Rove Misleadingly Suggested That CBO Added $115 Billion To Cost Of HCR, Which Reduced Savings

Rove: “CBO Added $115 Billion To Administer The Legislation,” Which “Reduced ... Claimed Savings To $28 Billion.” From Fox News Contributor Karl Rove's June 16 Wall Street Journal column:

Mr. Obama's health-care law has already put the country in bad financial shape. He claimed it reduced the deficit by $143 billion--but that was before the CBO added $115 billion to administer the legislation, including the hiring of bureaucrats and thousands of IRS agents to enforce the new mandates. This reduced Mr. Obama's claimed savings to $28 billion. [The Wall Street Journal, 6/16/11]

But Congress Must Separately Vote On Provisions Included In The $115 Billion Figure

CBO: Health Care Reform Authorizes At Least $115 Billion In “Discretionary Spending” That “Are Subject To Future Appropriation Actions.” In a May 11, 2010, letter to Rep. Jerry Lewis (R-CA), CBO estimated the “costs that will be incurred by federal agencies to implement the new policies established” by the health care reform law, as well as the cost of "[e]xplicit authorizations" for grant and program spending that is not specifically appropriated by the bills. CBO determined that costs of implementation would be at least $10 billion to $20 billion over 10 years, while the costs of the explicit authorizations would be “about $105 billion” over that period, and thus the total would “probably exceed $115 billion over the 2010-2019 period.” The letter added that "[b]y their nature ... all such potential effects on discretionary spending are subject to future appropriation actions, which could result in greater or smaller costs than the sums authorized by the legislation. [CBO, 5/11/10]

CBPP: “Large Bulk” Of $115B Estimate “Is Neither Required Nor Necessary To Implement The Health Reform Law.” The Center on Budget and Policy Priorities (CBPP) noted on January 7:

Claim: CBO's cost estimate is misleading because it doesn't include $115 billion in additional discretionary spending that Congress must provide to implement health reform.

Fact: The health reform law contains authorizations for a variety of grant and other programs, and CBO has estimated that if future Congresses chose to fully fund these authorizations -- which Congress is under no requirement to do -- the total expenditures involved would amount to $115 billion over ten years. But the large bulk of this amount is neither required nor necessary to implement the health reform law, and much of it doesn't even reflect new expenditures. As CBO has stated, more than $86 billion is “for activities that were already being carried out under prior law or that were previously authorized.”3 CBO has noted that the law's actual implementation costs -- that is, the cost that federal agencies will incur to administer the law -- will be roughly $10-20 billion over the first decade. [CBPP, 1/7/11]

Time's Pickert: "[T]his Additional Discretionary Spending Will Only Happen If Congress Authorizes It." Time's Kate Pickert wrote on May 12, 2010, that “this additional discretionary spending will only happen if Congress authorizes it. The $938 billion in mandatory spending called for in the law, on the other hand, will happen unless Congress acts to change the law.” Pickert further wrote:

So the new law says the government will spend $938 billion over ten years on provisions in the Patient Protection and Affordable Care Act. The law also says Congress can spend $115 billion more, but it doesn't have to. In other words, future discretionary spending called for in some new programs, along with expenses incurred by federal agencies charged with overseeing implementation -- like the IRS and Department of Health and Human Services -- is up to Congress.

This is not atypical. This is run-of-the-mill business as usual Congress. Funding to keep the government running -- and the lights on at the IRS -- is often doled out this way, via the budget. There is $34 billion in authorized spending for community health centers in the new CBO health reform estimate. These centers are almost always paid for with discretionary spending. In fact, says Paul Van de Water, of the Center on Budget and Policy Priorities, “Most of things [in the CBO letter] are things traditional [sic] financed through appropriations.” [Time, 5/12/10]

