ObamaCare: Bending the cost curve upward

Keith Hennessey discovers a valuable little ObamaCare nugget in a new report by the Congressional Budget Office:

Unlike with other major legislation, CBO’s scoring of the health laws blended spending increases and tax cuts into a single measure of deficit effects. The final scoring showed that these two bills combined would reduce the budget deficit over the next ten years. [emphasis original]

Some analysts dispute this scoring. That’s not my point. In addition to providing the deficit effects, CBO should have told lawmakers what the separate effects would be on spending and on taxes. To make a well-informed decision, policymakers need to know the gross effects and not just the net.

(snip)

Only now does CBO tell us in a parenthetical:

“Taking into account all of the provisions related to health care and revenues, the two pieces of legislation were estimated to increase mandatory outlays by $401 billion and raise revenues by $525 billion.”

This is a very different picture. Imagine two scenarios of a lawmaker who was on the fence last March. He or she is a Blue Dog Democrat, or a Democrat from a fiscally conservative red district, and is deeply concerned that the legislation may be fiscally responsible. He is presented with two different statements from CBO:

1. “CBO says these bills will reduce the budget deficit by $124 billion over the next decade.”

2. “CBO says these bills will increase federal entitlement spending by $401 billion over the next decade, and will increase taxes by $525 billion over that same time period, for a net deficit reduction of $124 billion.”

These are very different statements. Both are true. CBO said only the first when Members were looking to understand the fiscal impacts of this legislation. This failure by CBO is important both because they failed to fully inform legislators and because that lack of information may have affected how some Members voted.

So, the feds are going to spend $401 billion more thanks to ObamaCare; so much for “bending the cost curve downward,” huh?

And our taxes are going up by more than half a trillion dollars to pay for it.

The only question left is exactly how much pressure Nancy Pelosi & Co. exerted on the CBO to make sure those numbers weren’t broken down before the final vote.

64 comments Add your comment

@@

August 25th, 2010
4:39 pm

Kyle:

There’s nothing about this administration that’s on the UP and UP, other than the cost, that is.

I call it the “nunancy” language of politics.

Matti

August 25th, 2010
4:42 pm

How WILL you sleep at night when Kaiser and Blue Cross can no longer tell an hourly wage worker w/o a company group medical plan whose child has asthma to go get scroooed when he tries to be a responsible adult and provide health coverage for his family?

Richard

August 25th, 2010
4:49 pm

$525 billion in taxes split over 10 years? So $52.5 billion per year. In other words, less than half the cost of the Iraq war (which was less than 1% of the GDP).

Always list total dollars as a percentage of the GDP.

Bruno

August 25th, 2010
4:54 pm

There’s no doubt in my mind that the health care bill is the worst piece of legislation to be passed in my lifetime for several reasons, the greatest of these being that it does nothing to address the fundamental cause of the runaway costs: over-reliance on the third-party billing system. In fact, by requiring every US citizen to purchase insurance, it’s guaranteed to raise costs.

My biggest concern at this point is that the new Republican majority in Congress come January won’t have the votes to simply overturn this monstrosity. All I can hope for now is that the individual state challenges will be successful.

Bruno

August 25th, 2010
4:57 pm

“How WILL you sleep at night when Kaiser and Blue Cross can no longer tell an hourly wage worker w/o a company group medical plan whose child has asthma to go get scroooed when he tries to be a responsible adult and provide health coverage for his family?”

The only problem with your line of thinking, Matti, is that the increased peacefulness of sleeping better once everyone is covered will be more than offset by having to sleep 5 to a bed in order to pay for it. Don’t know about you, but I like having my own bed to sleep in.

BTW, what are you doing hanging out at Kyle’s??

Jimmy62

August 25th, 2010
4:58 pm

Matti: Medicine is not cheap. Unless you want to enslave all the doctors and researchers that make it so the kid with asthma doesn’t automatically die like he would have before modern research and medicine. This stuff doesn’t come cheap, it costs a lot of money to figure out how to heal people. And doctors go through a lot of years of hard work and study to be able to heal people. Unless you are willing to enslave them, then medical care will be expensive. And stealing money from rich people to pay for it is not a very good answer.

