Krauthammer Still Misinforming On Health Care Deficit Reduction

Krauthammer Calls Deficit Reduction “Flimflammery,” Claims “Bill Was Gamed To Produce A Favorable CBO Number.” In a January 21 Washington Post column, Krauthammer continued pushing the false claim that “the very numbers that yield this $230 billion 'deficit reduction' are phony to begin with” and that “the whole Obamacare bill was gamed to produce a favorable CBO number.” Krauthammer continued:

[T]he entitlement it creates - government-subsidized health insurance for 32 million Americans - doesn't kick in until 2014. That was deliberately designed so any projection for this decade would cover only six years of expenditures - while that same 10-year projection would capture 10 years of revenue. With 10 years of money inflow vs. six years of outflow, the result is a positive - i.e., deficit-reducing - number. Surprise. [Washington Post, 1/21/11]

Krauthammer Has Previously Pushed False Claim That Health Care Reform Won't Reduce Deficit. On the January 18 edition of Fox News' The O'Reilly Factor, Krauthammer claimed that if Democrats say the health care reform law “is going to reduce the deficit,” they're “talking out of [their] hat”:

KRAUTHAMMER: People are not stupid. If people say we're passing a bill that is going to expand coverage to 33 million Americans who haven't had it, and this is going to reduce the deficit, they know you're talking out of your hat. Or that you've jiggled the numbers in such a way as to make it look like that.

The argument against this deficit reduction is so clear, it's so obvious, so easy to make; if Republicans can't make it, they don't deserve to be the opposition. [Fox News, The O'Reilly Factor, 1/18/11]

In Fact, CBO Found That Health Care Reform Would Continue To Reduce The Deficit Beyond 2019

Krugman: Claim That The Bill “Front-Loads Revenues And Back-Loads Spending” Is A “Lie.” In a March 27, 2010, New York Times blog post, Paul Krugman responded to former Congressional Budget Office (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, 2010, 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, 2010, 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: The Long-Term Budget Outlook, pg. ix, 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: The Long-Term Budget Outlook, pg. 22, CBO, 6/30/10]

Krauthammer Falsely Claims CLASS Act Is An “Entitlement To Long-Term Care”

Krauthammer Calls CLASS Act An “Entitlement To Long-Term Care.” In his column, Krauthammer further claimed that the Community Living Assistance Services and Supports (CLASS) Act is a “new entitlement to long-term care” and quoted Holtz-Eakin saying, “Only in Washington could the creation of a reckless entitlement program be used as 'offset' to grease the way for another entitlement.” [Washington Post, 1/21/11]

In Fact, The CLASS Act Is A Voluntary Program, Funded By Its Participants

The New York Times: CLASS Act Is A “Voluntary” “Long-Term Care Insurance Program,” And “Those Who Participate Will Pay Monthly Premiums.” In a March 24, 2010, New York Times blog post, Paula Span reported that the CLASS Act “sets up a voluntary government-run long-term care insurance program available through employers. Those who participate will pay monthly premiums. After five years, they'll be covered and can receive benefits if they need care -- whether they are 20-somethings in snowboard accidents or 80-somethings with Parkinson's disease.” [New York Times, 3/24/10]

CBPP: CLASS Act Is A “Voluntary Program” That “Would Be Fully Paid For.” A March 2010 report from the Center on Budget and Policy Priorities (CBPP) explained that CLASS is a “voluntary program” that “would be fully paid for.” From the CBPP:

The legislation also establishes a new, voluntary program of long-term care insurance, called the CLASS Act. Benefit payments from CLASS will be fully financed by premiums that beneficiaries pay and interest earnings. In its early years, as the program starts up, premium collections will substantially exceed benefit payments.

Congressional leaders crafted the health reform bill so that it would be fully paid for without relying on these additional Social Security payroll contributions or the CLASS Act premiums. The CBO estimate clearly shows that if one excludes the net revenues of $29 billion from Social Security contributions and $70 billion from CLASS Act premiums, health reform still reduces the deficit by $44 billion over the first ten years. [CBPP, 3/25/10, emphasis original]

White House Fact Sheet: The CLASS Act Is A “Self-Funded And Voluntary Long-Term Care Insurance Choice.” According to the White House, CLASS Act, as passed into law, is “self-funded and voluntary”:

It is a self-funded and voluntary long-term care insurance choice. Workers will pay in premiums in order to receive a daily cash benefit if they develop a disability. Need will be based on difficulty in performing basic activities such as bathing or dressing. The benefit is flexible: it could be used for a range of community support services, from respite care to home care.

No taxpayer funds will be used to pay benefits under this provision. The program will actually reduce Medicaid spending, as people are able to continue working and living in their homes and not enter nursing homes. Safeguards will be put in place to ensure its premiums are enough to cover its costs. [White House Health Care Fact Sheet, accessed 1/21/11]