One of the more enduring falsehoods surrounding the Affordable Care Act has to do with its price tag and its effect on the nation’s financing. To be sure, “Obamacare” is a sweeping reform measure, but when its detractors say it’s “too expensive” or “America can’t afford this,” it’s an inherently dubious claim: the law lowers the debt and saves the nation hundreds of billions of dollars.
For the right, this poses an important problem. If Republicans can argue Obamacare makes the country’s finances worse, they’ll have a stronger case to undo the recent progress (unless the Supreme Court beats them to it). If this talking point falls apart, GOP officials have to explain why they want to make the debt smaller by making the debt bigger.
To that end, the Washington Post reports today, “Health-care law will add $340 billion to deficit, new study finds.” The article cites the research of conservative policy analyst Charles Blahous, a former Bush administration official, who, despite all available evidence, insists that the health care will add roughly a third of a trillion dollars to the debt over the next decade.
The problem, which the Post article didn’t mention, is that Blahous’ research falls apart under scrutiny. The Center on Budget and Policy Priorities’ Paul N. Van de Water easily dismissed the Republican’s report.
Blahous claims the Congressional Budget Office’s cost estimate for the health reform law “double-counts” a considerable portion of the law’s Medicare savings. By subtracting these savings, Blahous asserts that – contrary to CBO – health reform increases the deficit.
But there’s no double-counting involved in recognizing that Medicare savings improve the status of both the federal budget and the Medicare trust funds. The outlooks for the budget and for the Medicare trust funds are two different things; some changes in law may affect one and not the other, but other changes affect both.
CBO estimates that health reform will modestly reduce the federal budget deficit. The Medicare actuary says that health reform will extend the solvency of the Hospital Insurance trust fund by eight years.
I can appreciate the fact that these budget figures can seem complex, but certainly a guy who worked on entitlement policy for Bush/Cheney should understand the basics here, and the basics tell us that Obama’s health care law helps lower the national debt. Whether the right finds this inconvenient or not is irrelevant.
Jon Chait published a brutal takedown of Blahous’ research today.
You may wonder what methods Blahous used to obtain a more accurate measure of the bill’s cost. The answer is that he relies on a simple conceptual trick. Medicare Part A has a trust fund. By law, the trust fund can’t spend more than it takes in. So Blahous assumes that, when the trust fund reaches its expiration, it would automatically cut benefits.
The assumption is important because it forms the baseline against which he measures Obama’s health-care law. He’s assuming that Medicare’s deficits will automatically go away. Therefore, the roughly $500 billion in Medicare savings that Obama used to help cover the uninsured is money that Blahous assumes the government wouldn’t have spent anyway. Without the health-care law, in other words, we would have had Medicare cuts but no new spending on the uninsured. Now we have the Medicare cuts and new spending on the uninsured. Therefore, the new spending in the law counts toward increasing the deficit, but the spending cuts don’t count toward reducing it.
That is a completely bizarre assumption. It’s not an assumption that any scoring agency ever applies in other situations…. Assume the Medicare savings don’t count because Medicare would have reduced its payments anyway, and boom – Obamacare now increases the deficit.
Paul Krugman added that Blahous’ conclusions are “crazy,” and “basically a sick joke that doesn’t pass the laugh test.”
The reality of the situation is stubborn: independent analyses from nonpartisan officials have concluded that Obamacare makes a significant dent in the long-term debt forecast. For conservatives who claim to care about fiscal responsibility, and are eager to repeal the law, the question seems quite simple: tell American taxpayers how you intend to pay for Obamacare’s demise.
Update: It’s probably worth mentioning that Blahous works at George Mason University’s Mercatus Center, which was founded and financed by the Koch brothers.