Intown

August 25th, 2010
4:59 pm

Kyle,

I think the American public knew this would raise taxes and lead to more entitlement spending. Is this really such a scoop?

Also, why is it that you hate muslims? I’m still reeling from your ridiculous Ground Zero Mosque article. That has truly colored my perception of you in the extreme negative.

Bruno

August 25th, 2010
5:01 pm

If “covering” everyone is the top priority, then single-payer is the only sensible way to go. Simply forcing everyone to buy an overpriced insurance plan is the worst way to go. It was a horrible idea when the Republicans suggested it in 1993 and it’s even a worse idea now. RomneyCare in Massachusetts has proven that beyond a shadow of a doubt.

left wing

August 25th, 2010
5:04 pm

Reform could help reduce deficit, CBO saysBy Jennifer Lubell

Posted: August 25, 2010 – 3:15 pm ET

The healthcare reform legislation approved this year has the capacity to reduce the projected budget deficit by $30 billion over the next 10 years, the Congressional Budget Office estimates.

The CBO enclosed its latest analysis on the deficit impact associated with healthcare reform in an Aug. 24 letter to Sen. Mike Crapo (R-Idaho), the ranking member of the Senate Finance Subcommittee on Healthcare, and to the leadership of the Finance Committee.

Citing findings from its August report on the budget outlook, the CBO estimates that the combined healthcare and revenue provisions of the Patient Protection and Affordable Care Act and the companion reconciliation bill would reduce the projected deficit by $28 billion in 2020. In addition, the education provisions of the reconciliation bill are estimated to reduce the deficit by $2 billion over the same time period.

Certain provisions of the health reform statutes have been estimated to generate savings for the Medicare, Medicaid and Children’s Health Insurance Program, as well as offsetting certain costs. If repealed, the CBO estimates that there would be an increase in deficits totaling near $455 billion—based on an original estimate of the net savings of these programs.

The CBO also revised earlier estimates on preventing Medicare reimbursement cuts to doctors to reflect costs through the year 2020. Over the next decade, staving off the effects of Medicare’s sustainable growth rate or SGR formula would cost up to $330 billion, according to CBO. The SGR formula has called for payment cuts to doctors for years, with Congress stepping in to stop the reductions. See the CBO letter.

http://www.modernhealthcare.com/article/20100825/NEWS/308259980

Any questions?

Bruno

August 25th, 2010
5:05 pm

“And doctors go through a lot of years of hard work and study to be able to heal people. Unless you are willing to enslave them, then medical care will be expensive.”

Jimmy62–Doctor’s inflated salaries are only one of the reasons that medical care cost so much more in this country than in any other nation on earth. Over-reliance on third-party billing creates a built-in inefficiency due to high transaction costs and opens the door wide open for abuse and fraud. Return honesty to the system and the costs would be cut by a third overnight.

Shocked and Awed

August 25th, 2010
5:08 pm

This is terrible! What if every administration hid the truth from us! What would we do! Healthcare costs are going up! War costs are going down… .

Bruno

August 25th, 2010
5:09 pm

“Certain provisions of the health reform statutes have been estimated to generate savings for the Medicare, Medicaid and Children’s Health Insurance Program, as well as offsetting certain costs.”

And if you believe that load of malarkey, left wing, then I’ve got some lake-front property in Iowa to sell you. Every cost projection ever done for Medicare, Medicaid, etc, has been way off. Why should it be different this time around?

casual observer

August 25th, 2010
5:10 pm

Rats leaping from a sinking ship!

left wing

August 25th, 2010
5:12 pm

Bruno @ 5:01 – Wow. I took you for a right-winger. Are you proposing that we should have gone to single payer?

I’m actually to the right of you on this. I believe in Capitalism, and as much as I absolutely hate health insurance companies, I do believe that they could have a positive role in our economy. I’d prefer that they’d have to compete in the market place against each other, like auto insurance (which obviously works).

The problem is they were allowed anti-trust exemption back in the 1940’s and they’re way too powerful (think lobbiests) to lose that exemption (and all the extra profits that they gain from anti-trust exempt status).

So, what we were left with was either a ‘public option’ or this. Republicans railed against a public option, so this is what you got.

left wing

August 25th, 2010
5:14 pm

Hey Bruno @ 5:09 – Are you arguing with me, or with the CBO and Modern Health Care?

