JONATHAN COHN JANUARY 17, 2011
With the House Republicans planning a Wednesday vote on repealing the Affordable Care Act, I’m going to go back through some of their arguments over the next few days. And I want to start with the argument that seems to be getting the most mileage lately, on Capitol Hill and in the media: The Republicans’ claim that the Affordable Care Act will cost too much--that it will mean additional government debt and, over the long run, more national spending on health care.
In theory, it should be a difficult argument for the Republicans and their allies to make, since the Congressional Budget Office looked at the Affordable Care Act very carefully and came to more or less the opposite conclusion. Specifically, the CBO predicted that the Act will reduce the deficit and reduce, albeit slightly, the rate at which health care spending is increasing.
But the Republicans say the CBO’s numbers aren’t reliable. Among the reasons: the CBO must assume that laws written today will be carried out tomorrow. And that's extremely unlikely, at least according to the GOP and its allies, because Congress has never been willing to such deep cuts take effect before.
I happened to hear a version of this argument first-hand last week, when I was participating in the “Intelligence Squared” debate series. (Video above) During our debate, conservative economist and former CBO director Douglas Holtz-Eakin called the Affordable Care Act the law a fiscal “cancer.” His partner, former Congressman John Shadegg, claimed that it was “common sense” that health care reform could not save money.
I suspect a lot of people assume they are right. Washington Post columnist Ruth Marcus wrote as much recently, for example. But the critics are not right--at least, not if you know the history. So once again, for those who may have missed it the first time, here's why there's nothing outlandish about thinking the spending cuts in the Affordable Care Act will stay in place.
The Affordable Care Act includes new revenue and savings that CBO says are worth more than $1 trillion over ten years, more than enough to offset the cost of expanding coverage to 30 million people. Among the most important of these offsets are about $230 billion in planned reductions to Medicare. They are important not only because are they supposed to free up money to help pay for the coverage expansions. They also important, in theory, because they create incentives for doctors and hospitals to be more efficient, thus making the whole health care system less costly.
But the critics think that those Medicare cuts will never take effect, because doctors and hospitals will scream about them—and, inevitably, lawmakers will listen, delaying or canceling them outright. The proof of this, say the Republicans, is the experience with the so-called Sustainable Growth Rate (SGR) in Medicare. Under the SGR, created in the late 1990s, Medicare is supposed to reduce spending on physicians every year, under a specific formula. But for most of the last decade, Congress has been postponing the SGR adjustments.
All of that is true. What the Republicans don’t tell you is that it’s not the only historical example we can go by. On the contrary, Congress passed much larger reductions in Medicare spending several times in the last 20 years. Researchers at both the Kaiser Family Foundation and the Center on Budget and Policy Priorities have published papers on those cuts. The conclusion? According to the Center's researchers, "The history of health legislation in recent decades demonstrates that, despite some critics’ charges, Congress has repeatedly adopted measures to produce considerable savings in Medicare and has let them take effect."
The Center's researchers go on to note that the SGR adjustment was supposed to be only a small portion of the overall cuts in 1997. They also point out that Congress did allow at least some of the SGR cuts to take effect, enough that physician reimbursement is now 17 percent lower than what it might have been.
None of this guarantees that the cuts in the Affordable Care Act will stay in place. But, contrary to Holtz-Eakin and the Republicans, history suggests there's a perfectly good chance they will.