JONATHAN CHAIT MARCH 24, 2010
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Of all the conservative complaints about health care reform, the one I find most baffling is the notion that the financing is phony because it fails to account for physician pay increases. The complaint is 100% phony. And yet it continues to be repeated over and over in the conservative media, recycling through a misinformation feedback loop.
The complaint gained new momentum and publicity last week, when right-wing icon Paul Ryan requested that the Congressional Budget Office calculate the cost of health care reform combined with physician pay increases. The result was cited as proof of the "true" cost of Obamacare.
Let me explain this again. In 1997, Congress changed the formula for reimbursing doctors under Medicare. Due to poor design, they created a formula that would impose massive reimbursement cuts that were never intended by Congress. As a result Congress has regularly restored the unintended cuts. Yet because the law remains on the books, the budget assumes the cut will go into effect every year even though it won't. In other words, the budget baseline is off by about $200 billion a year, which is the rough cost of filling in this hole.
Doctors have been agitating Congress to permanently fix this, as they don't appreciate the year-to-year drama of Congress saving them from a draconian payment reduction. In an early version of health care reform, the House considered including a permanent "doc fix," which would have pleased the physicians as well as solved a longstanding fiscal problem. They decided not to do so, because they were having a hard enough time coming up with enough revenue to pay for the changes they were imposing in health care reform, let alone taking care of this as well.
In any case, this is not one of the costs of health care reform. It is a cost that would have happened regardless of whether health care reform passed. Moreover, the imaginary future savings of cutting physician reimbursement is not one of the cost offsets for health care reform. Over the next decade, the new law will create $800 billion in new obligations for the government and $938 billion in new savings.
I have yet to see anybody explain why the Democrats have some obligation to cover the cost of a government policy that would occur whether or not reform becomes law. Is it possible that conservatives believe that anybody proposing a health care reform has some obligation to solve this problem, even though the problem would occur anyway? I suppose it's possible. But I'd point out that none of the Republican plans account for the doc fix. The House Republican health care plan makes no provision for the doc fix. Ryan, who has endlessly flayed Obama for failing to provide such a fix, has no such provision in his "roadmap."
Ryan, who has nonetheless made the absence of the doc fix into a crusade, requested that the CBO score the cost of Obamacare plus a doc fix. The CBO dutifully produced such an analysis:
You asked about the total budgetary impact of enacting the reconciliation proposal (the amendment to H.R. 4872), the Senate-passed health bill (H.R. 3590), and the Medicare Physicians Payment Reform Act of 2009 (H.R. 3961). CBO estimates that enacting all three pieces of legislation would add $59 billion to budget deficits over the 2010–2019 period.
In other words, a member of Congress asked the CBO to add up the combined budgetary sum of the health care bill (HR 3590) plus the reconciliation fixes (HR 4872) and then throw in the doc fix. This hardly constitutes an endorsement of Ryan's claim that the doc fix is part of the cost of enacting Obamacare. If Ryan asked CBO to add in the cost of continuing the Iraq war, it would have done that, too. And, of course, Ryan was not requesting this to obtain information from CBO -- all CBO did was add the budgetary cost of the doc fix to the cost of Obamacare, something an elementary school student could have done. The point of this request was to add CBO's imprimatur to Ryan's disingenuous claim.
Ryan's stunt has further deepened the confusion among suspicious conservatives. Former Bush healthcare speechwriter Jeffrey H. Anderson complains that the Democrats directed CBO not to score the doc fix:
The only reason that the White House could ever claim, however implausibly, that its health-care bill would not dramatically increase deficits was because the Democrats instructed the CBO to give the bill credit for "savings" from reducing doctors' pay under Medicare by over 20 percent and never raising it back up.
This is categorically false. Democrats did not instruct the CBO to credit savings from reducing physician pay toward the health care bill. Every dollar of new health care spending is offset by different savings. The purported cut in physician pay is not part of those savings. There are parts of the CBO score you can legitimately suggest underestimate the cost of health care reform -- most prominently, the slowdown in value of the tax credits over the second ten years. (I'd argue that there are places where CBO is underestimating cost savings, as well.) But the doc fix is simply not a legitimate complaint.
I dwell on this example because it's a perfect case study of the broader phenomena of right-wing media creating a closed information circuit, in which even claims that are demonstrably false questions of fact can circulate unchallenged. Other such closed information circuits can be found in American culture, but none of them is the dominant faction of a major political party.