Bruno

August 25th, 2010
5:19 pm

“Bruno @ 5:01 – Wow. I took you for a right-winger. Are you proposing that we should have gone to single payer?”

I am a right-winger, but one who puts common sense above ideology. If you re-read what I said, I said if covering everyone is the top priority, then single-payer is the only way to go. Personally, I favor a capitalistic solution which involves returning insurance to its rightful place as a hedge against catastrophic loss, i.e. $10,000 deductible or more, and pay cash for routine doctor’s visits. As such, I’m sure that I’m much further to the right than you are on this issue.

Bruno

August 25th, 2010
5:22 pm

“Hey Bruno @ 5:09 – Are you arguing with me, or with the CBO and Modern Health Care?”

I’ll argue with a fence post if I have to, left wing. The CBO is full of it. I know it, you know it, and the American people know it, to borrow a line from Bob Dole. I’m a little too tired to pull up stats, but the actuarial forecasts for the cost of health care have been way too low for more than 30 years now.

left wing

August 25th, 2010
5:26 pm

Bruno @ 5:19 Thank you for restoring order to the universe. Yes, you’re to the right of me.

As I said, I’d get rid of anti-trust and subsidize lower income people who want health insurance. I’d like health insurance to have to compete like Geiko and Allstate, et al. And I personally liked the Wyden Bennett bill that would have forced companies who provide healthcare to their employees to have at least 2 different providers.

One of the biggest problems with the cost of healthcare in this country is the lack of competition in the market place.

Of course, Bennett cooperating with a liberal like Wyden is why he lost his senate seat in Utah.

left wing

August 25th, 2010
5:30 pm

Bruno I bet you like the CBO when they back your side of the argument. They’re supposed to be non-partisan and both sides use their figures verbatum.

Lil' Barry Bailout

August 25th, 2010
5:31 pm

Anyone who believed the Idiot Messiah’s fascist health care scheme would lower costs is a retard.

Jefferson

August 25th, 2010
5:34 pm

My taxes won’t go up, so don’t include me when you say “our” taxes are going up.

Bruno

August 25th, 2010
5:34 pm

“One of the biggest problems with the cost of healthcare in this country is the lack of competition in the market place.”

That’s a no-brainer, left wing. The truth is that consumerism has been slowly bled out of our health care system from top to bottom, with the third-party billing system leading the way. How else could hospitals get away with charging $10 for a single aspirin?? How else could doctors get away with ordering unnecessary test after unnecessary test?? If people were pulling money out of their own pockets directly for their care, the shenanigans would disappear overnight. More importantly, if folks were paying for their own care directly, maybe they would take control of their own health instead of turning it over to someone else.

BTW, here’s a video of that lake-front property in Iowa should you be interested:

http://blogs.citypages.com/blotter/2010/07/iowas_lake_delh.php

Bruno

August 25th, 2010
5:35 pm

“Bruno I bet you like the CBO when they back your side of the argument. They’re supposed to be non-partisan and both sides use their figures verbatum.”

Try again, left wing. I trust nothing and no one without doing my own investigation.

citizen

August 25th, 2010
5:36 pm

I have a $10,000.00 deductible, Blue Cross Blue Shield health insurance policy. Several years ago, I opened a Health Savings Account, this account is funded with tax free money from my paycheck. I am scheduled for a $6,000.00 procedure next week; the hospital is giving me a discount for BCBS and another discount for payment when services performed for a cost of $3,119.00.
I’ve been getting a 50% discount on my medical bills for a few years now because I pay at time of the service. I’ve tried to convince my friends to look into these Health Savings Accounts because it has saved me so much health care costs and is tax deductible.

Matti

August 25th, 2010
5:37 pm

I was under the impression that the insurance companies are ra-ping the doctors every bit as much as they’re scroooooing companies and individuals. Has tort reform that was passed in Georgia actually brought malpractice premiums down? Anyone? Because it hasn’t brought costs OR my premiums down. And as far as I know, the costs of treating the uninsured who can’t pay still get absorbed into the system that raises prices on everybody else. This bill doesn’t do a fraction of what *I* had hoped (no public option), but that’s because the Dems tried to “reach across the aisle” and compromise with people who bit their fingers off every time.

