Wednesday, June 30, 2010

Did Democrats’ Health Law Violate the Fifth Commandment?

No, I’m not referring to the dictum to “Honor your father and your mother” and its applicability to the Medicare portions of the law, which is an entirely different discussion.  I write instead about the “Ten Commandments for Fiscal Adjustment in Advanced Economies” that the International Monetary Fund released last week, ahead of the G-20 summit.  That document’s fifth point specifically called on developed countries to pass “early health and pension reforms, as current trends are unsustainable.”

How well did Democrats’ health “reform” law meet this standard, according to the non-partisan Congressional Budget Office?  CBO Director Elmendorf today gave a lukewarm assessment at best, noting that if the law is fully implemented, it will make “steps in the direction of a sustainable fiscal policy.  But they are small steps relative to the journey that will be needed for fiscally sustainability.”

Most critically, even this rather tepid analysis presumes that all the tax increases and savings measures in the health care law are fully implemented – an assumption about which CBO remains highly skeptical.  While today’s CBO report included one current-law baseline estimate that presumes the law is fully implemented, it also included an alternative baseline that presumes many of the largest and most controversial savings proposals will never be allowed to take effect by Congress.  The alternative fiscal scenario is not an unusual phenomenon – at the Fiscal Commission meeting this morning, Budget Committee Chairman Conrad called it a useful tool, and some experts view it as giving a more accurate and realistic picture of the country’s long-term fiscal picture.  What is striking though is the way in which CBO, in arriving at its alternative scenario, assumed that most of the law’s major savings provisions will never take full effect – this only three months after the law was first enacted.

So in sum: While the IMF called current trends on health spending “unsustainable,” the Congressional Budget Office released a report highlighting several “Questions About Sustainability” for a law enacted mere months ago, and recently asserted that even if the law is fully and successfully implemented, “putting the federal budget on a sustainable path would almost certainly require a significant reduction in the growth of federal health spending relative to current law (including this year’s health legislation).”  Sounds like some Democratic fiscal hawks may need a trip to the IMF confessional.

One final word on health care and the budget: The Center for American Progress released a report today claiming that according to CBO, the health care law “is fully funded, strengthens the Medicare trust fund, and reduces the federal deficit.”  That claim is demonstrably false.  In January CBO stated that “the majority of the [Medicare] trust fund savings under [the health law] would be used to pay for other spending and therefore would not enhance the ability of the government to pay future benefits.”  CBO followed up with a March letter to Congressman Ryan, in which it tallied the budgetary effects of keeping the Medicare Hospital Insurance savings in the Medicare HI trust fund: “the legislation’s effects on the rest of the budget—other than the cash flows of the HI trust fund—would amount to a net increase in federal deficits of $260 billion over” 10 years.  In plain English, the same money can’t be used BOTH to “save” Medicare and to reduce the deficit – if the Medicare savings proposals were dedicated solely toward Medicare, the deficit would soar – so CAP’s claim is clearly false.  Moreover, with respect to the claim that the law is “fully funded,” CBO released a letter last week claiming the high-risk pool program is NOT fully funded, and that as many as 500,000 individuals with pre-existing conditions could lose out on coverage as a result – so that CAP claim needs fact-checking as well.