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ObamaCare's budget trickery

Yesterday, President Obama asserted that Harry Reid's healthcare takeover bill is in fact deficit neutral:

The argument that opponents are making against this bill does not hold water.

But when he and other Democrats claim that the government takeover of the healthcare system will cost less than $900 billion and reduce the deficit, they fail to take into account the elaborate budget gimmicks that were strategically placed within the bill.  Such assertions blatantly ignore the costs of:

  • The withholding of benefits: According to the Heritage Foundation:

The Senate bill is cleverly designed to gather revenues (higher taxes, fees, and other offsets) over the full 10 year window but delays paying out the major benefits, like subsidies, until the last 6 years. So, the 2010-2019 estimate is not a full cost estimate of all provisions fully implemented and will certainly add significantly to the true cost of the bill.

Although the total cost of reform is unknowable, it has been estimated that the cost of the bill is somewhere around $2.5 trillion over 10 years of full implementation (2014-2023).

  • The deceitful "Doc Fix" that could not pass through the Senate: Introduced by Senator Debbie Stabenow (D-Mich.), S. 1776, the Medicare Physician Fairness Act of 2009, would have spent an additional $247 billion in taxpayer money on reimbursements for physicians through Medicare. In part, the Reid bill owes its "deficit neutral" status to the reduction of $200 billion in physician reimbursements through Medicare that exist within the legislation. The savings in the Reid plan are almost the exact equivalent of the cost of S. 1776. The passage of S. 1776 would have negated reductions in Reid's legislation without adding to the perceived cost of reform. This deception helps to explain why the Reid proposal was estimated to cost less than a trillion dollars and also why it was estimated to reduce the deficit. 

With the defeat of S. 1776 by a bipartisan majority, the price of the $247 billion doc-fix will have to be added to the cost of Senator Reid's bill. The CBO examined what would happen if the cost of the doc-fix bill in the House was added to the cost of the House bill. It estimated that combining the two would "add $89 billion to budget deficits over the 2010-2019 period."

  • The CLASS Act: Senator Reid's bill includes the creation of a government healthcare program for individuals with disabilities called the Community Living Assistance Services and Supports Act, or CLASS Act. At first, the premiums collected for the new entitlement will raise revenues for the federal government.  The benefits paid out will be lower than the premiums taken in. This gives the impression that the Act lowers the deficit. It does not. The CBO points out that after 10 years the program would, "lead to net outlays when benefits exceed premiums" and, thus, it would add billions to the deficit over time.

  • Underestimates: Historically, such attempts to estimate the price of government programs have fallen woefully short of the actual cost of legislation.  For example, in 1967 House Ways and Means analysts estimated Medicare would cost $12 billion in 1990. They were wrong--by a staggering factor of 10. The actual spending in 1990 was $110 billion. If the current CBO estimates are off by a similar margin, the Reid bill could end up being a multi-trillion dollar piece of legislation.

Now, even some of the president's own supporters are realizing that deceitful budget gimmicks are solely responsible for the bill's "deficit neutral" status.

According to Ezra Klein of the Washington Post:

The delay is a budget trick, an attempt to lower the 10-year cost of the bill at the expense of the very people we’re trying to help.

Kevin Drum of Mother Jones states:

I’m pretty sure the 2014 date is mostly due to budget finagling. This stuff can’t be done overnight, but I’ll bet most of it could be implemented within 12 months, and it could certainly be implemented within 24.

And Josh Marshall of Talking Points Memo says:

My impression is that some of the delays are there because it makes the budgetary accounting work better in terms of deficit neutrality. And I know the Dems would likely lose critical support without being able to show that the overall bill actually lowers the deficit. But if that’s the main reason, I suspect the legislative authors may be too clever by half since they may be slitting the bill’s and perhaps their own throats in the process.

It is clear that President Obama and his supporters are hiding behind the false "deficit neutral" status of the Reid bill.  Multiple budget gimmicks have been included within the legislation to manipulate the estimated cost of reform.  Unfortunately, such trickery is only one of the many reasons to oppose Mr. Obama's plan for healthcare reform.