10 comments
Yes, thank you for harping on this point. See another example below -- Douglas Holtz-Eakin's March 21 op-ed in the New York Times: "Finally, in perhaps the most amazing bit of unrealistic accounting, the legislation proposes to trim $463 billion from Medicare spending and use it to finance insurance subsidies. But Medicare is already bleeding red ink, and the health care bill has no reforms that would enable the program to operate more cheaply in the future. Instead, Congress is likely to continue to regularly override scheduled cuts in payments to Medicare doctors and other providers. "Removing the unrealistic annual Medicare savings ($463 billion) and the stolen annual revenues from Social Security and long-term care insurance ($123 billion), and adding in the annual spending that so far is not accounted for ($114 billion) quickly generates additional deficits of $562 billion in the first 10 years. And the nation would be on the hook for two more entitlement programs rapidly expanding as far as the eye can see." One doesn't know where to begin. First, it makes the doc fix error, suggesting that the Medicare savings are due to "regularly scheduled cuts" to doctors. No, the savings from Medicare are on top of those cuts, which figure into the baseline and not the budgetary effect of HCR. As Jon never tires of pointing out, if the cuts in payments to doctors are a fantasy, they're equally a fantasy with or without HCR, and passing or not passing HCR makes no difference. Second, yes the bill most certainly does have mechanisms for reducing Medicare costs, chief among them freezing and then lowering of Medicare Advantage payments. The bill also introduces the testing of more efficient payment mechanisms and sets up the advisory board to study and recommend cost-saving measures, neither of which, I believe, the CBO gave any credit. Holtz-Eakin totally ignores all of this and assumes zero Medicare savings. Who's doing fuzzy math? Third, this is wrong: "Gimmick No. 1 [there isn't a Gimmick No. 2 or 3, by the way] is the way the bill front-loads revenues and backloads spending. That is, the taxes and fees it calls for are set to begin immediately, but its new subsidies would be deferred so that the first 10 years of revenue would be used to pay for only 6 years of spending." No, the taxes and fees don't begin immediately. They go into effect in 2013 I believe (payroll tax increase for wealthy people) and 2018 (Cadillac plan tax). And some significant benefits begin immediately. In any event, this would only be a "gimmick" if the bill didn't save money after ten years -- if the mix of revenues and costs were being manipulated in the first ten years in order to disguise later shortfalls. But the CBO says the bill will save *a trillion dollars* in the second ten years, a point Holtz-Eakin totally ignores. Holtz-Eakin is the one only looking at the first ten years to the exclusion of the big picture. I don't understand his point about Social Security. It sounds like he's saying that the bill will generate Social Security savings, but that that doesn't count. His op-ed is filled with similar nonsense. He huffs that the student loan bill has nothing to do with health care -- obviously true -- but doesn't dispute that it saves money. Indeed, that's the reason it was included in this bill. Why does it matter where the savings come from? Savings are savings. The question is how this bill affects the budget. All provisions count. He began with a question: "In other words, a bill that would set up two new entitlement spending programs — health insurance subsidies and long-term health care benefits — would actually improve the nation’s bottom line. "Could this really be true? How can the budget office give a green light to a bill that commits the federal government to spending nearly $1 trillion more over the next 10 years?" The dirty little secret is that it's not hard to come up with a trillion bucks over ten years if you tax wealthy people just a little more. That's it. Not that difficult to understand. If you want to argue that provisions *in this bill* will be repealed or not go into effect due to political pressures, I'll listen. At least that would be an honest argument. But that's not the arguments these guys are making. The fact that they're forced to rely on bogus arguments should give comfort to skeptics.
- jhildner
March 24, 2010 at 5:30pm
Let me try to help explain: 1. Doc fix is part of the Dems health care reform agenda/ObamaCare; it was in the bill late last year, and is still part of their agenda per Pelosi and others. 2. If you include the Doc fix, which reflects the more accurate ObamaCare costs, the CBO scores as above -- wiping out the 'deficit reductions' 3. The folks who include the cost of Doc Fix in healthcare reform are correct -- as it will be a cost. 4. Doc Fix is directly related to Healthcare reform ; Iraq war not so much Simple analogy -- if you remodel a house to be more energy efficient (where benefits outweight costs) and don't include the costs of fixing the roof where you mount the solar panels --- you have simply made an error ObamaCare/Dem healthcare reform includes Doc Fix but they don't include the cost. Pretty simple.
- mr_rationale
March 24, 2010 at 10:59pm
Mr_Rationale's post is a beautiful example of the subtle genius of the GOP's manipulation of its constituency through imprecise language. Notice how, because an attack on the finances of HR 3590 isn't going to bear fruit after the CBO score, they direct their attack against "healthcare reform". This allows them to tack on costs that aren't directly associated with these bills, but which SEEM to be -- at least to a credulous audience. This technique has its limits, naturally, as suggested by Mr_Rationale's mention of the Iraq War in his item 4. However, anything plausibly connected with medical care, health insurance, etc. is a candidate for such misuse. I expect the 'Doc Fix' to be just the tip of the iceberg. It is likely that any legislation democrats pursue related to health care in the coming years will be tarred as a 'hidden cost of health care reform', which will intended, of course, to be misheard as a hidden cost of the current bill. In other words, be prepared for comments like, "This was on the Democrats' agenda, they knew it needed to be done, but they kept it out of the bill so they could make false claims about deficit reduction." Looking forward to it. OK, not really.
- Fishpeddler
March 25, 2010 at 9:53am
"Closed information circuit" is the best description yet of the anti-evolution crowd.