CBO Director: “CBO's Discretionary Baseline ... Already Accounts For Much Of The Potential Discretionary Funding.” In a May 13, 2010, statement, CBO Director Doug Elmendorf clarified that the cost increases estimated by CBO were discretionary and “include many items whose funding would be a continuation of recent funding levels for health-related programs or that were previously authorized and that PPACA would authorize for future years.” Further, Elmendorf explained that most of the costs were already included in the cost estimates of the health care bill: “CBO's discretionary baseline, which assumes that 2010 appropriations are extended with adjustments for anticipated inflation, already accounts for much of the potential discretionary spending under PPACA.” [CBO, 5/13/10]

Senate Democratic Policy Committee: “Republicans Exaggerate The Costs Of Implementing And Administering The Affordable Care Act.” From a March 7 Democratic Policy Committee release:

Republicans exaggerate the costs of implementing and administering the Affordable Care Act. Republicans contend that an additional $115 billion over ten years will be required in discretionary spending to fully implement and administer the Affordable Care Act. [GOP Report, 2/7/2011]

• Republicans are selective in their interpretation of a CBO analysis regarding the discretionary funds required to implement Affordable Care Act. Although the CBO analysis states that the law will require an additional $100 billion in discretionary funding over ten years, the analysis includes $85 billion are for “activities that were already being carried out under prior law or that were previously authorized and that PPACA authorized for future years.” [CBO, 2/18/2011] Therefore, the law will require an additional $1.5 billion each year in discretionary funds, not $10.5 billion as the Republicans contend. [Democratic Policy Committee, 3/7/11, emphasis in original]

PolitiFact: "[J]ust $10 To $20 Billion Of That $115 Billion Is Actually Tied To Implementation Of The New Health Care Law." Responding to Rep. Paul Ryan's (R-WI) claim that "[t]he CBO score did not include the cost of setting up and administering" the health care law, PolitiFact wrote on January 27:

The release links to a CBO letter that estimates these discretionary appropriations would cost $115 billion over the next 10 years. That includes the administrative cost to implement new health care policies, as well as grants and other program spending prescribed in the law. And it's true that those costs weren't in the CBO's estimates regarding the budget effects of the health care law.

But these are discretionary appropriations, which means Congress will determine each year how much of that cost it is willing to appropriate.

Also, as the CBO pointed out in its letter to Boehner, “most of those authorizations, for more than $86 billion, were for activities that were already being carried out under prior law or that were previously authorized.”

Marc Goldwein, policy director at the Committee for a Responsible Federal Budget, said just $10 to $20 billion of that $115 billion is actually tied to implementation of the new health care law. In other words, much of the rest is not new cost. [PolitiFact, 1/27/11]

White House: Discretionary Health Care Provisions Would Have To Be Offset By Comparable Spending Cuts

White House Has Reportedly Said Discretionary Spending Must Be “Offset Somewhere Else In The Discretionary Budget.” In a May 11, 2010, article about the CBO estimate, Politico reported that Office of Management and Budget (OMB) spokesman Kenneth Baer stated: “If these authorizations are funded, they must be offset somewhere else in the discretionary budget. The president has called for a non-security discretionary spending freeze, and he will enforce that with his veto pen.” [Politico, 5/11/10]

Politico: Democratic Aide Said Discretionary Spending “Will Need To Compete For Funds Within Set Budgetary Limits.” Politico further reported: "[A] Democratic leadership aide on Capitol Hill said the Congress will have to stay within the budget." Politico quoted the aide as saying: “Just like other authorized programs, the discretionary programs in health reform will need to compete for funds within set budgetary limits.” [Politico, 5/11/10]

CNN: “Congress Requires Most Discretionary Spending To Have Available Resources Under So-Called 'Pay To Go' Rules.” Reporting on the revised CBO discretionary cost estimate, CNN.com noted that "[i]ncreased costs in discretionary spending would not necessarily offset the estimated deficit reduction. Congress requires most discretionary spending to have available resources under so-called 'pay to go' rules." [CNN.com, 5/11/10]

Congress Often Decides Not To Approve This Type Of Authorized Discretionary Spending

