Tag: cbo

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

Medicare for Everyone?

According to The Hill, House Democrats are considering re-branding their new government-run health insurance program.  A “public option” evidently isn’t catchy enough.  Now they’re thinking, “Medicare Part E” as in, Medicare for Everyone.

By all means, model a new government program after Medicare, which:

Pleeeeease don’t throw me into that briar patch.

House Democrats Choose Dishonesty

I’m not a fan of the House Democrats’ proposed takeover of the health care sector.  (If there’s one thing that legislation is not, it’s “reform.”)  But at least House Democrats were honest enough to include the cost of the $245 billion bump in Medicare physician payments in their legislation, unlike some committee chairmen I could mention.

Unfortunately, House Democrats have since decided that dishonesty is the better strategy.  They, like Senate Democrats, now plan to strip that additional Medicare spending out of health “reform” and enact it separately.  (Democrats are already trying to exempt that spending from pay-as-you-go rules, making it easier for them to expand our record federal deficits.)  Why enact it separately?  Because excising that spending from the “reform” legislation reduces the cost of health “reform”!

But why stop there?  Heck, enact all the new spending separately, and the cost of “reform” would plummet!  Enact the new Medicaid spending separately, and the cost of “reform” would fall by $438 billion! Do it with the subsidies to private health insurance companies, and the cost of “reform” would plunge by $773 billion!  All that would be left of “reform” would be tax increases and Medicare payment cuts.  Health “reform” would dramatically reduce federal deficits!  Huzzah!

Except it wouldn’t, because at the end of the day Congress would be spending the same amount of money.

The only good news may be this.  If this dishonest budget gimmick succeeds, then Congress will have “fixed” Medicare’s physician payments.  Absent that “must pass” legislation, the Democrats health care takeover would lose momentum, and would have to stand on its own merit.  That would be good for the Republic, though not for the legislation.

(Cross-posted at Politico’s Health Care Arena.)