Ezra Klein, he of recent “the Constitution’s old, and stuff” fame, is one of the great and most persuasive cheerleaders for the belief that Republicans cannot repeal Obamacare and remain fiscally responsible since — as everybody knows! — Obamacare reduces the national debt by $100 billion over the next ten years. He makes his case here. Taking a slightly different but in many ways similar view in National Review Online, Avik Roy concedes that, purely as a matter of parliamentary process, Obamacare’s deficit-reduction features have to be taken into account. (Roy is no doubt correct in his analysis of the process questions.)
Klein makes a persuasive case, in the same way that a lawyer who knows his client is guilty makes a persuasive case. Yes, if we confine ourselves to a very narrow range of debate and a very narrow selection of possible outcomes, then Obamacare does reduce the deficit over the next ten years, and its repeal would add to it over that time.
But there is a bit more to the story than that.
First, it is worth asking how complete and how accurate the CBO’s estimates are. You know who has some useful insights into that question? The CBO. For instance, CBO director Douglas Elmendorf readily concedes that “estimates of the effects of comprehensive reforms are clearly very uncertain, and the actual outcomes will surely differ from our estimates in one direction or another.” One direction or another. (Guess!) It will not come as a shock to observers of federal activities ranging from the ethanol program to the Iraq war that — unthinkable as it may seem — a government program may under some circumstances exceed its budget. If Obamacare spends not a nickel more than the CBO estimates, and if Obamacare produces every dime of the revenue promised, then it will prove a deficit-reduction tool over the next decade, by definition: That’s $411 billion in spending and $525 billion in revenue. I wonder if Ezra Klein would like to place a very large bet with his own money on the possibility of that happening. I would. In fact, I am willing to bet not only that there will be significant variation, I am willing to bet on the direction of that variation, at least insofar as the spending goes. (I would not be surprised if revenue projections fell short, too: Those tax increases are going to be even less popular when people start paying them.)
You know who seems sympathetic to my position? Douglas Elmendorf of the CBO, who writes: “CBO’s cost estimate noted that the legislation maintains and puts into effect a number of policies that might be difficult to sustain over a long period of time. For example, the legislation reduces the growth rate of Medicare spending (per beneficiary, adjusting for overall inflation) from about 4 percent per year for the past two decades to about 2 percent per year for the next two decades. It is unclear whether such a reduction can be achieved, and, if so, whether it would be through greater efficiencies in the delivery of health care or through reductions in access to care or the quality of care. The legislation also indexes exchange subsidies at a lower rate after 2018, and it establishes a tax on insurance plans with relatively high premiums in 2018 and (beginning in 2020) indexes the tax thresholds to general inflation.”
Take a look at the 1965 cost and revenue projections for Medicare and compare them to the reality of Medicare today. In 1965, Medicare was going to be totally solvent on a 1 percent payroll tax. How’d that work out?
And it is worth noting that Obamacare does not vanish into the legislative ether after this ten-year window we’re talking about. What happens in 75 year? In 100 years? There are very reasonable estimates that Obamacare will add many billions of dollars to the national debt over a longer timeline, even assuming that the bill is not monkeyed with piecemeal to reduce the taxes and increase the benefits — which is to say, assuming Washington suddenly is populated by saints and stoics.
This discussion, as framed by Klein, also rewards the Democrats for engaging in dishonest parliamentary shenanigans. As Klein well knows and the CBO reminds us, the Medicare “doc fix” was spun off into a separate bill specifically in order to keep some costs from being counted on Obamacare’s tab. As Cato’s Michael Tanner notes, “In a letter to Congressman Paul Ryan (RWI), the Congressional Budget Office confirms that if the costs of repealing the payment reductions, known as the “doc-fix,” as reflected in HR 3961, were to be included in the cost of health care reform, the legislation would actually increase budget deficits by $59 billion over 10 years.” This is a cheap accounting gimmick, conveniently excluded from the discussion. But it certainly is convenient to be able to account for the costs of Obamacare without having to account for the cost of bribing the doctors, and the congressmen who are most sensitive to them, to accept it. That is, of course, far from the only cost-shifting mechanism at work.