- cforeman
March 25, 2010 at 10:28am
If we apply the logic of Mr_R, Ryan, and co., then the sort of incremental reform they are claiming to support wouldn't work: if we intend to address any of these problems down the road, then they must be considered part of the cost of any individual bill now. That's clearly not how things work. In the real world, when people fix up their houses, they budget for individual fixes separately if they can't afford it all in one go. If they say, "hmm, I'd have to go deeper in debt to fix my roof right now, so let's postpone that until I can figure out how to pay for it," then that's not any kind of error or deception; that's just being financially responsible. Likewise, a permanent Doc Fix would have to be fully funded separately, especially in the current political climate. But wait for conservatives to switch from complaining about the deficit to attacking any taxes or spending cuts that would allow the fix not to add to the deficit after all. And anyway, in Mr_R's house analogy, what's really going on with the status quo is that we're pretending that the higher energy costs of an unfixed roof don't count against our expenses -- talk about math errors.
- frippo
March 25, 2010 at 10:54am
Clarification: actually, I don't have an immediate example at hand of Mr_Rationale's supporting incremental reform -- but any other Republican who buys both Ryan's "doc fix" logic AND the idea of taking it slow is being inconsistent.
- frippo
March 25, 2010 at 10:58am
Rationale: No, the doc fix is not part of the health care reform agenda. The doc fix happens with or without reform. It's not a hidden cost of reform. If anything, it's a hidden cost, period. If you're arguing that *overall* budget predictions are off becuase they don't take into account costs likely to be incurred but not figured in current law, that's fine. That's a good argument, one that applies to any such underestimation in any area of federal spending. But, on the other hand, if you're arguing that the savings from *health care reform* are off, it's not a good argument to point to some other cost (could be the doc fix; could be anything) that would have been incurred anyway. Pretty simple. Your analogy is wrong, because the doc fix is not a prerequisite to health care reform like fixing the roof is a prerequisite to installing solar panels. A better analogy would be to include the cost of of a new energy-efficient air conditioner in the cost of installing solar panels, because they're both home renovation projects having to do with efficiency, even though you were going to buy the air conditioner anyway.
- jhildner
March 25, 2010 at 11:43am
Good comments and a few misunderstandings: 1. Doc fix is part of the democratic health care reform agenda. Assertions otherwise are just wrong, e.g.: Here’s what Nancy Pelosi had to say today (last week) in response to just such a question about the “doctor fix” from a brave reporter: “We’ve been including it in legislation for a long time…it is not about a doctor fix, it is about our seniors or anyone who relies upon Medicare to have access…you call it the doctor fix, its really about access to health are for Americans…its not in this [Obamacare] bill, but we’ll have it soon. We have made a commitment to do this -And it was in the Obamacare bill last year 2. Doc fix is a pre-requisite to health-care reform -- if you allowed the 21% Medicare physician pay cut to actually take effect Medicare would disintegrate as Dr.s stopped seeing Medicare patients 3. There are a several reasons why the Obamacare bill will not reduce the deficit. Not including the Doc Fix costs just the most glaring. But then again deficit reduction was just a sales strategy anyway.
- mr_rationale
March 25, 2010 at 3:46pm
So mr. Rat, health care reform with the Doc. fix equals minor increase in long term deficit with 32 million previously uninsured covered, no more rescission and guaranteed issue versus no health care reform and an even larger increase in long term deficit. Boy, that is a toughie.
- blackton
March 25, 2010 at 6:01pm
Rationale: Here's the point, for, like, the fourth time: The doc fix is not a cost of HCR, because it would have happened anyway, with or without HCR. Do you disagree with that? Your no. 2 bolsters my point, not yours. It suggests that the doc fix would have happened anyway because it's necessary in order to sustain Medicare, whether HCR passed or not. As I said, if you want to argue that federal spending on entitlements overall is not sustainable, or that official projections regarding same underestimate budgetary shortfalls because they don't take into account things like the doc fix, that's fine. We can get to a serious place if we start going down that path. But it's simply not true to argue that the doc fix is a hidden cost of *HCR*. HCR makes new spending commitments and new revenue commitments. The latter will amount to more than the former, sans fuzzy math -- indeed, with *conservative* estimates that don't even take into account cost-savings measures that hold promise -- both in the next ten years, and, even more so, in the next ten after that. Ergo, HCR saves money. With your no. 3, you indicate your disagreement with that, but you don't back it up, so I'll have to await a more detailed analysis. There was an infuriating, but sometimes funny anyway, SNL sketch recently featuring Obama meeting with the Chinese premier. The Chinese premier asked Obama, with sarcastic credulity, something like, "So you're planning to cover 30 million people without increasing the deficit. How is this possible?" Obama's response was "I don't know." Ha ha. SNL's writers may not know, but Obama -- and anyone else who has looked at this seriously -- knows. HCR more than pays for itself by cutting a few benefits -- mainly Medicare Advantage payments, which may result in the loss of some too-cheap perks -- by raising taxes on the well-off a little bit, and by imposing a tax penalty on those who choose not to to buy health insurance. In other words, some minor Medicare cuts and a little bit of taxes, affecting people who won't miss it. These things turn out to go a long way to restoring some rationality and decency to our health care system.
- jhildner
March 25, 2010 at 10:40pm