Tag: cbo

Obama on Health Care: Half Right

President Obama gave what seems like his thousandth exclusive health care interview last night, this one to ABC News’s Charles Gibson.  In trying to sell his health care plan, the president warned that if Congress does not pass legislation controlling health care costs, the federal government “will go bankrupt.”  He also warned that unless health care is reformed, “your premiums will go up.”

 The president is absolutely correct about that.  The only problem is that, according to the president’s own chief health care actuary, the bills that Congress is now considering do nothing to restrain either federal health care spending or total health care costs.  In fact, Rick Foster, chief actuary at the Center for Medicare and Medicaid Services (CMS) says that if Congress passes the bill now before the Senate, health care spending will actually increase by $234 billion more over the next 10 years than if we did nothing. 

And, according to the Congressional Budget Office, the congressional bills do little or nothing to reduce the growth in insurance premiums. Even if a bill passes, premiums will roughly double by 2016, and keep rising after that.   But for millions of Americans the bill will actually make things worse.  According to CBO, the Senate bill would actually increase insurance premiums by 10-13 percent for Americans who buy their insurance through the non-group market, that is those who don’t receive insurance from their employer.  Those 10-13 percent increases are over and above the increases that would occur if we did nothing.    

On the other hand, if the president were really serious about controlling health care costs and lowering premiums, he wouldn’t need to spend trillions of dollars and take over one-sixth of the US economy; he could try some of the ideas written about here, and here, and here.

Strange Bedfellows?

Jon Walker at FireDogLake says I’ve got the wrong smoking gun:

The smoking gun was a manual put out by the CBO in May…It spelled out exactly how much regulation was “too much” regulation. It explained what was the magical threshold that would cause [CBO director] Doug Elmendorf to declare some private market part of the government budget. Now, I’m angry about this for different reasons than the Cato Institute. I think it is insane that there could be any level of regulation that would make the private market part of the federal budget. Either the money is going through the federal treasury or it is not. I don’t think the the CBO director should have the power to see gray areas on this issue…There is no real logic to it, he simply decided what he thought was enough regulation to make something part of the budget.

To be sure, Walker and I have different ideas when it comes to (1) health care reform.  (Not that you asked, but here are my ideas.)  We likewise disagree that (2) the CBO’s May 27 paper was the smoking gun.  That paper laid out the CBO’s (vague) criteria for including “private” financial transactions in the federal budget (and I duly linked to it in my ‘smoking gun’ post).  But the December 13 memo is the first documented instance of Democrats gaming those criteria.  And I disagree that (3) this was all Elmendorf’s decision, (4) the federal budget should reflect only money that passes through the Treasury (instead of all the money that the feds control), and (5) there’s no logic behind the CBO’s criteria.

All that said, there are a couple of areas where Walker and I agree.  For one, he writes:

More importantly, I don’t think something as important as regulation should be written to trick the CBO. It should be written to produce the best heath care system possible, not the best looking CBO score possible.

Hear, hear.  Yet congressional Democrats have been doing just that, gaming the CBO’s rules to hide the implicit subsidies their legislation would provide to large private insurance companies.

For another, he and I both agree that that legislation is little more than a bailout of large private insurance companies and would be worse than doing nothing.

My question for Walker, and for Howard Dean, and for Markos Moulitsas is: will they join me in calling for the Senate to obtain a CBO cost estimate of the off-budget part of the insurance-industry bailout (i.e., the individual and employer mandates)?  Do they think Senate Majority Leader Harry Reid should at least be up front with his base about what he’s asking them to swallow?  Do they think that We, the People deserve to know the whole truth about this bill?

Bland CBO Memo, or Smoking Gun?

This weekend, the Congressional Budget Office released “a very strange memo” titled, “Budgetary Treatment of Proposals to Regulate Medical Loss Ratios.”  You wouldn’t know it from the title, but that little memo is the smoking gun that shows how congressional Democrats have very carefully hidden more than half the cost of their health care bills.

First, a little history.  Like both the House and Senate bills, the Clinton health plan would have mandated that individuals and employers purchase private insurance.  In its 1994 score of the Clinton plan, Bob Reischauer’s CBO included those mandated “private” payments in the federal budget –- i.e., as federal revenues and federal expenditures.

And yet, none of the CBO scores of this year’s bills include the costs of similar individual/employer mandates as federal revenues or federal spending.

My read of the CBO’s score of the Clinton health plan is that the private-sector mandates accounted for around 60 percent of the Clinton health plan’s total cost, the remainder being (traditional) government spending.  So how is it that the CBO made the full cost of the Clinton health plan apparent to the public in 1994, but may now be revealing only 40 percent of the cost of the Obama health plan?

For some time, I’ve suspected the answer is that congressional Democrats have very carefully tailored their individual and employer mandates to avoid CBO’s definition of what shall be counted in the federal budget. Democrats are still smarting over the CBO’s decision in 1994.  By revealing the full cost of the Clinton plan, the CBO helped to kill the bill.

