Scoring the Health Care Bill

I’ve had to correct a lot of this post, twice now, because I’ve read some more about it, and I’ve changed my mind. It happens, when you think about things. It also helps to read all the sources you normally do, but hey, weekends exist for lazing around.

The health care bill will lower the deficit, according to the only nonpartisan entity whose job it is to score the cost of bills objectively. This means they follow the intent of the bill, and assume its measures will be enacted as law.

So why are some scoring the bill like the deficit reduction measures will never happen? You cannot include your assumption on future political will when estimating the cost of legislation! But some make an attempt to list details saying that the accounting methods themselves don’t add up. There’s also a fake memo saying the Democrats have no intention of cutting Medicare. But no Republican who has used the document has been able to name a source. More on the health care bill opponents’ nihilism after the jump.Conservative pundits scorn the deficit reducing merits of the bill, claiming the cost reduction parts of the bill will never be implemented. How do they know this?

Mr. David Brooks, futurologist,  foresees:

This bill may be deficit-neutral on paper. But it has just become a fiscal time bomb. The revenue will never come. Compromises have to be made to keep it (barely) alive. But responsibility ebbs. Politics wins.

And these dandies from Media Matters:

Brooks: “[A] lot of the deficit control is totally bogus.” Appearing on the March 14 edition of NBC’s Meet the Press, Brooks said he “lean[s] against” health care reform, in part because “a lot of the deficit control is totally bogus.” Brooks added: “We’re [going to] have 10 years of revenue to pay for six years of costs.”

Will: Legislation’s deficit reduction is due to “accounting gimmicks.” On the March 14 edition of ABC’s This Week, host Jake Tapper said to Will, “[F]ormer Congressman Ray LaHood … has an op-ed in the Chicago Tribune today talking about why, as a member of the House, he would have voted for this bill, because this bill reduces the deficit, and it also brings down health care costs and it will make insurance more affordable. Do you believe that he would have voted for it as a Republican congressman?” Will replied: “Not a bit. It reduces the deficit because you have 10 years of taxes and six years of benefits and other accounting gimmicks.”

These assertions seem misleading to me for two reasons. First, the CBO scores the bill as having even greater impact in the second decade, after those 10 years of taxes and “gimmicks”, than the current projected costs of health care, so where are these four years of discrepancy?

Second, we don’t know if Congress is going to have the political will to apply the deficit-reducing taxes and cuts. Right now, the Cadillac tax will start in 2018. Saying this won’t happen because lawmakers aren’t serious about taxing is just way out of anybody’s job qualifications. But if you don’t enact such measures, then the opportunity to reduce the deficit will never happen.

Third, the new Medicare board has the power to make spending targets that must either be approved, or if rejected, Congress has to find ways to pay for them. This is Pay-As-You-Go type stuff Republicans loved in the 90s and it worked. So props for the Dems for taking good ideas.

And yet, there are certain problems with the scoring.

Specifically, I’m talking about this op-ed by Douglas Holtz-Eakin, CBO director from 2003-2005.

He brings up a couple ways in which the scoring of the bill may be misleading:

  • There are $53 billion in Social Security taxes used to pay for this bill, which as another entitlement, he argues, won’t offset costs because the taxed revenue will come from the same entitlement system and tax any wage gains made from these new subsidies for the lower and middle classes. UPDATE: This is true of only a part of the Social Security taxes in the health care bill.
  • Another $70 billion of revenue for health insurance programs not starting for ten years are included in the cost estimates of the first ten years. UPDATE: The costs of new long-term health insurance programs are paid for by reductions in Medicare spending growth.
  • And $19 billion is saved from the student loan reform package, which cuts out bankers receiving interest from loans that were guaranteed from the government anyway. Also good news to anyone a student or people with children. While not health care related, this doesn’t seem like that big a deal, in size or negative impact to society.

But from there, Mr. Holtz-Eakin reverts back to the argument of Will and Brooks, that Medicare cuts won’t be enacted because they haven’t in the past. Congress has routinely raised the sustainable growth rate (SGR) of Medicare in the past, and the bill proposes making cuts to this. This amounts to $463 billion in cuts in the first ten years. They are assuming the new Medicare board, with new powers, will have the same old results, and that Congress won’t step up and get serious on the deficit. They go too far.

UPDATE:

A good rebuttal about Mr. Holtz-Eakin’s editorial here, particularly that he added his figures incorrectly. Slightly embarrassing that I didn’t catch simple addition errors. Yikes. Holtz-Eakin’s numbers add up to $700 billion, not $562 billion. Anyway, a summary of DeLong’s critique below:

  • The student loan savings reduce the deficit. That is no gimmick, even if it’s part of the health care bill.
  • Only some of the Social Security taxes are associated with higher Social Security benefits in out-years

And the big one, as I thought of this independently (hooray for me): if we assume Congress can’t reduce deficits, yet require that Congress only pass bills that reduce the deficit. Then we can only do nothing, it’s nihilism people. Are we Americans or not? We don’t like nihilism. Therefore, pass the damn bill!

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