More broadly speaking, what the Obamacare-reduces-the-deficit argument neglects is this: Repeal is not the end of the story. Repeal need not be followed by . . . the void. If we want to reduce the federal deficit by $100 billion over ten years, there are lots of ways to cut $10 billion a year from spending. The federal government in 2004 estimated that it spent $10 billion a year on services for illegal aliens. Cut it. Done. Color me skeptical that we have to spend nearly $1 trillion over a decade to get $10 billion a year in spending cuts. If I’m reading the budget right, HUD spent $45 billion in 2007. And Republicans have some very good ideas for health-care reform that also will reduce federal outlays, thereby reducing the deficit. It is not as though the choice is Obamacare or nothing.
Treating the CBO ten-year estimate as though it is the alpha and the omega of the Obamacare-deficit discussion is a debater’s trick, one that we should not fall for. We have a good deal of history and experience on our side, and good reason for skepticism — if only we had a word for a political philosophy grounded in history, experience, and skepticism, in standing athwart history . . .
– Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, wherein you can learn more about the socialistic intrusions of Obamacare, and which now available at Amazon.com. You can buy an autographed copy through National Review Online here.
The doc fix canard is just a canard. It should never have been included in Obamacare in the first place, because it would have to be fixed whether or not Obamacare passed. Including the doc fix in the deficit projections would be like including the AMT fix. Both are independent of Obamacare. Even NRO's Jeffrey Anderson admits that here (after asserting the opposite and getting called out on it):
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Reply to this commentLinkReport AbuseTreating CBO estimates as yardsticks for measuring the budgetary impact of bills is a common, bipartisan practice and is no less applicable to this bill than any other. Calling it a "debater's trick" is a good example of a debaters trick. Citing "very reasonable estimates that Obamacare will add many billions of dollars to the national debt over a longer timeline" (without even a link) while rejecting the shorter term estimate just makes Kevin Williamson's case that much less credible.
Reply to this commentLinkReport AbuseAlso, the CBO didn't just look at the 10-year window. They looked at the next 10 years as well, and they said it saved around a trillion (plus or minus a few hundred billion). In general, the pay-fors grow faster than the spending, so the more time passes, the more cut from the deficit.
Reply to this commentLinkReport AbuseAemJeff: "Treating CBO estimates as yardsticks for measuring the budgetary impact of bills is a common, bipartisan practice and is no less applicable to this bill than any other."
And how does that make it right in any way? How accurate has this "common, bipartisan practice" been in the past?
Eric: the only way to tell if you are right is to have two parallel universes, one in which Obamacare passes, and one in which it doesn't. Failing that, we're fruitlessly arguing - that is why conservatives generally rely on economic principles and intuition. Now, when people are even farther removed from paying for their own healthcare, as in Obamacare, costs will go up (see, for example, many writings by Russ Roberts explaining why). As the costs of the nation go up, the net revenues will go down. So why on earth would spending more on healthcare, either at an individual or at a governmental level, lead to reduced costs overall? I am genuinely curious.
Reply to this commentLinkReport Abuse"Also, the CBO didn't just look at the 10-year window. They looked at the next 10 years as well, and they said it saved around a trillion (plus or minus a few hundred billion). In general, the pay-fors grow faster than the spending, so the more time passes, the more cut from the deficit."
When Medicare passed the CBO predicted that it would only cost $12 billion annually. We all know what happened there.
Obamacare is Medicare on steroids. It not only promises to give care to all old Americans, but ALL Americans. Query: How will the federal government ensure that 310+ million Americans across a geographical area spanning 3,000 miles get affordable, reasonable care (Obamacare's statutory goal)? As soon as they figure it out they should immediately let the Chinese and Russkies know because they have been trying to figure it out for decades.
