Peter Orszag, the former White House budget chief and newly minted New York Times columnist, is still claiming that the health care overhaul will reduce the deficit and rein in Medicare spending—at least, that is, if “Congress sticks to its guns and the Obama administration does a good job carrying out the provisions of the law.” Which will happen! Right? Well, maybe not.
Orszag makes his claim based on official estimates. “That’s what the projections show,” he insists, as if the official projections were the beginning and the end of the discussion, and no one could possibly have any legitimate reason to believe that those projections won’t come true.
Sure, he’s right that the CBO’s projections show that the law will reduce the deficit by about $140 billion over the next decade, and perhaps by more than that over the following decade.
But those projections are based on current law, which means that they assume that Medicare will cut physician payments by 21 percent. But that assumption has been proven wrong every single time the law has called for a reimbursement cut since 2003. Indeed, Congress has already declined to allow the payment reduction once in the few months since the law passed. When the law was passed, the payment reduction was supposed to happen shortly afterward. As virtually everyone expected, it didn’t. Instead, Congress voted to postpone the cuts for another six months.
That’s because doing away with the formula that supposedly governs the cuts would cost north of $200 billion, and no one knows how to pay for it. So Congressional Democrats asked CBO to score the law based on the assumption that the cuts wouldn’t take effect but knowing full well that the likelihood of Congress allowing doctors to feel the full force of the scheduled cuts was pretty much zero.
Orszag may want the Times’ readers to believe that the CBO’s official numbers are the only reasonable story, but back in March, former CBO director Douglas Holtz-Eakin, writing on, yes, The New York Times op-ed page, laid out a host of reasons to be skeptical of the official score. According to Holtz-Eakin, a more realistic estimate is that the law will result in a more than $550 billion increase in the deficit.
Even current CBO director Douglas Elmendorf—the same person responsible for the scores that Orszag is relying on—has implicitly suggested that, at minimum, it’s worth considering the possibility that the health care bill won’t actually pare back Medicare spending. Over the summer, he released a long-term budget analysis. That analysis contained two scenarios: The baseline scenario follows current law to the letter, and the alternative fiscal scenario that assumes that certain policy changes that are built into current law—such as the proposed Medicare cuts—do not come into effect.
And in the July report, Elmendorf and his team decided to include the assumption that the provisions in the health overhaul designed to keep health care spending in check don’t work after 2020. The results aren’t pretty:
The upshot of those differences is that Medicare spending in 2035 is projected to be about 17 percent higher under the alternative fiscal scenario than under the extended baseline scenario—a difference that persists in later years because the growth rates of spending beyond that point are the same under the two scenarios.
Now, maybe Elmendorf decided to include those assumptions in the alternative fiscal scenario purely for kicks, believing them to be totally irrelevant to the long-term fiscal outlook. But it’s a lot more likely that Elmendorf included those assumption as a warning? Or, at the very least, a strong hint that he and his team believe there’s a significant chance that the health care overhaul’s efforts to put the brakes on taxpayer-financed health care spending just won’t work?