Federal Judiciary

Obamacare's Imaginary Savings -- By: The Editors

President Obama and Democratic leaders in Congress touted the latest cost projections from the Congressional Budget Office (CBO) as evidence that the bill they are attempting to ram through Congress this weekend is fiscally responsible. Some Blue Dog Democrats may try to use the latest projections as an excuse to switch their votes from opposition to support of Obamacare.

But if they do so, the only people they will be fooling are themselves -- the public long ago saw through the gimmicks and sleight-of-hand behind the Democratic deficit-cutting claims. Voters know a runaway entitlement program when they see one, and in this case they got some crucial help from Rep. Paul Ryan and others. The bill the Democrats want to pass is a massive federal spending spree, and the claims that it will reduce the deficit do not stand up to scrutiny.

According to CBO, Obamacare?s new subsidies for health insurance would cost $216 billion by 2019 -- an expense that would increase another 8 percent every year thereafter. In addition, the plan includes $130 billion in other entitlement spending, plus another $70 billion for the bureaucracy needed to implement it. All totaled, the bill would cost at least $1.2 trillion through 2019, not the $940 billion advertised by the White House.

And even that $1.2 trillion is a low-ball estimate, because the Democratic plan would do almost nothing of real consequence until 2014. But when the program?s spending measures did finally kick in, costs would soar. Over the first ten years of full implementation, the bill?s cost would grow to at least $2.5 trillion, and perhaps much more. Today, Medicare and Medicaid spend far more money -- about ten times as much -- as the original government estimates predicted.

Most of the offsets the Democrats are pushing to ?pay for? the bill are smoke and mirrors -- cuts that won?t be made, taxes that won?t be collected. But there are some measures that, if enacted, promise to inflict real damage on the American economy and on America?s seniors. Among the plan?s $560 billion in tax hikes over the next ten years is a new Medicare tax on non-wage income, a penalty on investment that would undermine business growth and job creation. And there?s the Medicare Advantage cut, more than $200 billion over ten years. This reduction would force millions of Medicare beneficiaries out of their health-insurance plans, in direct contradiction of Obama?s promise. In total, the Medicare cuts in the president?s plan now exceed $520 billion over ten years.

But most of the offsets are window dressing, helpful in making the sale but unlikely to amount to much in the end. The president wants us to believe we can count on a massive revenue surge from the ?Cadillac tax? after 2020, but the unions hate the tax, and the fact that the president?s plan puts off collecting it until he is safely in retirement suggests that Democrats are not serious about enforcing the measure when the time comes.

The Democrats? plan assumes permanent, across-the-board cuts in Medicare hospital and nursing-home payments -- cuts that that would go so deep that the chief actuary of the program expects that one in five facilities would have to stop taking Medicare patients to avoid insolvency. Which means those cuts probably aren?t going to happen. We have seen this before: Even as Democrats claim these new Medicare savings can be taken to the bank, they are working to undo a similarly clumsy and ill-advised cut in Medicare physicians? fees -- at a cost of $371 billion over ten years, another massive pile of money not accounted for in the Democrats? ?savings? projections.

While much of the spending isn?t counted, a big piece of the revenue is double-counted: The Democrats? numbers show premiums from the new long-term care insurance program, along with Social Security and Medicare surpluses, being used both to pay for the insurance subsidies and to strengthen the ailing entitlement programs. But you can?t spend the same dollar in two different places. Which means that the Democrats are trying to finance another expensive entitlement program with funds that are needed to pay for entitlement programs already on the books.

When that double-counting is omitted and the real cost of physicians? fees is included, all of the claimed deficit-reduction from the health bill vanishes.

The recklessness of the Democratic majority is remarkable. The federal budget is already suffocating under unaffordable entitlement commitments. We can?t pay for the ones we have, and they want to create a bunch of new ones. CBO finds no ?bending of the cost curve? in the president?s plan. It is nothing but high-speed spending that is almost certain to grow even more expensive than advertised. It will be financed in part with job-killing tax hikes and ideologically driven cuts to Medicare Advantage -- but mainly it?s going to be papered over with accounting gimmicks and ?savings? that will never materialize.

The United States is already rushing headlong toward a debt crisis, in part because of the massive spending President Obama has already pushed through the Congress. Contrary to his claims, his health plan would not reduce the deficit, in the short term or in the long term. If enacted, it would only accelerate our descent into debt, and hasten the day of reckoning.

Full post as published by Bench Memos - National Review Online on March 19, 2010 (boomark / email).