Political Correction

Debunking The Republican Claim That Health Care Reform Adds "$701 Billion" To The Debt

January 19, 2011 12:25 pm ET

At the outset of the floor debate on the GOP's effort to repeal the Affordable Care Act (ACA), Rep. Paul Ryan (R-WI) laid out the Republican case that Democrats bamboozled the CBO with "smoke and mirrors," and the reform package actually "has a $701 billion deficit." Ryan claimed the CBO score relies on 'double-counting' of savings to Medicare and some tax revenue, but that is provably false — and Ryan himself admitted last year that the CBO doesn't double-count. Ryan also revived the claim that "$115 billion in new appropriations" for the bill "wasn't counted." But that $115 billion is not "new" spending, it's not mandatory under the bill, and $86 billion of it was counted by the CBO. Finally, Ryan argued that "the doctor fix" adds another $208 billion to the debt, but the "doc fix" is only necessary because the GOP screwed up the formulas for Medicare reimbursement back in 1997. The "doc fix" is a separate legislative issue — and a separate budget item — from the Affordable Care Act.

Rep. Ryan: ACA Is A "Fiscal House Of Cards" With "A $701 Billion Deficit"

REP. PAUL RYAN (R-WI): Let me speak to the fiscal house of cards that's represented by this law. Now the minority is saying, 'This reduces the deficit, just look at the letter from CBO to Speaker Boehner, it reduces the deficit by $143 billion over eight years, 230 over ten.' It does that if you manipulate the CBO. I've heard charges of Enron accounting, the only Enron accounting that's been employed here is the previous majority gave the CBO a bill full of smoke and mirrors and made them score that. Well, here's what the CBO says: if you take away the smoke and mirrors, if you take away the fact that there's $70 billion in CLASS Act premiums that are being double-counted, $53 billion in social security taxes that are being double-counted, $115 billion in new appropriations required to hire the bureaucracy that wasn't counted, $398 billion in Medicare cuts that are being double-counted, and oh let's not forget the fact that we're going to do the doctor fix, $208 billion that we just discounted and ignored. When you take away the smoke and the mirrors, this thing has a $701 billion deficit.

Double-Counting? Not In CBO's Numbers

Rep. Ryan Himself Conceded That CBO Did Not Double-Count Any Revenue Or Savings When Scoring The Affordable Care Act. In an interview with the Washington Post, Rep. Paul Ryan had the following exchange with Ezra Klein:

REP. RYAN: CBO just scores what's in front of them. So let's just go through it point-by-point. When you raise Social Security's tax revenues, you also raise benefits. More coming in taxes says more benefits are being obligated CBO says you can only count that money once. If you're counting it as offsets for this bill, you're increasing unfunded obligations for Social Security. CLASS Act is another example: These are premiums for a benefit. You're counting these premiums for this benefit as offsets for another spending project, you're creating unfunded benefits. That's double counting. We're increasing obligations and we're not setting aside those dollars for those programs. [...]

KLEIN: This is where I think we end up in different places. The philosophical differences are all fair enough. But insofar as the double counting goes, the double counting is an issue of how some Democrats are talking about this. And I agree with you. Saying that the money will do two things at once is out of line. But what I want to make sure is clarified here is that the numbers people are using from CBO are not afflicted by that rhetorical overreach. When CBO says the bill will save this much money, it really will, at least according to the best estimates.

REP. RYAN: I'm not disagreeing with that. But I think CBO is omitting other fiscal effects that are not in the bill -- unless we plan on cutting doctors 21 percent next month. Unless we plan on doing that, then we're not truly capturing the fiscal effects. [Washington Post, 3/4/10, emphasis added]

CBO Director: We Count Savings To Medicare Trust Fund "Only Once." In a 2009 blog post, CBO Director Doug Elmendorf wrote: "The key point is that the savings to the HI trust fund under the PPACA would be received by the government only once, so they cannot be set aside to pay for future Medicare spending and, at the same time, pay for current spending on other parts of the legislation or on other programs. Trust fund accounting shows the magnitude of the savings within the trust fund, and those savings indeed improve the solvency of that fund; however, that accounting ignores the burden that would be faced by the rest of the government later in redeeming the bonds held by the trust fund. Unified budget accounting shows that the majority of the HI trust fund savings would be used to pay for other spending under the PPACA and would not enhance the ability of the government to redeem the bonds credited to the trust fund to pay for future Medicare benefits. To describe the full amount of HI trust fund savings as both improving the government's ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a large share of those savings and thus overstate the improvement in the government's fiscal position." [CBO, 12/23/09]

CBPP: Even If You Didn't Count Social Security And CLASS Act Revenues At All, The Bill Reduces The Deficit. According to the Center on Budget and Policy Priorities:

CBO and the Joint Committee on Taxation have concluded that the health reform legislation will reduce employer spending on health insurance, in part because the new excise tax on high-cost insurance plans will lead employers to shift some employee compensation from health insurance to cash wages. Workers will pay Social Security payroll contributions and income taxes on the additional wages.

