Krauthammer: Pulling “Doc Fix” Out Of Health Care Reform Was A “Gimmick”

Krauthammer On Doc Fix: Democrats “Pulled It Out” Of The Bill Because It “Reduces The Liability In Obamacare.” From the January 6 edition of Fox News' Special Report with Bret Baier:

KRAUTHAMMER: As a former CBO director Douglas Holtz-Eakin said today, “It's garbage in and garbage out.” CBO is honest; it doesn't play with the numbers, but it's required to work into its numbers exactly what the Congress gives it. So --

BAIER: In other words, it's a calculator. You put in the stuff, it gives you the --

KRAUTHAMMER: And the Democrats are the ones who decided that the doc fix, which is over -- I think it's $200 billion -- would look bad in Obamacare. So what happened? They pulled it out, they put it in a separate bill, and of course there's no way to pay for it. And of course it reduces the liability in Obamacare. All of these gimmicks. The biggest gimmick of all is that the benefits don't kick in till 2014. The taxes start now, so you've got ten years of revenue in, six years of expenditures out. Of course you're going to end up with a surplus. [Fox News, Special Report with Bret Baier, 1/6/11, emphasis added]

FACT: “Doc Fix” Will Need To Be Resolved Irrespective Of Health Care Reform

Klein: Doc Fix Will Need To Be Resolved “Irrespective Of Health-Care Reform's Fate” And “Attempts To Lash The Two Together Are Nonsensical.” From a WashingtonPost.com post by Ezra Klein:

For a longer explanation of this issue, head to this post. The short version: In 1997, Republicans passed the Medicare Sustainable Growth Rate into law. The provision created a simple equation meant to hold down Medicare costs and cut doctor payments when they rose. But the provision was passed when Medicare's costs were uncommonly low. Suddenly, SGR was forcing huge cuts rather than the modest adjustments that had been intended. So legislators began voting to delay implementation rather than cut doctor payments.

The first delay was passed in 2003, under Republicans. Then again in 2005, also under Republicans. Then in 2006, under Republicans. Then in 2007 and 2008, under Democrats. For those keeping count at home, this is a policy in a Republican bill that Republicans delayed three times and Democrats delayed twice. What's needed is to reform the system so we stop delaying it. And we will need to do that -- and this is important -- whether or not health-care reform passes.

To put this slightly differently, imagine you're buying a new house. But your old house needs $20,000 in roof repairs. You will have to pay for those repairs whether you move or whether you stay, because you can't have your roof caving in come the next heavy rain. Are your roof repairs part of the cost of the new house? If you think so, then you agree with Ryan. If not, then you don't. The SGR problem predates health-care reform and exists irrespective of health-care reform's fate. Attempts to lash the two together are nonsensical. [Voices.WashingtonPost.com, 3/1/10]

NY Times: “Doc Fix Long Predates” Reform And Criticism Is “Pretty Flimsy.” From a March 9, 2010, by The New York Times' David Leonhardt:

The current health care bills don't fix this problem. An early version of them tried to, which has led some people to suggest that the doc fix is a creation of this health reform effort. But it isn't. The doc fix long predates it. For reform to reduce the deficit relative to the status quo, it doesn't need to undo the doc fix -- any more than it needs to, say, cure cancer in order to improve the nation's health. The bill simply needs to improve the status quo. [NYTimes.com, 3/9/10]

FACT: CBO Found That Health Care Reform Would Reduce The Deficit Beyond 2019

Krugman: Claim That The Bill “Front-Loads Revenues And Backloads Spending” Is A “Lie.” In a March 27 New York Times blog post, Paul Krugman responded to former Congressional Budget Officer (CBO) director Douglas Holtz-Eakin's claim that health care reform legislation is filled with “gimmicks” designed to make the legislation appear to reduce the deficit. Krugman wrote:

OK, I finally got around to reading Douglas Holtz-Eakin's op-ed on health care reform. It's much worse than I thought; time to scratch Holtz-Eakin off my shrinking list of reasonable, reasonably honest conservatives.

