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No, the Medicare Trustee's Report on Obamacare's Deficit Expansion Isn't 'Bogus'

April 10, 2012

By Avik Roy

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The Congressional Budget Office has estimated that Obamacare will reduce the deficit, by coupling a multi-trillion-dollar expansion of federal health spending with cuts to Medicare and higher taxes. Now, a new study by a Medicare trustee suggests that the law will actually increase deficits, over the next ten years, by between $346 and $527 billion. Why do the trustee’s numbers differ from those of the CBO, and who’s right? Let’s take a look.

Chuck Blahous, who was appointed by President Obama to be a public trustee of the Social Security and Medicare programs, published the study, under the aegis of the Mercatus Center of George Mason University. He makes two basic arguments: (1) the ACA’s cuts to Medicare should be counted as contributing to Medicare’s solvency, and can’t be redirected towards reducing the deficit; and (2) it’s likely that Congress will increase the law’s spending, and fail to enforce its spending cuts and tax increases, thereby worsening the law’s fiscal consequences. “Historical evidence suggests that the upholding of [the deficit-expanding and deficit-reducing] provisions may not be equally certain,” says Blahous.

Medicare cuts can’t be double-counted

In March of 2011, Health and Human Services Secretary Kathleen Sebelius admitted that the law double-counts its reductions in Medicare spending, by claiming that the law both reduces the deficit and extends Medicare’s solvency.

Blahous estimates that at least “$470 billion of the Medicare savings under the ACA scored by CBO through 2021 substitutes for savings required under previous law.” Whether or not you accept his approach depends on whether or not you think that Medicare funds should be segregated from the rest of the budget.

Blahous also takes out the (near-term) deficit-reducing features of the CLASS program, which Sebelius has suspended. CBO has already stated that, due to Sebelius’ actions, they are now modeling the impact of CLASS as zero.

Will future Congress act in fiscally reckless ways?

“There is substantial risk,” Blahous writes, “that the ACA’s cost-saving provisions will not be enforced as currently specified.” Blahous fears that “elected officials will choose to expand the growth of [Obamacare’s exchange] subsidies in the future relative to projections under current law.”

It’s certainly possible that Congress could flinch on enforcing Obamacare’s cost controls and tax increases. The difference between Blahous’ “optimistic scenario” and his “pessimistic scenario” reflect different levels of Congressional discipline. In his optimistic case, in which Congress left the law intact, Blahous estimates that it will increase the deficit by $346 billion from 2012-2021; in the pessimistic case, he thinks it will increase the deficit by $527 billion: a spread of $181 billion.

The White House goes ballistic

The White House has already responded to Blahous’ report, noting Blahous’ prior ties to the Bush administration, and citing the official CBO numbers to argue that it’s “new math” to claim that the ACA double-counts its Medicare savings. The White House cites a report from the left-leaning Center on Budget and Policy Priorities that says that Republican Congresses engaged in Medicare double-counting with the Balanced Budget Act of 1997 and the Deficit Reduction Act of 2005.

This White House strategy of attacking Blahous’ politics, and repeating “CBO, CBO, CBO” until it’s blue in the face, isn’t likely to persuade anyone. The CBO has, quite regularly, issued substantial caveats with its projections, highlighting many of the same issues that Blahous raises in his report. But CBO is constrained by Congress in how it can quantify those issues, in a way that Blahous is not.

“The improvement in Medicare’s finances,” wrote the CBO in December 2009, “would not be matched by a corresponding improvement in the federal government’s overall finances…The key point is that savings to the [Medicare Hospital Insurance] trust fund under the PPACA would be received by the government only once, so they cannot be set aside to pay for future Medicare spending and, at the same time, pay for current spending on other parts of the legislation or on other programs.”

CBO also regularly puts out an “alternative fiscal scenario,” in which “some current or recent policies are assumed to continue in effect, even though, by law, they are scheduled to change. The decisions made by lawmakers as they confront those policy choices will have a significant impact on budget outcomes in the coming years.” A big part of the CBO’s alternative scenario is an assumption that scheduled cuts to Medicare’s fee schedule are held off.

It’s pretty much the standard left-wing playbook to attack Blahous’ credibility, instead of critiquing his methodology. When one of Blahous’ critics actually reads his report and contests his assumptions, I’ll take notice.

Original Source: http://www.forbes.com/sites/aroy/2012/04/10/medicare-trustee-obamacare-will-increase-the-deficit-by-as-much-as-527-billion/

 

 
 
 

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