This will only come as a surprise to President Obama’s most gullible admirers: The Congressional Budget Office (CBO) now claims that the president’s signature health care legislation will cost hundreds of billions of dollars more than originally predicted. So naturally, the media are running headlines claiming ObamaCare will cost less.
No serious policy person ever believed the original CBO gross cost projection of $938 billion (over 10 years) made when the bill was rammed through Congress in March of 2010. Working to achieve an acceptable CBO “score” (i.e., cost projection) is just part of the game Washington plays with legislation—and the American people.
To begin with, the costs in the legislation were back-loaded: Many of the costs won’t emerge until the latter half of the initial 10-year projection, ending in 2019. And sure enough, when the CBO issued its update in March 2011 the 10-year gross cost projection through 2021 jumped to $1.44 trillion. The just-released 2012 projection tags the gross cost at $1.76 trillion through 2022—nearly twice the original cost. Surprise!
Given that the Obama administration’s federal budget deficit for the month of February was $232 billion, an $800 billion increase in the cost of ObamaCare may seem like chump change—only about three and a half months worth of monthly Obama deficits. Still, I for one can’t help but think of $800 billion as real money.
So how do the media describe this huge cost increase? Why, as a decrease, of course. The Reuters headline read: “CBO Cuts Cost Estimate for Obama HealthCare Law,” and The Hill asserts, “CBO: Obama Health Law to Cost Less, Cover Fewer People Than First Thought.”
To be fair, the CBO did say that offsetting savings and revenue enhancements will lower the grand total for the bill, and the media reported some of the sordid details in their stories. But the overall impression was positive, leaving the wrong impression. For example, one source of “savings”—$20 billion—comes from the fact that fewer than projected small businesses are using the tax credit to subsidize health coverage, even though liberal groups (and here on Forbes) tried to convince us it would be otherwise. In reality, this small business-coverage rejection marks a huge failure for the legislation, but the media stories largely ignore that fact.
And one of the sources of increased revenue, helping to offset the additional cost, is the increase in penalties on individuals and businesses. The CBO increased its estimated revenues from penalty payments from uninsured individuals from $34 billion (the March 2011 estimate) to $45 billion. The penalties paid by employers not providing coverage jump from $81 billion to $96 billion.
Thus, one reason that the projected total cost of ObamaCare goes down is the government plans on raking in $141 billion in penalties imposed on employers and individuals. I’m betting we wont see that at the top of the president’s list of ObamaCare benefits.
Another reason for the budget changes has to do with the sorry state of the economic recovery. The legislation expands the Medicaid program for low-income Americans and provides subsidies for middle-income families getting coverage through a state health insurance exchange.
Past economic recoveries have been more robust than the current one, in part because they didn’t have to overcome Obama’s economic policies and regulatory smackdowns. Thus economic projections a few years ago turned out to be too optimistic; the CBO now projects more people will be in Medicaid and some 4 million fewer people will be getting health insurance through their jobs. That raised the projected federal Medicaid outlays from $627 billion to $795 billion, and dropped the exchange subsidies from $777 billion to $681 billion—a total additional cost to taxpayers of about $65 billion.
Ironically, while the CBO is estimating the health insurance exchanges will need less money, the Obama administration is asking for more—$111 billion more. That recent request prompted House Ways and Means Committee Chairman Dave Camp (R-Mich.) to send the administration a letter demanding to know the reason for the increase.
The CBO also mentions other cost savings, but there aren’t enough details to ascertain their merits. But if they’re anything like the alleged $500 billion-plus savings from changes to the Medicare program included in the legislation, be skeptical. That scam was so patently ludicrous that the chief actuary for Medicare, Richard Foster, released an unprecedented rebuttal claiming, in very diplomatic language, that those savings would likely never materialize.
To be sure, accurately estimating the long-term cost of very complex legislation with lots of moving parts and a struggling economy is an impossible—and thankless—task. If bill sponsors don’t get the numbers they’re looking for, they berate the CBO for its stupidity; if they do they act as if the numbers were written in stone and handed down from Mt. Sinai—which is how Democrats acted when they got the March 2010 ObamaCare score.
But ultimately the numbers didn’t matter—not really. The president’s promise of an affordable and sustainable health care legislation was only political cover so the congressional leadership could arm-twist the votes they needed. ObamaCare was always about giving the government almost complete control over the health care system. And with the help of the willing media (even now), mission accomplished.
March 15, 2012