JONATHAN COHN MARCH 15, 2012
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Sorting through the deceptive attacks on health care reform gets old, even for me. But on Wednesday the Republicans and their allies made a claim so obviously misleading that they, and the media outlets parroting them, must have known they spreading false information.
The basis for the claim is the Congressional Budget Office’s latest projections for the Affordable Care Act, which critics (and I!) like to call Obamacare. When Congress first passed the law, in the spring of 2010, CBO made official estimates of how much the law would cost, how many people would get insurance as a result, and so on. It updated that estimate one year later and has, now, updated it one more time.
The CBO distributed its report in the morning and, by 11 a.m., Republican offices on Capitol Hill were spitting out press releases about it. According to the Republicans, CBO had discovered that Obamacare was going to cost $1.76 trillion over the next ten years. “The CBO’s revised cost estimate indicates that this massive government intrusion into America’s health care system will be far more costly than was originally claimed,” Tom Price, chairman of the House Republican Policy Committee, said. Within a few hours, both Fox News and the Washington Times were carrying online stories making the same claim. According to the Fox News account, CBO was “showing that the bill is substantially more expensive—twice as much as the original $900 billion price tag.”
If CBO had truly determined that health care reform’s cost will be twice the original estimates, it would be huge news. But CBO said nothing of the sort.
To figure out the cost of health care reform, CBO looks at each of the law’s component parts and, for accounting purposes, groups them into different categories. It calls one category “gross cost of coverage expansions”—that’s the amount of money the federal government will spend to help people get insurance, mostly by offering Medicaid to more people or giving people subsidies they can use to help offset the cost of private insurance. Last year, CBO estimated that the gross cost of coverage expansion from 2012 through 2021 would be $1.445 trillion. Now CBO thinks the gross cost will be $1.496 trillion. The number shifted, in part, because the CBO has changed its projections for economic growth. (MSNBC’s Tom Curry has a nice explanation of this.) But, in the context of such a large a budget projection, that’s barely any difference at all.
In the this latest estimate, CBO extends its projection out one more year, to capture the expenses from 2012 to 2022, in order to capture a full decade. In 2022, CBO says, the gross cost of coverage expansion will be $265 billion. Add that to the $1.496 and you get (with rounding) the $1.76 trillion—the one in the press releases and the Fox story.
But there is nothing new or surprising about this. It’s only slightly more money than the previous year’s outlays. The ten-year number seems to jump only because the time frame for the estimate has moved, dropping one year, 2011, and adding another, 2022. Obamacare has virtually no outlays in 2011, because the Medicaid expansion and subsidies don’t start up until 2014, which means the shifting time frame drops a year of no implementation and adds one of full implementation.
Still, doesn’t that just validate what the law’s critics have always said, that the administration was playing games to hide the program’s true impact on the deficit? Hardly. Remember, this is just the raw cost of expanding insurance coverage we’re talking about here—in other words, the money the federal government is sending out the door. The new law also calls for new revenue, in the form of taxes and penalties. It also reduces spending, mostly through Medicare, to help offset the cost of the coverage expansion. When the Affordable Care Act became law, CBO estimated that the net result of all these changes, taken together, would be to reduce the deficit. Now, with this revised estimate, CBO has decided the law will reduce the deficit by even more money.
Yes, you read that right: The real news of the CBO estimate is that, according to its models, health care reform is going to save even more taxpayer dollars than previously thought.
I want to be clear about something. The Affordable Care Act has flaws: Among other things, it reaches fewer people and provides less financial protection than I would prefer. The revised CBO report actually suggests this problem will get mildly worse, since it also expects slightly fewer people to end up with insurance. That’s one reason why the law will cost less; it’s helping fewer people. Another reason is that more employers pay penalties for not offering insurance and more people pay penalties pay penalties for not obtaining it. That’s obviously not great, either.
The report also had one finding that give us at least a little pause: CBO now projects the number of people with employer-sponsored insurance will drop by 4 million people, on net. It’s still a small effect, representing less than 2 percent of the total population with employer-sponsored coverage. That’s well within the margin of error of these models. It’s also difficult to tell why CBO thinks this will happen—whether it’s fewer employers offering insurance, fewer employees accepting coverage, or workers moving into firms that are less likely to provide benefits. Any of those would be consistent with lower economic growth, as CBO now expects. Still, the issue merits attention. (If I can get a more detailed explanation of why CBO thinks this will happen, I’ll update this item.)
But these aren’t the nuanced claims Republicans and their allies are making. Nor are their complaints consistent with this general point of view. On the contrary, if they had their way, health care reform would reach even fewer people and provide less protection.
Meanwhile, the bottom line about Obamacare really hasn’t changed. Notwithstanding these latest adjustments, CBO still thinks it will mean about 30 million additional people get insurance, that insurance will become more secure for those who have it, that the law will more than pay for itself in the first ten years, and that, over the long run, the law will reduce the deficit.
But why admit those things when you can dissemble about them and when outlets like Fox and the Washington Times will let you get away with it?
