Samuelson falsely suggests health care bill doesn't reduce deficits after first decade

Samuelson: CBO deficit estimate “is misleading” because 10 years of revenue pay for six years of spending. From Samuelson's March 29 Washington Post column:

To criticisms, Obama supporters make two arguments. First, the CBO says the plan reduces the deficit by $143 billion over a decade. Second, the legislation contains measures (an expert panel to curb Medicare spending, emphasis on “comparative effectiveness research”) to control health spending. These rejoinders are self-serving and unconvincing.

Suppose the CBO estimate is correct. So? The $143 billion saving is about 1 percent of the projected $12.7 trillion deficit from 2009 to 2020. If the administration has $1 trillion or so of spending cuts and tax increases over a decade, all these monies should first cover existing deficits -- not finance new spending. Obama's behavior resembles a highly indebted family's taking an expensive round-the-world trip because it claims to have found ways to pay for it. It's self-indulgent and reckless.

But the CBO estimate is misleading, because it must embody the law's many unrealistic assumptions and gimmicks. Benefits are phased in “so that the first 10 years of [higher] revenue would be used to pay for only six years of spending” increases, a former CBO director, Douglas Holtz-Eakin, wrote in the New York Times on March 20. Holtz-Eakin also noted the $70 billion of premiums for a new program of long-term care that reduce present deficits but will be paid out in benefits later.

In fact, the bill continues to reduce deficits in second decade, according to CBO

CBO: Health care reform would reduce deficits in second decade by around “one-half percent of GDP.” In it's March 20 estimate of H.R. 3590 and the reconciliation proposal, CBO stated of the deficit impact “for the decade following the 2010-2019 period”: "[T]he combined effect of enacting H.R. 3590 and the reconciliation proposal would also be to reduce federal budget deficits over the ensuing decade relative to those projected under current law - with a total effect during that decade in a broad range around one-half percent of GDP."

CBO: Health care reform would “probably continue to reduce budget deficits” in subsequent decades. CBO further stated of the impact of the health care reform bill on deficits after 2029: “CBO has not extrapolated estimates further into the future because the uncertainties surrounding them are magnified even more. However, in view of the projected net savings during the decade following the 10-year budget window, CBO anticipates that the reconciliation proposal would probably continue to reduce budget deficits relative to those under current law in subsequent decades, assuming that all of its provisions continued to be fully implemented.”

Sameulson: CBO health care reform estimate “is misleading” because “doc fix” is excluded

Samuelson: CBO deficit estimate “is misleading” because “doc fix” would “cost about $200 billion.” In his Washington Post column, Samuelson cited the “doc fix” as one reason “the CBO estimate is misleading.” Samuelson said the “doc fix” means “higher Medicare reimbursements under separate legislation that would cost about $200 billion over a decade.”

In fact, “doc fix” costs unrelated to health care reform bill

CBPP: "The federal government will incur this cost regardless of health reform, not because of it." In a March 25 document, The Center on Budget and Policy Priorities (CBPP) addressed “claims about budgetary gimmicks and games” that they said “do not withstand scrutiny.” One of the many claims the CBPP addressed was that “the estimate for health reform should include the cost of fixing the sustainable growth rate (SGR) payment formula for physicians,” often referred to as the “doc fix.” CBPP noted: “The cost of fixing the SGR formula is entirely unrelated to health reform; all of its cost would remain if health reform were repealed tomorrow.” CBPP further stated:

Some critics complain that the CBO cost estimate for health reform is misleading because the legislation does not include a permanent fix to the broken SGR payment formula for physicians. Since Congress will likely continue to prevent the SGR from taking effect, they say, Congress should consider the cost of such action as part of the cost of health reform.

Indeed, Congress likely will never let the full SGR cuts take effect, and it probably won't offset the cost of scrapping them. But that cost is neither part of, nor in any way a result of, health reform. The federal government will incur this cost regardless of health reform, not because of it. This fact is undeniable: if health reform legislation had not been enacted, the full SGR cost would remain. To be sure, it would be better if Congress offset the cost of cancelling the SGR cuts. But that issue is separate from the question of how much health reform itself reduces the deficit.

NY Times: “Doc fix long predates” reform and criticism is “pretty flimsy.” The Times' David Leonhardt described criticisms of the “so-called doc fix” as “pretty flimsy,” explaining that the fix would rectify an “accounting fiction” resulting from the 1990s legislation that has been repeatedly overridden since 2003. He wrote:

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.

Klein: Doc fix will need to be resolved “irrespective of health-care reform's fate” and "[a]ttempts to lash the two together are nonsensical." The Washington Post's Ezra Klein explained that the so-called “doc fix” is a remedy to faulty legislation that will need to be passed irrespective of health care reform. From Klein's explanation:

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.

Klein further stated that the problem necessitating the fix “predates health-care reform and exists irrespective of health-care reform's fate. Attempts to lash the two together are nonsensical.”