The pertinent thing to remember is this: Allowing the insurance industry to scroooo the people over is what led to this legislation in the first place. Had they been regulated ONLY enough to scroo 20% fewer people than they did, this bill would never have happened. Own it, Repubs. Your guys could have improved the lives of their constituents ever so slightly instead of suckling at the teat of industry lobbyists, and avoided all this, but nooooooooooo……

Lil' Barry Bailout

August 25th, 2010
5:42 pm

So, Matti, do you believe ObamaCare will lower your health care costs? Let us know how that works out for you, sucka.

left wing

August 25th, 2010
5:45 pm

Thanks for the offer, Bruno but right now I prefer to stay out of the real estate market.

And doctors, hospitals, et al, have different billing rates if you have insurance and if you don’t. How do they get away with that?

The $10 asprin is because indigent (in this case, those without healthcare) go to emergency rooms when they run temperatures or need their boil lanced. When we pay $10 for the asprin, it is to subsidize them. Part of the lowering of the costs is to give them primary care physicians and force the indigents to see them first.

And Bruno I don’t know your background; I have my undergraduate in economics, so I feel I have some understanding of the basics, but don’t pretend to be able to go indepth into the numbers like true healthcare economists (and I wouldn’t have time, anyway). The CBO has a staff of them, several with PHD’s (I’m sure). So, when the non-partisan group publishes their numbers, I accept them.

Bruno

August 25th, 2010
5:46 pm

“I was under the impression that the insurance companies are ra-ping the doctors every bit as much as they’re scroooooing companies and individuals.”

Allow me to let you in on a little trade secret, Matti, called up-coding. That’s how a simple procedure like removing tubes from a child’s ears becomes “surgery”. Doctors expect the insurance companies to cut the bills, and simply overcharge on the front end. Which is why I ran a cash practice.

“Has tort reform that was passed in Georgia actually brought malpractice premiums down?”

Malpractice costs are low in my field, so not an issue. On the MD side, I think the trial lawyers will ensure that their costs remain high, particularly in the OB/GYN field.

“Allowing the insurance industry to scroooo the people over is what led to this legislation in the first place.”

Insurance companies are merely clearinghouses, Matti. They simply add up the costs and tack on a fixed profit. The source of the cost over-runs are the providers. The unnecessary transaction costs don’t help matters either. If you’re hating on insurance companies, your anger is misplaced.

Matti

August 25th, 2010
5:47 pm

Larry, you answer MY question first. Did tort reform bring down premiums or costs? Theme from Jeopardy plays. But it did indeed strip you of your access to the judicial system your taxes fund, and that’s the only solution I ever heard from a Republican.

Seriously.. NOBODY cared that I was between jobs, couldn’t afford COBRA payments, and was denied the chance to PURCHASE insurance, like a responsible parent to protect my family and avoid using the ER for primary care, due to a common, easily-treatable pre-existing condition. Nobody cared then or now. (Don’t pretend! I know better!)

But the families of the cancer patients who were cut off by corporate death panels went and testified to Congress, where cameras broadcast it coast to coast. UH-oh….. People are maaaaaaad! Tsk, tsk. Had the Kaiser death panels only kicked half as many off their chemo as they did…. well, it’s too late now. Suck it, Kaiser.

Bruno

August 25th, 2010
5:48 pm

“’ve been getting a 50% discount on my medical bills for a few years now because I pay at time of the service.”

citizen–I’ve saved bundles of cash through the years by paying cash for all of my medical care. Unfortunately, a lot of folks don’t have the imagination or courage to take control of the situation like you and I have.

Bruno

August 25th, 2010
5:50 pm

“And Bruno I don’t know your background; I have my undergraduate in economics, so I feel I have some understanding of the basics, but don’t pretend to be able to go indepth into the numbers like true healthcare economists”

I’m a licensed doctor (non-MD) who has taken the actuarial exams in my spare time.

Matti

August 25th, 2010
5:51 pm

Bruno,

I have no argument with you on costs, and (unlike so many) won’t pretend to be an expert. If you say this bill will not lower costs, then I believe you. MY point is simply that the representatives who are screeching about the horrors of “obamacare” had many chances to address the voters’ very real grievances, and chose to side with their industry donors instead. Sometimes there’s a backlash for sucking up to the money instead of looking out for the people. That’s all I’m saying.

md

August 25th, 2010
5:53 pm

CBO works with numbers presented, they do no digging outside the sandbox.