OMB Spokesman: “Congress Does Not Always Act On Authorizations That Are Put Into Legislation By Drafters.” The Associated Press reported on May 11, 2010, that “the additional spending is not mandatory, leaving Congress with discretion to provide the funds in follow-on legislation -- or not.” The AP quoted Baer as saying: “Congress does not always act on authorizations that are put into legislation by drafters. ... Authorizations for discretionary spending are not expenditures.” [AP, 5/11/10, via CBSNews.com]

CBPP: “Congress Traditionally Authorizes Spending For Many Discretionary Programs At Much Higher Levels Than Are Actually Appropriated.” CBPP wrote on March 25, 2010:

Congress traditionally authorizes spending for many discretionary programs at much higher levels than are actually appropriated; indeed, many authorizations are never funded at all, because the Appropriations Committees cannot find room to fund them within the overall amount they are allowed to appropriate for the year.

[...]

CBO treats mandatory spending and discretionary spending separately in estimating the cost of legislation. It does so for good reason. Mandatory spending, such as Medicare and Medicaid, continues from year to year unless new legislation is passed to reduce it. In contrast, discretionary spending, which covers most of the day-to-day operations of federal agencies, is provided for a year at a time in annual appropriations bills and is provided only to the extent that those bills make funding available. The CBO cost estimate for health reform appropriately includes all mandatory spending costs in its calculation of the effects of the legislation on the deficit, and provides a separate tabulation of the possible discretionary spending that could -- contingent on future appropriations legislation -- result from enactment of health reform. [CBPP, 3/25/10, emphasis in original]

Rove Hyped Dubious Study That Claimed 78 Million Would Lose Current Coverage Under HCR Law

Rove: "[D]evastating McKinsey & Company Study ... Concluded Up To 78 Million Americans Would Lose Their Current Health Coverage" Because Of HCR Law. From Rove's column:

A kerfuffle was stirred up last week by a devastating McKinsey & Company study that concluded up to 78 million Americans would lose their current health coverage as employers stopped offering insurance because of President Obama's Patient Protection and Affordable Care Act.

The report contradicted Mr. Obama's frequent pledge that under his reform, “if you like your health-care plan, you can keep your health-care plan.” And McKinsey's was at least the fourth such analysis calling the president's promise into question. [The Wall Street Journal, 6/16/11]

But McKinsey Study Has Been Widely Questioned And Its Methodology Remains A Mystery

Talking Points Memo: "[S]ources Both Within And Outside" McKinsey Say “The Survey Was Not Conducted Using McKinsey's Typical, Meticulous Methodology.” Talking Points Memo reported on June 10:

But multiple sources both within and outside the firm tell TPM the survey was not conducted using McKinsey's typical, meticulous methodology. Indeed, the article the firm published was not intended to give the subject matter the same authoritative treatment as more thorough studies on the same topic -- particularly those conducted by numerous think tanks, and the Congressional Budget Office, which came to the opposite conclusion. And that's created a clamor within the firm at high levels to set the record straight.

“This particular survey wasn't designed in away [sic] that would allow it to be peer review published or cited academically,” said one source familiar with the controversy.

All sources were granted anonymity, in order to be able to speak candidly about the controversy.

Reached for comment today, a McKinsey spokesperson once again declined to release the survey materials, or to comment beyond saying that, for the moment, McKinsey will let the study speak for itself. However, McKinsey notes that the survey is only one indicator of employers' potential future actions -- that the conclusions remain uncertain and employers' future decisions will ultimately depend on numerous variables. The three authors of the report were not immediately available for comment.

Another keyed-in source says McKinsey is unlikely to release the survey materials because “it would be damaging to them.”