Reply to this commentLinkReport AbuseIt's a bit off the main topic but:
Actually, Obama-Care DOES vanish into the legislative aether in 10 years. It was passed using Budget Reconciliation Protocol and thus has an automatic 10 year sunset, just like the "Bush Tax-Cuts."
If you thought the renewal of the tax rates was a problem just think what will happen as all the bad things rolled into one come up for renewal/extension in 10 years! I'm not suggesting waiting, just that this fight will occur again and again, as each new damaging aspect of Obama-Care is enacted and enforced.
The time to stop the train wreck is before the first train goes off the rails. After that it just gets worse and worse as each new train collides with the wreckage of the previous trains.
Reply to this commentLinkReport AbuseJimS,
If the bill just increased spending, you might have a point. But actually, it has pay-fors: it reduces Medicare spending, and it lowers the deductability of health insurance. These payfors grow faster than the spending grows.
chrisboltssr,
There actually was no CBO when Medicare passed.
As for the goal of universal healthcare, nearly every advanced democracy on Earth has figured it out. It really isn't that difficult, and the vast majority of the people of these countries, if given the choice between our system and their system, would pick their system.
If you told most of them that they should adopt the "uniquely American" solution of tens of millions with no health care and many more are underinsured, and where you can continue to be insured as long as you don't get sick, they would look at you as if you were some sort of alien from Mars.
Southpaw,
You are wrong. Only a tiny set of changes passed under reconciliation. The vast majority of the bill is the Senate bill, which passed under regular order with 60 votes on Christmas Eve. That bill does not expire after any length of time. It can be repealed obviously by 60 votes in the Senate with a willing House and President, but it would not expire unless and until that happened.
As for the tiny changes that were passed by reconciliation, a few of them expire after 10 years to keep the bill deficit neutral after 10 years (such as slight changes to subsidy levels). But even reconciliation bills don't expire after 10 years -- they just have to be deficit neutral beyond that point.
Reply to this commentLinkReport AbuseEric, you ridiculous buffoon. The Demwits rigged the CBO estimates and Elmendorf has already acknowledged a number of the lies and misrepresentations:
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Go back to DU and fester.
Reply to this commentLinkReport AbuseThis is a perfect example of the postmodern view of policy that conservatives have adopted. The CBO says that by their best estimate, the Affordable Care Act will decrease the deficit. It includes caveats about the inherent uncertainty, so that means the estimate is worthless.
It will be difficult to maintain cuts in payments to health care providers over time. Know what makes it harder? Repealing the provision that enacts the cuts.
Meanwhile, the elephant in the room is a policy that without a doubt did increase the deficit. Why did we have to extend Bush's high income tax cuts? Because high income tax rates on high income people will harm growth and job creation. Remember how great things were in the 90's, when we had intolerably high tax rates? They could have been even better if we had cut taxes back in 1995!
Think about how bad things are going to be in 100 years!
Reply to this commentLinkReport AbuseBravo Eric! You saved me a lot of typing. Your common sense assessment is lost on the conservative movement since Obama was elected.
What you didn't add was that the AMA and many large insurance companies are lobbying big-time against repeal. 40-50 million new customers at the stroke of a pen for private insurers, what a boon for Americans and the free market.
Reply to this commentLinkReport AbuseI'll believe Medicare spending is going to be reduced when I see it.
Reply to this commentLinkReport AbuseDoes Ezra Klein think that the world will end in 10 years? Does the CBO? Why does the argument over the fiscal prudence of Obamacare only encapsulate the first 10 years? Its an entitlement. A program meant to be a permanent fixture. Its deficit reducing abilities or lack thereof should include analysis based on its existence to perpetuity like medicare, medicaid, and social security. Not just the first 10 years.
Reply to this commentLinkReport AbuseEric,
Concerning Medicaire. When it was implemented, the US had totally different (ie more favorable) demogrpahic. In the mid-1960s our Total Fertility Rate (TFR) was close to 3.6 children per female. The Baby Boomers were just about to enter college (about 76 million of them were either coming of age were in elementary school. The Greatest Generation was at thier peak earnings. In that respect, we could "afford Medicaire".
