every major deficit-reduction effort for the past four decades — including the blueprint offered last month by House Budget Committee Chairman Paul Ryan (R-Wis.).
Basically, Blahous calls these budget rules “double counting.” His argument is that, without the Affordable Care Act, Medicare would have had to reduce benefits in 2016, because the trust fund would have run out. The Medicare savings extend the life of the Medicare trust fund through 2029, eliminating the need for those benefit cuts. But the savings also pay for the expansion of Medicaid and the exchange subsidies. So, double counting. But Igor Volsky explains why this is not true:
What Blahous calls “double counting” is actually the “unified budget process,” an accounting method that considers the spending and revenues of the entire federal budget over a 10 year period and the way Congress keeps track of its dollars. It’s the same math that the Congressional Budget Office (CBO) relied on to conclude in 2010 that the law “would produce a net reduction in federal deficits of $143 billion over the 2010–2019 period as result of changes in direct spending and revenues.” […]
Here is how the accounting process works: revenue or savings from the law enters the general fund of the federal treasury, where it is counted towards deficit reduction. The money is credited to the Medicare trust fund, which receives a treasury security that will be paid out in interest when necessary. Should the trust fund cash in its bond, that money is transferred from the general treasury to the fund. However, since the same revenue cannot be used to reduce the deficit and extend the life of the trust fund, Treasury would have to find that money somewhere else. But, given the principles of unified accounting, that money is said to reduce the deficit and extend the life of the fund.
This is a somewhat complex artifact of the budget process that Blahous wants to exploit to “prove” that Obamacare counts its money twice. Blahous wants to open up the way Washington works and place a layer of alleged fraud on it. I don’t really see anything fraudulent here. The money isn’t getting used twice. Blahous wants to make an assumption about trust fund accounting that isn’t replicated anywhere else in the federal government.
There’s one area where I do agree with Blahous: he counts the lack of implementation of the CLASS Act as an $86 billion cost to the federal Treasury over ten years. That’s correct. The Administration will not implement the CLASS Act, the long-term care insurance program, and in the CBO score, they counted the savings from the first ten years, as people paid into the program but before they realized the benefits. Over time, the CLASS Act was said to be a source of deficit increase for the government, however.
I agree with Jon Chait that this study will become a conservative benchmark for the “true cost” of Obamacare, to be trotted out constantly this election year. It got a front-page imprimatur from the Washington Post, after all. But that doesn’t make it totally accurate.