Update: David Hogberg, of Investor’s Business Daily, noted via Twitter that one reason CBO predicts greater deficit reduction is that more employers and individuals will pay penalties. That’s true and I’ve added a sentence to that effect, although, again, the overall effect here is pretty small.
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22 comments
Moonbats and accounting -- never the two shall meet: Not surprisingly - Original CBO projections have been wildly inaccurate. Yet moonbats still believe, facts below When the law was passed in 2010, the Congressional Budget Office (CBO) estimated it would cost $940 billion over a ten year period. The new estimate? $1.76 trillion. A year ago, the CBO estimated that one million workers would no longer get insurance coverage from their employers when the healthcare law was fully implemented. The CBO now projects that 4 million fewer people will be getting their healthcare covered by their employer Yet moonbats still believe Obamacare is going to reduce the deficit. Almost laughable.
- mr_rationale
March 15, 2012 at 10:50am
Moonbat-in-chief is back! It crawled from under that rock in Somalia.
- tmmats
March 15, 2012 at 11:15am
For the bulk of Mr.R's post (except the use of "moonbat"), the usual sort of source: http://frontpagemag.com/2012/03/15/costs-for-obamacare-skyrocket/
- mldarby
March 15, 2012 at 11:21am
First of all, rationale, would you care to cite this 2010 estimate of yours, or is that just some hearsay we should accept as truth even though you've proven yourself an unreliable source?
Second, you really expect us to fall for this accounting sleight-of-hand? 2010 estimate would have obviously included several years of non-implementation, 4 of them, and estimated costs through 2020. You can't just move the time frame to 2012 - 2022 from 2010 - 2020, and say Obamacare really costs more than they said. That's not just comparing apples and oranges, that's absurdity on a grand scale; you could compare the actualized expenditures to the original estimate, but even then you have to take into account all the baseline assumptions and anything that's changed with them.
- GSpinks
March 15, 2012 at 11:36am
Poor rat. It's kind of sad that the program is simply reposting the exact arguments that are refuted by the posts he responds to.
- miceelf
March 15, 2012 at 11:43am
Cohn is skirting the issue here. The assertion that the gross estimate is now double the original CBO estimate, even within the 2012-2021time frame he insists upon, is more correct than not; about 66% to be exact. By politico BS standards, that ain't half bad.
- jkodak
March 15, 2012 at 11:46am
Don't get weary. Keep up the good fight, Jonathan!
- Claris
March 15, 2012 at 12:51pm
No, the issue here is an invalid comparison. The implementation wasn't delayed until 2014 as an accounting trick; it was delayed to give states time to set up the exchanges or otherwise comply with the law. The 10 year costs from 2011 - 2020 haven't doubled, the 10 year costs from 2013 - 2022 might be almost double the 10 year costs from 2011-2020, assuming the numbers compared are apples and the $900 billion is accurate, but that's not a big story, that's a big "no shit Sherlock". And the CBO doesn't estimate more than 10 years out because there's too many unknowns and too many variables, so trying to compare 2011 - 2022, which doesn't exist, to 2013 - 2022 cost projections is just as absurd as comparing 2011 - 2020 to 2013-2022 because the time frames aren't the same. I could see trying to raise a stink if the realized costs were twice the original official projects, but no one's talking about the realized costs. Obama wins by default because the hullabaloo is absurd.
- GSpinks
March 15, 2012 at 12:54pm
One could break that 1.74T price tag over the existing population of the U.S. and it comes out to $558.4/person/year for the cost of providing expanded health care access to the uninsured and insured. That breaks down to $1.5 a day / person. I guess I can buy Mr_Rat a cup of coffee instead.
- singlspeed
March 15, 2012 at 12:57pm
And, even if they do correct for the time frame, or bring up the realized costs, you also need to factor in all of the baseline assumptions against the realities that occurred before you start complaining about the price tag; passing laws that affect the assumptions of the cost estimate invalidate all complaints about changes to the estimate.
- GSpinks
March 15, 2012 at 12:57pm
When Mr_Rationale uses the term "Moonbats" it reminds me of the character Golum. in Lord of the Rings walking around saying "My precious."
- Nusholtz
March 15, 2012 at 3:57pm
OK, can you comment on "$900 billion price tag". You didn't address where Fox came up with that. Thanks!
- ronsimen
March 15, 2012 at 6:03pm
What happened this week is the direct result of the deceptive approach taken by advocates of the bill in 2009-2010. That is, by front-end-loading revenue, and back-in-loading the costs, Democrats could claim that the cost was less than a trillion dollars (over the initial ten years). More offensive to me, however, is that the supporters of Obamacare have failed to call Obama out for the biggest of the frauds used to support passage of the bill: "If you like your health insurance, you can keep your health insurance." I am fully satisfied that many employees of Catholic hospitals and schools liked their health insurance, despite the fact that it did not provide coverage for contraception. Guess what, under regulations promulgated by the Obama administration, the only entities/persons who will be able to "keep" the health insurance that they liked are those who, fortuitously, had policies that include the exact same coverage, riders and exclusions as those now designed by Washington bureaucrats. Virtually no one will end up with the same insurance that they had and enjoyed prior to the passage of Obamacare, and it does not matter how desperately they want to keep it. That choice is now off the table. Does anyone care?