Both sources disagree with the results of the survey, which was devised by consultants without particular expertise in this area, not by the firm's health experts. [Talking Points Memo, 6/10/11]

The New Republic: “McKinsey Employees” Say Survey Is “Not A Good Tool For Prediction.” The New Republic reported on June 15:

Brian Beutler of TPM Media, who like the Washington Post's Greg Sargent has advanced this story with his own extensive reporting, has already quoted multiple sources familiar with the survey questioning its controversial finding. One of them said, “this particular study wasn't designed in a way that would allow it to be peer review published or cited academically.” Now McKinsey employees are telling TNR similar things, sometimes in even blunter terms. “Trust me,” says one of the firm's insiders. “The survey is not a good tool for prediction.”

Another senior firm employee defends the report's “quality and rigor,” describing it as an “independent, professionally conducted, extensive survey.” But this employee also says that, notwithstanding the hype, the survey was not designed to produce the sort of reliable forecasts that CBO and other authorities make. “We are not making a point prediction or forecast about employer behavior after the implementation of health reform.” [The New Republic, 6/15/11]

WaPo's Greg Sargent: “McKinsey Refuses White House Request For Info On Study.” On June 10, The Washington Post's Greg Sargent reported that “the White House, as well as top Democrats on key House and Senate committees, have privately contacted McKinsey to ask for details on the study's methodology. According to an Obama administration official and a source on the House Ways and Means Committee, the company refused.” From Sargent's post:

I'm told that the White House, as well as top Democrats on key House and Senate committees, have privately contacted McKinsey to ask for details on the study's methodology. According to an Obama administration official and a source on the House Ways and Means Committee, the company refused.

A spokesperson for McKinsey -- which does proprietary research regularly -- declined comment.

The study's topline conclusion was that 30 percent of employers will stop offering employer-sponsored insurance to employees in the years after 2014, when the health reform law fully kicks in. As the White House was quick to point out, this is an outlier: Other studies have concluded that health reform will produce minimal changes in whether employers will continue to provide coverage.

How did McKinsey conduct their study? An article accompanying the study claimed that 1300 employers of varying sizes, industries and regions had been surveyed. But there's a good deal more we need to know about how it was conducted in order to verify its reliability. For instance, as Kate Pickert argued persuasively, a detailed breakdown of the sizes, locations and industries included in the survey would help us evaluate whether it's “representative of American business as a whole.” [The Washington Post, 6/10/11]

Krugman: "[N]obody Should Be Citing [The McKinsey Study] Until Or Unless McKinsey Comes Clean." In a June 10 New York Times blog post citing Sargent's report, Nobel laureate economist Paul Krugman wrote: “One has to assume that there was something terribly wrong with the study. At any rate, nobody should be citing it until or unless McKinsey comes clean.” [The New York Times, 6/10/11]

White House: “McKinsey Study Is An Outlier”

White House Notes That Other Studies Have Found That HCR Will Not Substantially Affect Employer-Sponsored Coverage. Responding to the McKinsey study, White House official Nancy-Ann DeParle wrote on June 8:

You might have seen reports about a study from McKinsey and Company claiming that a significant number of employers will stop offering insurance to their workers in 2014. Unfortunately, the study misses some key points and doesn't provide the complete picture about how the Affordable Care Act will strengthen the health care system and make it easier for employers to offer high quality coverage to their employees. Here are the facts:

The McKinsey Study is an Outlier

Respected independent organizations have examined whether employers will continue to offer coverage. Here's what they found:

The Rand Corporation: “The percentage of employees offered insurance will not change substantially, but a small number of employees in small firms (defined as those with under 100 employees in 2016) will obtain employer-sponsored insurance through the state insurance exchanges.”

The Urban Institute: “Some have argued that the Patient Protection and Affordable Care Act would erode employer-sponsored insurance (ESI) by providing incentives for employers to stop offering coverage. Others have claimed that most businesses would face increased costs as a result of reform. A new study finds that overall ESI coverage under the ACA would not differ significantly from what coverage would be without reform.”

Mercer: “In a survey released today by consulting firm Mercer, employers were asked how likely they are to get out of the business of providing health care once state-run insurance exchanges become operational in 2014 and make it easier for individuals to buy coverage. For the great majority, the answer was 'not likely.'” [The White House, 6/8/11]