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October 9 2009

CBO Shoots, Doesn’t Really Score…

Nicole Kurokawa Neily

Democrats are celebrating the Congressional Budget Office's cost estimate of the Senate Finance Committee's health care reform bill released on Thursday. Coming in at a mere $829 billion over ten years and even allegedly reducing the deficit by $81 billion, it appears to give Congress carte blanche to move ahead with the legislation ASAP.

The most concise explanation of the score I've heard so far comes from Max Pappas of FreedomWorks, who points out that it's basically an "estimate of a summary," and should be assessed accordingly.

Where else but Washington could you spend $829 billion and SAVE money? Is it magic, or just sleight-of-hand?

Unfortunately, it's the latter. According to economist Dan Mitchell, the bill is not the panacea its supporters would have us believe.

In other words, the crowd in Washington wants us to believe they are being frugal because the cumulative tax hikes and Medicare savings, at least on paper, are $81 billion more than the $829 billion of handouts and subsidies in the proposal.

But why are we supposed to think that it is responsible to have more spending and more taxes? Frugality and fiscal responsibility should be defined by limiting the size of government, not by whether the amount of money the politicians take out of our pockets is larger than the amount of money they distribute to their political supporters and campaign contributors.

The Cato Institute's Michael Cannon points out one real reason why the estimate came out so low:

The biggest gimmick employed by the bill is that its individual mandate pushes more than half of the legislation's cost off-budget, and onto businesses and individuals who will have to shoulder that burden. A real-world parallel already exists in the Massachusetts health care plan, where private-sector mandates account for 60 percent of the cost. In 1994, CBO counted those mandated private payments in the federal budget, and it helped kill the Clinton health plan. This time around, Democrats were very careful to craft their mandates so that they just barely avoided having the CBO include those payments in the federal budget. But the CBO's decision does not change the fact that those private-sector mandates are part of the cost of this bill.

And The Wall Street Journal highlights a few other "assumptions" built into this cost estimate that would significantly alter the bill's bottom line.

Mr. Baucus spends $10.9 billion to eliminate the scheduled Medicare cuts to physician payments-but only for next year. In 2011, he assumes they'll be reduced by 25%, with even deeper cuts later. Congress has overridden this "sustainable growth rate" every year since 2003 and will continue to do so because deeper cuts in Medicare's price controls will cause many doctors to quit the program. Fixing this alone would add $245 billion to the bill's costs, according to an earlier CBO estimate.

The Baucus bill also expands ailing Medicaid by $345 billion-even as it busts state budgets by imposing an additional $33 billion unfunded mandate. The only Medicare cut that isn't made merely on paper is $117 billion in Medicare Advantage, which Democrats hate because it gives one of five seniors private insurance options.

Recall that when President Obama started the health-care debate, the goal was "bending the curve"-finding a way to reduce both Medicare and overall health spending. Budget director Peter Orszag talked about "game changers," which CBO has now outed as nonchangers. Comparative effectiveness research about what treatments work best? That will save all of $300 million in Medicare, even as it costs $2.6 billion in new taxes on premiums. More prevention and primary care will increase spending by $4.2 billion.

Meanwhile, the bill piles on new taxes, albeit on health-care businesses so the costs are hidden from customers. Insurance companies offering policies that cost more than $8,000 for individuals and $21,000 for families will pay $201 billion per a 40% excise tax, which will be passed down to all policy holders in higher premiums. Another $180 billion will hit the likes of drug and device makers, including $29 billion because companies won't be allowed to deduct these "fees" from their corporate income taxes. Then there's the $4 billion in penalty payments on those who don't buy insurance because all of ObamaCare's other new taxes and mandates have made it more expensive.

Huh. Well, that's disappointing. It sounded too good to be true... probably because it was.

Independent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
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