Today it is a totaly different situtation. The Boomers are now retiring at 10,000 per week; the national TFR sank to less than 1.5 in the 1970s, has been consistently below replacement levels (2.1) for 30+ years. Simply put, there are not enough young people to pay taxes needed to support the elderly and the indigent. There isn't enough wealth in this nation no matter how much you tax the rich. Currently the US's net assets (accumulated wealth) is $49 trillion. But the unfunded liabilities of Medicare and Medicaid are over $60 trillion through 2070. Add in Social Security and the number climbs to over $100 trillion. That is, these programs will consume over $6 trillion on average annually through 2070. Our GDP currently sits at $13 trillion. The CBO and the Democrats lied through thier teeth. The cost curve is bending upward, not downward. The only way we can "afford" ObamaCare is steep tax increases and rationing. The numbers don't lie.
And I find it amusing that ObamaCare defenders use the defecit to rationalize thier support. If the defecit was thier chief concern why run it up $3 trillion in 2 years? They essientially admit that ObamaCare is full of tax increases and rationing.
Again, the demographics are against us. We were bound to have problems even without ObamaCare. Our entitlement state requires a very fertile population. The just completed census indicated that our population is growing at some of the slowest rates in history - that is we are getting much older as a nation. And don't look to Mexico and points south for help. Thier population growth rates are plunging as well. To put it simply, there isn't enough wealth or people to pay for this Progressive nightmare.
Reply to this commentLinkReport Abuse@Eric, when it comes to lovers of government health care, do you speak of places like Greece where citizens have to bribe doctors to get to see them, or maybe Eastern European nations where citizens drink health teas since they know no governmnt doctor will be there to save them.
There's plenty of places where people would take American 'underinsurance' (whatever that is) over universal care which actually doesn't exist.
Anyway Kevin, the only thing amazing about this cost savings bit is that someone actually believed it and didn't see it for the marketing fluff it actually is. Medicare is broke, but somehow they're going to find money in that program that will allow them to pay for other 'stuff'? Right.
Reply to this commentLinkReport AbuseI love Erics of the world.
Provide for me which advanced democracy on earth has a SUSTAINABLE universal health care system. When you find it - it will be the first. I know the people like it - its free or essentially so. And then they get the odd problem and they die. Some western "advanced democracies" just go ahead and kill their old folks so no one has to pay to keep them alive anymore - yes they are so enlightened. And yes I do mean assisted non-voluntary suicide - some might call it triage or culling the herd I guess. But I digress.
Canada is retreating - the UK is not sure how they pay for what they provide now and have zero idea how to pay for it in 10 years. Switzerland, held up as the model for mandated insurance through private insurers is starting to see options dropping out and costs escalating at typical western rates - all because they won't let the insurers price risk. And China is actually introducing private health insurance. And since China is doing it shouldn't Friedman be all for it?
The cost of the bill fully loaded for the first decade of costs vs benefits is estimated roughly at 2.5T (and even this gives some benefit ramping advantage for the 2014-17 period) and the last analysis I saw put that at 100-200B in deficit, and that assumes rates of spending growth that are not consistent with what we have historically seen. So - no - it saves no money, it costs more, as the actual actuaries at CMS (Obama's guys, not mine) have said over and over and over. From a costing perpsective, we would have been better to have done nothing.
The only way the plan saves money is to ration care - hard. Hence the comparative treatment study groups and the like. The death panels aren't the reimbursed doctor-patient discussions on end of life treatment, they are these groups that will come up with age/condition/severity matrixes and determine whether or not your treatment will be approved. And they will have no choice because the money will run out - just as it is in the other advanced democracies.
Until the voters in this country realize that insurance is for big ticket items and not their monthly blood pressure medicine and annual physicals it still comes down to the Erics of the world, but really all of us, wanting someone else to pay for our healhcare. Pure and simple. There is very little true health insurance in the world, its just prepaid health services. That is why the GOPs talk about pre-existing and guarentee issue are also stupid. Look at RomeyCare and what has happened there - in a state that had low levels of uninsured people to start with. Look where insurance rates went.
