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Right Turn
Posted at 10:33 AM ET, 04/10/2012

Obamacare’s fake accounting

Charles Blahous, a senior research fellow at the Mercatus Center at George Mason University and one of the two public trustees for the Social Security and Medicare programs, is out with a study that confirms the common-sense argument conservatives have been making for years: You can’t vastly expand and subsidize gold-plated health-care insurance and expect to save money.

A Mitt Romney spokeswoman responded to Right Turn’s request for comment on the report: “Obamacare is bad policy, bad law and will burden future generations with record amounts of debt. That’s why Mitt Romney will repeal it and give each state the responsibility for crafting its own health care reforms.” A spokesman for Rep. Paul Ryan (R-Wis.) had a similar take: “President Obama’s health care law is unraveling. His string of empty promises continues to transform into a painful record of broken promises. To advance bipartisan, patient-centered solutions, the President’s partisan roadblock must be repealed.”

What is at issue is the difference between government accounting and a realistic assessment of our future costs. Although the Congressional Budget Office and Medicare Trustees accounting conventions have obscured the economic impact of Obamacare, in plain terms it will cost us more money than it will save. Blahous concludes:

Taken as a whole, the enactment of the ACA [Affordable Care Act] has substantially worsened a dire federal fiscal outlook. The ACA both increases a federal commitment to health care spending that was already unsustainable under prior law and would exacerbate projected federal deficits relative to prior law. This is an unambiguous conclusion, as it would result regardless of the degree of future success attained in upholding various cost-saving provisions now embedded in the law.
That the ACA has substantially worsened the federal fiscal outlook is not universally understood. The biggest source of confusion may reside in the widespread consultation of the scoring conventions employed by both CBO and the Medicare Trustees, in which it is assumed in the baseline that various entitlement-benefit promises will be honored without regard to statutory restrictions. Though this is an appropriate scoring convention for many purposes, it is nevertheless true that whenever budgetary savings already required under law to maintain the solvency of either Social Security or Medicare HI are enacted only to be spent on a new entitlement program, the federal government’s fiscal position is unequivocally worsened.

Almost comically, the White House responded by saying CBO says we’re okay, so there is no problem. (“Administration officials dismissed the study, arguing that it departs from bipartisan budget rules used to measure every major deficit-reduction effort for the past four decades — including the blueprint offered last month by House Budget Committee Chairman Paul Ryan (R-Wis.).”) But this fails to address the nub of Blahous’s argument:

Because the ACA relies upon many cost-savings already required in some form under previous law, and because it tapped those savings to finance an ambitious expansion of federal spending commitments, the government’s fiscal predicament is now significantly worse than before the law was enacted. Moreover, many of the law’s cost-saving measures are subject to considerable financing risk in that they depend upon future enforcement at some variance with historical precedent, including even the precedent of the ACA itself. As currently written, the ACA should be expected to increase federal spending obligations by more than $1.15 trillion over the upcoming decade and to worsen cumulative federal deficits by somewhere between $340 and $530 billion over the same period, depending on the degree of success with which future cost-savings provisions are enforced.

In other words, Blahous argues that just because the government allows us to double count savings and make shaky assumptions doesn’t mean we should bury our heads in the sand. Blahous puts it in simple terms for the accounting-challenged among us: “Here’s a simple way to think of it: under law Medicare is permitted to spend any proceeds of savings in the Medicare HI program. If we cut $1 from Medicare HI spending in the near term, then an additional $1 is credited to the HI Trust Fund as a result. The Trust Fund thus lasts longer and its spending authority is expanded, permitting it to spend another $1 in a later year.” He continues: “A core fiscal problem with the ACA is that the same $1 in Medicare savings that expands Medicare’s future spending authority by $1 is also assumed to finance the creation of a large new federal health program. Taken together, these two expansions of spending authorities — the new health program and Medicare’s solvency extension — far exceed the cost-savings in the legislation.”

Blahous readily notes that CBO doesn’t look at things this way. (“The government scorekeeping conventions now in wide use are useful and appropriate for many policy purposes, but unfortunately they do not account for this phenomenon. CBO is diligent in carefully noting that these scoring conventions, dating back to the 1985 Deficit Control Act, do not represent actual law.”) The bottom line is that we will wind up in a situation where “substantial real additional spending and real additional debt will accrue as a result of the legislation having been passed.”

A few points should be made. First, this was precisely one of the arguments that Ryan used in opposition to Obamacare at the time it was being debated. Second, the White House can repeat until the cows come home that “the government allows us to count this way,” but voters are already convinced that the government plays games with numbers and knows the debt is going up.

Finally, this problem will become astronomically worse if the individual mandate is struck down. That, after all, was the means by which healthy people could be forced to pay for health care for higher-risk individuals. Blahous’s study then is just one more thing for Romney and the Republicans to use in their claim that Obama jammed through an unpopular bill with smoke-and-mirrors accounting.

By  |  10:33 AM ET, 04/10/2012

Categories:  Obamacare

 
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