The legislation also establishes a new, voluntary program of long-term care insurance, called the CLASS Act. Benefit payments from CLASS will be fully financed by premiums that beneficiaries pay and interest earnings. In its early years, as the program starts up, premium collections will substantially exceed benefit payments.

Congressional leaders crafted the health reform bill so that it would be fully paid for without relying on these additional Social Security payroll contributions or the CLASS Act premiums. The CBO estimate clearly shows that if one excludes the net revenues of $29 billion from Social Security contributions and $70 billion from CLASS Act premiums, health reform still reduces the deficit by $44 billion over the first ten years. [CBPP.org, 3/25/10, emphasis added]

"$115 Billion In New Appropriations To Hire The Bureaucracy That Wasn't Counted?" Not Quite

CBO Director Elmendorf: We Did Count Most Of The Discretionary Spending Authorized Under The Bill In Our Baseline Projections. In a blog post, CBO Director Doug Elmendorf wrote: "The potential discretionary costs identified two days ago include many items whose funding would be a continuation of recent funding levels for health-related programs or that were previously authorized and that PPACA would authorize for future years. (For example, those potential costs include $39 billion authorized for Indian health services that already receive appropriations every year.) CBO estimates that the amounts authorized for those items exceed $86 billion over the 10-year period (out of the roughly $105 billion total shown in the table provided yesterday). Thus, 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. That is one of the reasons that potential discretionary effects are shown separately from effects on revenues and mandatory spending in CBO's cost estimates." [CBO, 5/13/10]

CBO: Much Of The $115 Billion In Discretionary Spending Is In Fact "A Continuation Of Recent Funding Levels." The CBO clarified its letter of May 11: "The May 11 letter identified possible discretionary spending of at least $115 billion over the 2010-2019 period. Whether that spending will ultimately occur will depend on future appropriation actions. The potential discretionary costs identified in both CBO's earlier analysis and the letters provided on May 11 include many items whose funding would be a continuation of recent funding levels for health-related programs or that were previously authorized and that PPACA would authorize for future years." [CBO, 5/12/10, emphasis original]

$115 Billion Is Not Mandatory Spending "To Hire The Bureaucracy." As reported by the Washington Post's Ezra Klein: "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." [Washington Post, 1/6/11, emphasis original]

The "Doc Fix" Is A Separate Issue That's Been Around Since 1997

1997: Republicans Wrote "Flawed" Medicare Reimbursement Formula. As reported by the Washington Post's Ezra Klein: "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." [Washington Post, 1/6/11]

Reimbursement Formula Caused Much Steeper Cuts To Medicare Payments Than Congress Intended. According to the Center for Budget and Policy Priorities:

Ezra Klein: GOP's Broken Reimbursement Formula "Needed To Be Fixed Whether Or Not There Was A Health Care Bill." As reported by the Washington Post's Ezra Klein: "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." [Washington Post, 1/6/11]

Republican Repeal Bill Does Not Address "Doc Fix." As reported by the Washington Post's Ezra Klein: "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." [Washington Post, 1/6/11]

CBPP: Cost Of Fixing The 1997 Error Would Need To Be Paid "Regardless Of Health Reform, Not Because Of It." According to the Center on Budget and Policy Priorities: "Some critics complain that the CBO cost estimate for health reform is misleading because the legislation does not include a permanent fix to the broken SGR payment formula for physicians. Since Congress will likely continue to prevent the SGR from taking effect, they say, Congress should consider the cost of such action as part of the cost of health reform. Indeed, Congress likely will never let the full SGR cuts take effect, and it probably won't offset the cost of scrapping them. But that cost is neither part of, nor in any way a result of, health reform. The federal government will incur this cost regardless of health reform, not because of it. This fact is undeniable: if health reform legislation had not been enacted, the full SGR cost would remain. To be sure, it would be better if Congress offset the cost of cancelling the SGR cuts. But that issue is separate from the question of how much health reform itself reduces the deficit." [CBPP.org, 1/7/11, emphasis original]

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