Since then, keeping the cost of their private-sector mandates out of the federal budget has been Job One for Democratic health wonks.  While head of the CBO, Obama’s budget director Peter Orszag altered the CBO’s orientation to make it more open and collaborative.  One of the things about which the CBO has been more open is the criteria it uses to determine whether to include mandated private-sector spending in the federal budget.  The CBO even published a paper on the topic.  Read this profile of Orszag by Ezra Klein, and you’ll see that those criteria were also a likely area of collaboration with lawmakers.

The Medical Loss Ratios memo is the smoking gun.  It shows that indeed, Democrats have been submitting proposals to the CBO behind closed doors and tailoring their private-sector mandates to avoid having those costs appear in the federal budget.  Proposals that would result in a complete cost estimate – such as the proposal by Sen. Rockefeller discussed in the Medical Loss Ratios memo – are dropped.  Because we can’t let the public see how much this thing really costs.

Crafting the private-sector mandates such that they fall just a hair short of CBO’s criteria for inclusion in the federal budget does not reduce their cost, nor does it make those mandates any less binding.  But it dramatically reduces the apparent cost of the legislation.  It is the reason we’re all talking about an $848 billion Reid bill, rather than a $2.1 trillion Reid bill.

If someone sold you a house, or a car, or a mutual fund this way, we would put them in jail.

ObamaCare Cost-Estimate Watch: Day #178

It has been 178 days since Democrats introduced the first version of President Obama’s health plan, and a growing chorus of voices is demanding that the Congressional Budget Office reveal the full cost of Sen. Harry Reid’s health care legislation – including the cost of the private-sector mandates.

  • Philadelphia Inquirer columnist Kevin Ferris writes: “Have the CBO score the entire Senate bill – both on-budget expenses and off. Let senators and taxpayers see the real cost - before a vote is taken. Then decide what the nation can afford.”
  • Former New Jersey Governor and EPA administrator Christie Whitman – who should know a little something about private-sector mandates – writes: “the CBO estimates do not count the costs the private sector will have to pay to insurance companies as ‘taxes,’ even though they are surely costs for the system…I believe we need health care reform in this country. But we should start with honest accounting, responsible fiscal policies for the sake of our grandchildren, and a recognition of who is really going to shoulder the burden of this undertaking. Anything less is just more of the same.”

I also had an oped in Sunday’s Richmond Times-Dispatch where I argue that if Sen. Jim Webb (D-Va.) really meant what he wrote to Majority Leader Harry Reid back in October about holding an open and honest debate, Webb should insist on a complete CBO cost estimate – including the cost of the private-sector mandates – before the bill moves any further.

(Cross-posted at National Journal’s Health Care Experts Blog.)

What Will the Reid Bill Cost?

Michael Cannon has some astute analysis of the Senate health care bill below. I posted these thoughts at Politico’s Arena:

According to the Chamber of Commerce polls, strong majorities in every state they polled believe the health care bills will increase the deficit. In this case the public’s cynical instincts are almost certain to be more accurate than the computer models of the CBO. As David Dickson of the Washington Times reviewed yesterday, government health care programs have a history of cost overruns.

And not small overruns, like overdrawing your checking account – massive, order-of-magnitude cost overruns. Is that because politicians intentionally overstate the benefits and underestimate the costs of their proposals? Or just that computer models aren’t very good at predicting how entitlements programs change behavior? Either way, just look at the record: In 1967, the House Ways and Means Committee said the entire Medicare program would cost $12 billion in 1990. The actual cost in 1990 was $98 billion. In 1987, Congress projected that Medicaid would make special relief payments to hospitals of less than $1 billion in 1992. The actual cost, just five years after the projection, was $17 billion. Similarly, Medicare’s home care benefit was projected in 1988 to cost $4 billion in 1993, but the actual cost – again, just five years after the projection – was $10 billion.

The government is running a trillion-dollar annual deficit already, and Congress and the president propose to create a new program that promises to cover millions more people with health insurance, drag currently insured people onto government programs, and save billions of dollars in the process. No wonder levels of trust in government are at record lows.

Obamacare Will Be a Budget Buster

Does anyone think that a huge new entitlement program will lead to lower budget deficits? Sounds implausible, yet proponents of government-run healthcare claim this is the case according to the official estimates from the Congressional Budget Office and Joint Committee on Taxation.

To use a technical phrase, this is hogwash. This new 6-1/2 minute video, narrated by yours truly, gives 12 reasons why Obamacare will lead to higher deficits - including real-world evidence showing how Medicare and Medicaid are much more costly than originally projected.

By the way, this video doesn’t even touch on the mandate issue, which Michael Cannon explains is not being counted in order to make the cost of government-run healthcare less shocking.

Disguised Health Care Costs: The $1.5 Trillion Fraud

If House Democrats hold a vote on their health-care overhaul this weekend, they might as well vote to abolish the Congressional Budget Office too.

It would be no more audacious (and much more honest) than the way they have gamed the CBO’s rules to hide $1.5 trillion of the cost of their legislation — which has to be the biggest fiscal obfuscation in the history of American politics.

Here’s how they did it.

C/P Politico