The Democrats are proclaiming their (apparently) final version of health care reform as fiscally responsible, because the CBO scores it as reducing projected deficits by $138 billion over 10 years.
But those “savings” are illusory. Former CBO Director Donald B. Marron explains:
Similar problems afflict the other prominent claim: that health reform will reduce the federal budget deficit by $138 billion over the next ten years. That’s not true either. The entire legislative package—combining both the Senate bill and the reconciliation adjustment—now reforms the government’s student loan program in addition to the changes to health care. The student loan reforms account for $19 billion of the deficit reduction in the legislation. Thus at best health-care reform will reduce the deficit by $119 billion over the next decade.
But that’s not the only problem. The health-care reform also includes a budget gimmick that exaggerates the potential budget savings. The ingeniously-named CLASS Act would create a new federal insurance program for financing long-term care. Because premiums would start flowing faster than benefit payments, the program scores as reducing the deficit by $70 billion over the next decade. But those savings are temporary. In future years, benefit payments will accelerate and eventually consume the initial surpluses in the program. For that reason, most budget experts believe that the CLASS Act should not be counted as real deficit reduction. After netting that out, health-care reform reduces federal deficits by only $49 billion over the next decade, almost two-thirds less than the headline figure.
So the actual savings are closer to $49 billion, and that’s over a decade. That’s $4.9 billion a year–it’s absolutely meaningless.
Even then, those savings are dependent on (1) $172 billion of cuts in Medicare spending, and (2) significantly increased taxes, including $210 billion (from 2013-2019) from a new Medicare tax on capital gains. It is quite possible, even likely, that future Congresses will not allow the cuts to be implemented in the future.
These Medicare cuts and tax increases are necessary to pay for a massive new entitlement program, which provides new health insurance subsidies to the poor and middle class. These new subsidies are estimated to cost $800 billion over 10 years. And that’s how much they’re estimated to cost. Reality is often different.1
So, here’s the net effect: in a time when Medicare and Social Security are quite literally bankrupting our country (Medicare alone will, at current rates, grow to 12% of GDP by 2050; for comparison, the entire federal budget averages 19% of GDP), and our debt is ballooning, this bill does nothing to arrest health care costs, and adds a third entitlement program that costs at, minimum, $80 billion a year for the next decade.
Worse, to fund this new spending (which, if history is a judge, will out pace the taxes used to fund it), we are using up valuable means of reducing our budget-deficit. That’s the height of irresponsibility: in a time when we cannot pay for our current level of spending, we are increasing our spending, and using difficult tax increases and other spending cuts, which could be used to put us on a more sustainable path, to fund it.
Calling this “fiscally responsible” is monumentally dishonest. This is making an already dire financial situation even worse. Anyone who has supported this bill should be thrown out of Congress.