Here is a quiz you will like. Which country has the best survival rates from cancer, strokes and cardiac conditions? Which country has the most screenings as a percentage of patients for cancers and a host of other chronic conditions (and yes this one actually surprised me when I read it)? Which country, with a lower life expectancy frequently used to beat it over the head, is one of the only countries that actually accurately counts newborn deaths and places them in its life expectancy statistics? Which country has an amazingly poor activity level in their daily routine and eats way too many sugars and carbs (yeah I know kind of the same thing but work with me here)? Its the one all the "advanced democracies" seem to think they are better than.
So Eric, I hear you and will concede some of your facts about when the CBO actually came into being and the like. But on the balance of it - you don't have a clue what you are talking about.
Reply to this commentLinkReport AbuseJEM, it's funny how you refer derisively to the "Erics of the world," when in reality, there are FAR more "Erics of the world" than "JEMs of the world." In fact, even in the United States, the vast majority favor abolishing risk rating. In fact, believe it or not, over 2/3 of REPUBLICANS favor abolishing risk rating. And if you set foot outside the United States and started talking up risk rating, you would literally be looked at like an alien from outer space.
But even funnier than that, I find it amazing that you have the gall to claim OTHER healthcare systems aren't sustainable due to lack of ability to rate risk, when our pre-Obamacare system -- by far the most unsustainable system in the world from a government cost and total cost standpoint -- allows insurers to rate risk in most of the US. Pot, meet kettle?
We pay about twice as much as most single payer countries per capita for healthcare. As for rationing, you would of course be perfectly fine with money doing the "rationing care -- hard." You have no problem with one's money being the method of "culling the herd." You have no problem if a non-rich person dies because they "have no choice because the money will run out." In fact, to you, this is a uniquely American solution that represents the best form of liberty blah blah blah.
I wonder if you can answer your own questions, limited to the (growing) portion of the population that can't afford cancer treatments/transplants/etc. Compared with (say) any other advanced democracy on Earth. In fact, at current rates (FAR above other countries), only a small portion of the US will be able to afford any of these things after a few decades.
You make it sound like our entire problem is that we use insurance to cover annual physicals and blood pressure medicine. Do you really think that our healthcare costs are growing mainly because of routine physicals and prescriptions, and not due to the costs of EXPENSIVE procedures, that even you would concede need to be covered under insurance?
Reply to this commentLinkReport AbuseDoctors and hospitals are adept at gaming the Medicare system. Go ask a hospital administrator what would happen if their hospital were denied Medicare reimbursement? (The hospital would close). Losing money on every patient? BS.
Reply to this commentLinkReport AbuseWow. Yesterday, many commented on how inflation is essentially a petty concern given the government's recent currency printing orgy. Nothing to fear there I guess. Today many comment on how Obamacare is also essentially a petty concern in terms of increasing the deficit. Hmmm, silly me for believing so. After all, the government's track record of fiscal responsibility is well known. How can we, an unenlighted citizenry, ever question the viability (dare I say constitutionality) of a massive, new and uncharted program. I guess our brand of patent-pending socialism will be different. Hell, it's a cost saver!
Reply to this commentLinkReport AbuseJust because they love it and the GOP loves it doesn't mean it is right. I would prefer the right of free men and women making that choice as opposed to some faceless bureacrat who will make the choice while the wealthy pull strings and duck in to alternative arrangements all the same. The rich will be served in any system and in a system served by the federal government, the rich will also be our elected "representatives" who will exempt themselves from its more onerous provisions assuming they allow themselves to be covered by them at all. Your rich argument is a strawman. Try another one. As in Britain and now even Canada - the rich have and use alternatives to the benevolent state system.