How bad is it? Holtz-Eakin declares that

Gimmick No. 1 is the way the bill front-loads revenues and backloads spending. That is, the taxes and fees it calls for are set to begin immediately, but its new subsidies would be deferred so that the first 10 years of revenue would be used to pay for only 6 years of spending.

I think that's what is technically known as a “lie”. Holtz-Eakin, of all people, knows how to read a CBO report. So he's perfectly capable of looking at the actual report (pdf) and seeing that the revenues, like the costs, are minimal for the first four years. Here's the chart:

[...]

His implication that there's funny business going on is totally false, and he knows it.

Wait, it gets worse: Holtz-Eakin implies that there are hidden, delayed costs:

Consider, too, the fate of the $70 billion in premiums expected to be raised in the first 10 years for the legislation's new long-term health care insurance program. This money is counted as deficit reduction, but the benefits it is intended to finance are assumed not to materialize in the first 10 years, so they appear nowhere in the cost of the legislation.

Claims that the plan is window-dressed to look good in its first decade only to go sour later might sound plausible -- except for the fact that the CBO projects bigger deficit-reduction in the second decade of the reform than in the first decade, something that wouldn't happen if lots of costs were being hidden by being pushed off into the future.

That said, we do learn something important from Holtz-Eakin's article. If this is the best critique a conservative budget wonk can come up with -- if deliberately misrepresenting how the legislation works is the only way to make it seem irresponsible -- then the bill must be pretty sound in fiscal terms. [The New York Times, 3/27/10]

CBO Director Tells Deficit Commission That Health Care Reform Slightly Improves Budget Outlook. As The Washington Post noted on July 1, CBO director Doug Elmendorf said during a June 30 presentation that the health care reform bill “did not substantially diminish” the long-term deficit problem, but that it “made a dent”:

“Growth in spending on health-care programs remains the central fiscal challenge,” CBO Director Douglas W. Elmendorf said in a presentation to Obama's bipartisan deficit commission. “In CBO's judgment, the health-care legislation enacted earlier this year made a dent in the problem, but did not substantially diminish that challenge.”

Although more starkly stated, CBO's position has not changed since the health-care legislation was approved. The new forecast simply incorporates CBO's cost estimates from that time, which predicted that the plan to expand coverage, raise taxes and cut Medicare spending would reduce deficits by about $140 billion over the next decade and by more than $1 trillion in the decade after.

“Slowing the rate of health care cost growth is the single most important action we can take to reduce our long-term fiscal shortfall,” White House budget director Peter Orszag said in a statement. “The report confirms that the enactment and successful implementation of the Affordable Care Act is a key step toward a healthier fiscal future.” [The Washington Post, 7/1/10]

CBO Budget Outlook Says Health Care Reform Law Will “Reduce Budget Deficits Over The 2010-2019 Period And In Subsequent Years.” CBO's June 30 long-term budget outlook states that the health care reform law “is expected to increase federal spending in the next 10 years and for most of the following decade. By 2030, however, that legislation will slightly reduce federal spending for health care if all of its provisions are fully implemented, CBO projects.” CBO noted in a footnote that although the law -- which will reduce the number of uninsured by 32 million by 2019 -- will increase federal spending on health care in the next two decades, it will still reduce budget deficits:

If all of its provisions are carried out, the legislation will also increase federal revenues and reduce budget deficits over the 2010-2019 period and in subsequent years, according to estimates by CBO and the staff of the Joint Committee on Taxation. [CBO, 6/30/10]

CBO: In Long-Term, Health Care Reform “Slow[s] The Accumulation Of Debt Considerably.”While cautioning that long-term estimates of health care spending are uncertain, the CBO budget outlook stated that if the health care reform bill is implemented as written, it “increase[s] projected revenues, particularly in the 2030s and beyond, thus slowing the accumulation of debt considerably.” [CBO, 6/30/10]