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Health Reform And The Budget



January 19th, 2011
by Chris Fleming

As the Republican-controlled House prepares to vote today to repeal the Affordable Care Act (ACA), the debate continues on the consequences of repeal for the federal budget. Full-scale repeal of the ACA will surely die in the Democratic Senate, but the fiscal arguments will continue over the next two years and through the 2012 elections, and perhaps beyond.

Many differing opinions on the budgetary impact of the ACA and its repeal have been expressed in numerous forums. However, for the purposes of congressional legislation, normally only one opinion would count: that of the Congressional Budget Office, which has declared that repealing the ACA would increase the deficit by approximately $230 billion over the next decade, and by larger amounts in subsequent decades.

But House Republicans have dismissed CBO’s findings and issued a 19-page alternative analysis of their own. Indeed, newly adopted House budget rules exempt the costs of repealing the ACA from having to be paid for by cuts elsewhere. In addition, a letter to congressional leaders issued yesterday by former CBO director Douglas Holtz-Eakin, and signed by over 200 others, claims that the ACA would increase deficits by at least $1 trillion over the next decade. (Holtz-Eakin is currently president of the American Action Forum, a conservative think tank. See the recent Health Affairs article by Holtz-Eakin and Michael Ramlet for more detailed budgetary arguments.)

In a telephone briefing yesterday by the Center on Budget and Policy Priorities, CBPP executive director Robert Greenstein and two CBO veterans now at the Center — Paul Van de Water and James Horney — offered a point-by-point rebuttal of several criticisms of CBO’s analysis leveled by House Republicans and others such as Holtz-Eakin. The briefing by the left-leaning think tank elaborated on a written analysis by Van de Water.

An Attack On The Role Of CBO? 

As well as responding to specific criticisms of CBO’s methodology, the CBPP analysts objected to what they said was an unprecedented attack on CBO’s role as Congress’ neutral budgetary umpire. ”People often grouse about and criticize the CBO estimates. They do not normally issue 19-page reports and then seek to substitute an alternative estimate,” said Greenstein. He noted that, during the development of the Affordable Care Act, Democrats had often complained that CBO was overestimating the cost of the legislation; but “once the grousing was done, they then changed the bill” to produce budget savings as scored by CBO.

Medicare Cuts And Health Care Productivity

One interesting topic discussed during the CBPP call was not covered in the Center’s written analysis. The ACA includes Medicare provider payment cuts that are based on the assumption that providers will be able to increase their productivity in line with increases in economy-wide productivity. Medicare chief actuary Richard Foster and others have suggested that this level of productivity improvement is unrealistic and that, over time, Congress is likely to undo the cuts as it sees providers being pushed out of business.

Van de Water said that Foster raised legitimate issues that should be taken seriously, but he added, “This concern about savings provisions not going into effect is overblown.” He cited a December 2009 CBPP study reviewing Medicare cuts included in major deficit-reduction initiatives since 1990. “Overwhelmingly, these cuts went into effect,” said Horney.  Van de Water noted that others –- notably the Medicare Payment Advisory Commission, or MedPAC — have been more bullish than Foster about the ability of hospitals and other providers to operate more efficiently. (See for example the article by MedPAC analyst Jeffrey Stensland and coauthors published in the May 2010 issue of Health Affairs.)

Horney observed that this discussion illustrated the importance of “bending the cost curve” in health care: “If you somehow try to reduce Medicare and Medicaid without slowing the rate of growth systemwide, private and well as public, you will have real adverse consequences” on access to care and quality of care.” That’s true, he pointed out, whether you are talking about the cuts contained in the ACA or the deeper cuts suggested by Rep. Paul Ryan (R-WI), the new chairman of the House Budget Committee. 

In this regard, Horney and Greenstein stressed the importance of the ACA’s many initiatives aimed at making health care delivery more efficient. CBO was right not to include savings from these initiatives in its budget estimates for the ACA because the savings are not guaranteed, Greenstein said. However, he added that the presence of these initiatives, and the ability of the Department of Health and Human Services to expand them without going back to Congress, is why many experts say that the ACA ”is as likely to save more than the CBO said it would as to save less.”

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1 Response to “Health Reform And The Budget”

  1. Carroll Says:

    The attempt by the Republicans to politicize the CBO comes perilously close to making The Party the political arm of the government.

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