Much like the fallacy that the feds will pay for 100% of medicare for the States. Only, they forgot to include administration costs – imagine that.

And lastly, when we as a country start subsidizing “poor” people that make 88k a year, says a lot about how far we’ve fallen…………………

left wing

August 25th, 2010
5:54 pm

Matti @ 5:37 – You are correct. Health insurance providers screw people on both ends; you and I get stuck with exhorbitant premiums and doctors (particularly primary care doctors) get screwed by reimbursement rates.

Case in point; 3 years ago, my old doctor, because he couldn’t keep his practice going under insurance reimbursement rates, converted his practice to ‘concierge medicine’ (look it up). Bottom line was he wanted me to pay an extra $2000/yr just to keep him as my doctor. Needless to say I dropped him.

citizen I wish I could do that. I am self employed and buy my own policy from BCBS. I don’t have access to health care accounts. 7 years ago, I paid $350/month for healthcare with $1,000 deductible/person. I just got my renewal; I’ve since increased my deductible twice (it’s now $3,000/person) and the renewal jumped from $1064 to $1254/month. And I’m thrilled, because that’s the smallest increase I’ve had in the last 7 years.

I SO hate health insurance companies. Especially BCBS.

left wing

August 25th, 2010
6:04 pm

Bruno Still doesn’t qualify you to compete with teams of healthcare economists, accountants, actuaries, et al, working on their projections for months, using data you may or may not have access to.

left wing

August 25th, 2010
6:04 pm

Sorry about the all-bold font. Must have left off the closing characters.

Bruno

August 25th, 2010
6:08 pm

“If you say this bill will not lower costs, then I believe you.’

Matti–As I’ve told you countless times in the past, don’t trust me or anyone else on this issue or any other. You’re plenty smart enough to reason it through yourself.

“MY point is simply that the representatives who are screeching about the horrors of “obamacare” had many chances to address the voters’ very real grievances, and chose to side with their industry donors instead.”

During the 2008 Presidential campaign, McCain pushed for the increased use of MSAs, which is along the lines of what I and citizen are suggesting. Despite whatever lip service the Democrats gave toward including Republican ideas, the Repubs were completely shut out of the process as you well know. Arm-twisting and bribery on the part of the Dems is what got this bill passed.

Did the Repubs have every opportunity to do something from 2001-2006 before the Dems took control of Congress?? Absolutely, but that’s no justification for passing a bad piece of legislation later on.

Bruno

August 25th, 2010
6:11 pm

“Bruno Still doesn’t qualify you to compete with teams of healthcare economists, accountants, actuaries, et al, working on their projections for months, using data you may or may not have access to.”

left wing–I’m not competing with anyone since Obama or the CBO didn’t consult with me or any other health care providers before passing this bill. I’m just telling you how things are in the real world. You’re free to accept that or not, since this is only an anonymous blog.

Bruno

August 25th, 2010
6:15 pm

“I SO hate health insurance companies. Especially BCBS.”

left wing, insurance company profit margins are relatively low compared to other industries. Like Matti, your anger is misdirected.

“the renewal jumped from $1064 to $1254/month”

At that price, you might be better off self-insuring, which is what I do.

citizen

August 25th, 2010
6:18 pm

“left wing @ 5;54pm. I am a healthy individual and have not had any major health issues, that is why I have such a high deductible. I think you only have to have at least a $2,000.00 deductible to qualify for a Health Savings Account. I have my HSA with State Farm. I have been following the new health care scheme and I do so hope I am able to keep my HSA, it has really been a money saver, even with over the counter medicine.

Matti

August 25th, 2010
6:18 pm

Bruno,

The bill that was passed barely resembled what the Dems campaigned on in ‘08. The concessions, such as ditching the public option, were made to appease Repubs who pretended to support such compromises, and then voted straight party-line “NO” as always. Thanks for recognizing my little scrap of intelligence, ‘cuz I actually listen to my own Congressman, and I know he’d bite off his own d**k before he’d vote Yes on anything that might possibly make this President or any Dem look good. Additionally, I’m smart enough to know that I — the middle class cubicle drone — am scroooo’ed no matter who’s “in charge.” Hellooo? :roll:

left wing

August 25th, 2010
6:22 pm

Bruno @ 6:15 – If I had the resources to self insure . . . .

