CBO Revises Obama’s Savings Estimates

Stanley Feld M.D., FACP,MACE

President Obama has continually tricked the Congressional Budget Office with erroneous assumptions about the projected costs of Obamacare. 

On March 20,2010, Douglas Holtz-Eakin former chief of the CBO wrote that “the Congressional Budget Office reported that, if enacted, the latest health care reform legislation would, over the next 10 years, cost about $950 billion, but because it would raise some revenues and lower some costs, it would also lower federal deficits by $138 billion.”

This statement was written shortly before passage of President Obama’s healthcare reform act.

The accounting for the CLASS Act (Community Living Assistance Services and Supports) was one of President Obama’s tricks to the CBO’s scoring. It was an additional entitlement. Premiums from the CLASS act were supposed to decrease the deficit by $123 billion over a decade.

Realistically, the CLASS Act costs should have been estimated to be of an additional $70 billion per year and not a profit of $70 billion a year. 

The CBO was given an estimate of cost and revenue that indicated that the CLASS act would offset a substantial amount of the deficit created by Obamacare. 

In November 2011 the CLASS act was shut down by the government.

“CLASS quietly became an amendment to President Obama’s healthcare reform act at passage. There was little discussion about CLASS when the Democrats in congress passed President Obama’s healthcare reform act. There was little discussion until Kathleen Sibelius’ announcement to discontinue CLASS. “ 

 She said,

 “ the administration was shutting down Class. After 19 months of research and consultation, “we have not identified a way to make Class work at this time.”

 

Douglas Holtz-Eakin predicted in March 2010,

"In reality, if you strip out all the gimmicks and budgetary games and rework the calculus, a wholly different picture emerges: The health care reform legislation would raise, not lower, federal deficits, by $562 billion." 

Gimmick 1.  The bill front-loads revenues and backloads spending. Taxes and fees for the bill would begin immediately. The new subsidies would be deferred so that the first 10 years of revenue would be used to pay for only 6 years of spending.

Gimmick 2.  Operating costs for Obamacare were estimated to be $114 billion annually for the decade.  These costs were designated as discretionary spending and were excluded from the Congressional Budget Office’s scoring.

Gimmick 3. The CLASS act was expected to generate $70 billion annually totaling $700 billion in premiums over the first 10 years.  The $700 billion was counted as reduction in the healthcare budget deficit. Benefits the premiums were supposed to finance were assumed to be zero over the first 10 years. An estimate of the cost of the benefits does not appear in the CBO scoring creating the $700 billion of healthcare reform budget deficit reduction.

This was a nice trick.

Gimmick 4.  The administration and legislation anticipated higher Social Security tax revenue of $53 billion to offset Obamacare spending.

Social Security revenues were expected to rise as employers shifted from paying for health insurance to paying employees higher wages plus the penalty.

How this supposed increase in Social Security payments could be use to lower the deficit created by healthcare reform is beyond me.

 Gimmick 5.  The legislators put a provision in the bill to have corporations’ deposit $8 billion in higher estimated tax payments in 2014. The goal was to meet the budget targets of the President Obama’s healthcare reform bill for it first five years.

The corporations’ actual taxes would be unchanged in 2014 and 2015. The extra estimated taxes would need to be refunded to the corporations in 2015. The net effect is simply to shift dollars from 2015 to 2014 to lower the deficit created by Obamacare in 2014. The 2015 deficit would simply be increased.

Gimmick 5. The government proposed takeover of all federally financed student loans is rolled into the healthcare bill. The government expected to generate $19 billion in deficit reduction. The student loans have nothing to do with healthcare or deficit reduction that would be attributable to Obamacare.

Gimmick 6. The last bite of unrealistic accounting is the proposed trimming of $463 billion in Medicare spending. The $463 billion in “savings” was to be used to finance new healthcare insurance subsidies granted in the healthcare insurance exchanges.

This notion is where the double counting comes in.

The government cannot afford to cut payments for physicians’ services to Medicare patients. Medicare would lose its physician work force. Seniors would be burdened with much higher healthcare bills if physicians dropped out of Medicare. This increase in expense would be in addition to the ever-increasing Medicare premiums.

There are no convincing innovations in Obamacare that would decrease Medicare’s operating expenses.

All of the pilots studies for innovations have failed to be executed or save money. 

The CBO’s scoring of Obamacare in March 2012 is closer to the truth. It is still a long way from reality.

Obamacare deficit is estimated to be $1.762 trillion dollars. Included expenses reduce the deficit 1.253 trillion dollars. Figure 1

 

The problems with the CBO estimates are that costs will rise for three reasons.

First is the increase in baby boomers becoming Medicare age will increase Medicare spending.

Second is the expansion of Medicare, Medicaid and the SCHIP programs to 32 million uninsured people.

Third is the increase in enrollees in the subsidized healthcare insurance programs through healthcare insurance exchanges.

Surveys have shown that as many as 60% of employers a going to or thinking about dropping healthcare insurance and paying the penalty. Sixty percent is much higher than the estimates included in this CBO scoring.

 America is developing a gigantic budgetary mess as a result of President Obama’s Healthcare Reform Act.

Innovative thinking with an entirely new strategy is necessary to avoid an impending catastrophe and dissolution of Medicare.

All of President Obama’s “innovative programs” are failing at a huge cost to taxpayers.

Wake up America.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone. 

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