Do I believe the system as it exists is sustainable? No. Did Obamacare do anything to address its current flaws? Not a chance. It doubled down so to speak on every flaw in the current environment. That's about it. We do spend a lot on health care by any measure and much of it is wishing for every dollar to be covered for every little procedure. But not that alone. As I noted in my prior post, it is the desire of every individual, not just the Erics of the world, to have somebody else pay for their health care needs and desires.
So what drives cost? In a practical matter physicals and chronic condition drugs do drive cost because so many people use them. I realize the analogy is old but it still holds - your car warranty doesn't pay for oil changes and new tires or tune-ups unless you happen to get one of those premium free maintenance for 3 year deals - and those come primarily on pricier models and the cost has been accounted for in the base price of the vehicle. Another huge issue is end of life care. It has been estimated that most of the money you will spend on health care will be spent in the last 18 months of your life. It is why the efforts of extending life and living wills and the like are getting more attention. I know my wife doesn't want heroic measures at the end - if it is time, make me comfortable. Others might feel very differently. But there is a cost. Do we ever consider that - are we willing to allow our parents to drain their savings and then we will allow them to stay with us and take care of them as it used to occur instead of shipping them off to a nursing home for a year to die - or do we expect the taxpayers to do that for me so I won't be inconvenienced.
Another driver, the utilization of surgeries to correct nuisance and non-debilitating pain. How much of this care is really needed and how much should be paid for more by the patient. I don't know, but neither do you or anyone else. Why, because our present payment system deosn't ask us to even consider the question. So what you get is utilization increases far outstripping the actual medical procedure CPI.
At the root of all of this is that no one in health care - even the rich - can place a true value on the service of health care. We want it and its cost is hidden from us. It is hard to determine what things cost before we have them done - and since we generally aren't paying, we don't even bother to try very often. When we try to actually create a true health insurance regime, not prepaid health care, maybe we will find that people will be more interested in the value they receive for the services they wish to pay for. And if they wish to save some of their hard earned money, maybe they will work a little harder at improving their health status and reducing their own need for both chronic care and expensive life end care as well.
Reply to this commentLinkReport Abuse"There actually was no CBO when Medicare passed."
You're absolutely correct that there was no CBO when Medicare passed. But bills' impact on the federal budget was still estimated on, were they not? So, when Congress estimated that Medicare would be not a huge cost to the United States, they were wrong.
Of course, the point was lost on you: Even after the passage of Medicare, health care costs did NOT go down, they went UP and continue to go UP. And this is only on a fraction of the American people, but a fraction that consumes the most health care. Do you think that after passage of Obamacare that it would address these issues?
"As for the goal of universal healthcare, nearly every advanced democracy on Earth has figured it out. It really isn't that difficult, and the vast majority of the people of these countries, if given the choice between our system and their system, would pick their system."
No, they haven't. Everywhere on the globe where socialized medicine has been tried and implemented, it has turned into a nightmare. None of them have ever stayed below budget, all have had to start rationing care, all have resulted in long wait times, and all have developed a two-tiered system whereby the politically connected and wealthy can escape the public system and get private care. Can you honestly say that even with our flawed system that the poor are treated differently than the rich? If you can, then the problem is that you look through our healthcare system with political lenses, as attested by your next statement:
"If you told most of them that they should adopt the 'uniquely American' solution of tens of millions with no health care and many more are underinsured, and where you can continue to be insured as long as you don't get sick, they would look at you as if you were some sort of alien from Mars."
A better question would be to ask them why do they think they need socialized medicine even if you don't have a debilitating disease? I don't say sick because lots of people get sick and still never go to a hospital because getting sick is a fact of life.
You know, after Congress dilly-dallied on the tax issue, the IRS has had to issue warnings to tax preparers and taxpayers that some tax returns will have to be processed late due to their inability to get the regulations published in time for the 2010 tax season. Does that sound like an efficient way to do things? Now translate that to healthcare, where politicians will be more in the role of determining how healthcare dollars are spent. Do you want healthcare dollars held up because both sides can't agree on the proper amount of money to be spent for the coming year? Your philosophy practically guarantees that it will.
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