My daughter has Crones. I have to maintain insurance. No matter how much BCBS increases my rates (and in some years they’ve gone up 40%). And BCBS has denied paying for drugs for her. What they will cover is only partial. I pay (after hitting the drug deductible) about $125/month, just for her.

Not everyone is as lucky as you.

Bruno

August 25th, 2010
6:27 pm

“The bill that was passed barely resembled what the Dems campaigned on in ‘08. The concessions, such as ditching the public option, were made to appease Repubs who pretended to support such compromises, and then voted straight party-line “NO” as always.”

I don’t think for a minute that the Dems were counting on any Repub votes. In case you didn’t noticed, Obama’s campaign promises on several other important issues haven’t panned out either, e.g. the Patriot Act or the closing of Gitmo. Personally, I think he’s a liar who pandered to the far left during the campaign, then left y’all flapping in the wind ala Bill Clinton in the 1990s.

“Thanks for recognizing my little scrap of intelligence”

My feelings for you have never changed.

“Additionally, I’m smart enough to know that I — the middle class cubicle drone — am scroooo’ed no matter who’s “in charge.”

All I can do then is to remind you to count your blessings. There are a few billion people around the world who would trade places with you in a heartbeat.

left wing

August 25th, 2010
6:28 pm

citizen @ 6:18 – I’m self employed. I set up an LLC, but am not eligible to do things like health accounts. As I said above, I was forced into taking higher deductibles after my daugher was diagnosed with Crones.

md

August 25th, 2010
6:31 pm

Matti – I agree with Bruno – do your own research vs parroting the party talking points.

The dems were fighting the dems, the reps weren’t even in the picture. If you dig a bit, you may see that the dems had the numbers to pass it without a single rep vote. The changes were made in response to dems within the party, not the reps.

md

August 25th, 2010
6:33 pm

“There are a few billion people around the world who would trade places with you in a heartbeat.”

And every single one of them would take 88k and never even think about getting subsidized to boot.

Bruno

August 25th, 2010
6:38 pm

“My daughter has Crones.”

Crohn’s disease (the proper spelling) is a tough one, but there are several steps you can take using natural methods to reduce the frequency and severity of the episodes. My sympathies for your daughter in any case.

And yes, I have been blessed with great health, for which I feel fortunate.

CJ

August 25th, 2010
6:40 pm

Kyle: “So, the feds are going to spend $401 billion more thanks to ObamaCare; so much for ‘bending the cost curve downward,’ huh? And our taxes are going up by more than half a trillion dollars to pay for it.”

Seriously misleading post. Here’s why.

The phrase “bending the cost curve downward” referenced the cost of health care relative to the size of the economy (give or take, the US pays about twice as much, relative to GDP, as other industrialized economies for health care) and significantly reducing the rate of insurance premium increase for individuals and families (like all prices, premiums will continue to rise over time). It should be obvious that nobody ever claimed that legislation leading to coverage for tens of millions of uninsured would reduce the aggregate cost of health care—just the relative cost. Everybody was perfectly honest that subsidies would cost money, but that the savings in relative costs and additional revenues from insurer excise taxes would exceed any additional costs (hence the deficit reduction).

Also, as usual, when Kyle writes that our taxes are going up, what he means is that somebody’s taxes—somebody not likely to be reading reading this column—are going up. In this case, when insurers profit from unnecessary gold-plated insurance coverages, primarily benefiting union members, then the insurance company will have to pay an excise tax on the profits. (The unions opposed this form of taxation, by the way, giving faux-conservatives a reason to rejoice.)

CJ

August 25th, 2010
6:41 pm

Grrrrr. Sorry about the italics.

barking frog

August 25th, 2010
6:48 pm

All the money in the healthcare bill will go to
Medical care providers and Insurance companies.
consumers will get health care that many
providers say will be second rate if at all.
It seems that providers and insurance companies
are saying that the healthcare insurance bill
is not large enough.