- horsefly
March 15, 2012 at 7:27pm
horsefly It does not appear, to me at least, that going from a policy that does not provide contraceptive coverage to one that does provide contraceptives is a significant loss that rebuts the claim that people can keep their health insurance. I don't see how that means "virtually no one will end up with the same insurance." Also, note that you are talking about "employer provided insurance" and not an individual selection of insurance.
- Nusholtz
March 15, 2012 at 8:52pm
You mean the same approach where they have to keep extending the Bush tax cuts because if they actually make the law permanent then all the 10 year estimates go way down in terms of revenue? Like it or not, nobody would have been ready to implement Obamacare over night, and the CBO only does 10 year estimates, so what you're saying sounds reasonable but it's effectively quite fanciful. I think the more important issue is whether it will continue to contribute to a reduction of the national debt, even if that issue is easy to resolve by correcting the levels of taxation.
So you're trying to make the case for people who liked and want to continue their sub-standard policies, which leave them at risk for inflicting society with massive amounts of healthcare debts? No thank you. I lived in PA; I'm quite familiar with being taxed for the reimbursement of hospitals for their treatment of people who can't pay the medical bills afterwards, so I'm okay with making the people who were happy with their substandard health insurance being made to pay their fair share. Unless you want to start talking about hospitals not being mandated to provide life saving medical care to anyone who needs it, regardless of their ability to pay?
- GSpinks
March 15, 2012 at 8:58pm
Oh I'm getting sick of this with the contraception already. Knock it off guys. Women's health is important TOO.
- Sophia
March 15, 2012 at 10:11pm
good rebuttal nush. I am stuck with the insurance my employer provides, the notion that I, as a Catholic, would be pleased that my employer forbade me from using my insurance for family planning is simply crackpot. As a Catholic when I or my wife go to the Doctors we can always decline using contraception. I really don't understand the bizarre argument that less choice (for the same cost, probably even bigger since contraception is a hell of a lot cheaper than childbirth) is more freedom. On a positive note, I would have to say the overwhelming amount of Americans don't know of this Republican horseshit (outside of those that are glued to Faux) the only reason I heard of this is because I read it here.
- blackton
March 15, 2012 at 10:34pm
Nush-are you suggeting that when Obama repeatedly promised that if you like your health insurance, you can keep it, he was referring only to individually procured policies? He never ao qualified his promise. And, trust me, my extended family is awash in adults who believe that the procurement of contraceptives should not be the subject of something called "insurance." finally, why do people still refer to the Bush tax cuts. When the Bush tax cuts were set to expire, they were extended by a Democratically controlled house, a Democratically controlled senate, and a Democratic president. These are, in all fairness, the Obama tax cuts.
- horsefly
March 15, 2012 at 11:51pm
Horsefly, I am having trouble following your argument. You seem to be saying that if I liked my policy before and I get to keep it, but with additional benefits, I won't like it any more? I thought this was a thoughtful article. Too bad some commenters seem to resist reading it before commenting.
- brthompson
March 16, 2012 at 12:38am
Obama tried to end the BUSH tax cuts, but the REPUBLICAN-controlled House wouldn't let him. So rather than start World War III, Obama let the GOP further deplete funding for the U.S. government--for the time being. There may come a day when the U.S. is attacked, after the U.S. government has been weakened from lack of funds. In which case I would recommend that Americans who need to call 911 should instead: CALL A REPUBLICAN. All this talk about the exact cost and/or savings of the Affordable Health Care Act in the future is highly speculative and a bit silly. Some money will be saved, simply because the government is involved in the process. Without government involvement the cost of one of those pleated paper cups you get your meds in at the hospital will eventually be $20. Right now it's at least $2 and, with hocus-pocus accounting tricks, sometimes $5. All the traffic will bear, folks. If we don't get the government heavily involved, the cost of health care alone will break America.
- magboy47.
March 16, 2012 at 2:30am
horsefly"are you suggeting that when Obama repeatedly promised that if you like your health insurance, you can keep it, he was referring only to individually procured policies?" Obama's message was that if you had insurance you liked because it paid for certain things or whatever other features you liked, you would not be required to lose that policy. That message does not create a guarantee to each individual that he or she has a right to whatever insurance his or her employer was providing prior to enactment. About extending the Bush Tax Cuts, the Republican filibuster controlled the result, inasmuch as they threatened to shut down the Senate.
- Nusholtz
March 16, 2012 at 8:28am
"Guess what, under regulations promulgated by the Obama administration, the only entities/persons who will be able to "keep" the health insurance that they liked are those who, fortuitously, had policies that include the exact same coverage, riders and exclusions as those now designed by Washington bureaucrats." Do you really think that even without any new regulations people have the exact same coverage from year to year? Coverage, riders and exclusions are changed by insurance companies on a regular basis without any prompting by the government. What fantasy world are you living in where insurance policies remain unchanged for more than a few months? Your points are completely divorced form reality, and even if they had a basis in fact they have little to no meaningful substance.
- Attrill
March 16, 2012 at 1:30pm