Cutting the Deficit is Not the Same as Spending Less

The New York Times' health-care blog has a long post going over the fuzzy numbers House Democrats have used to make their recently released, 1,990-page health-care bill more palatable. The post covers a lot of the same territory as I did last Friday: It's only $900 billion if you look at the net rather than the gross; the score doesn't account for the doctors' Medicare "fix"; the bill increases Medicaid costs for states by $34 billion (which isn't counted in the score). And, the post adds, it's not clear that the bill "bends the cost curve," in other words, that it reduces the rate of rise in health-care spending. 

The post ends, however, with a response from Florida Democrat Alan Grayson, who takes issue with the idea that Democrats should be talking about budgeting or cost-curves at all:

Representative Alan Grayson, Democrat of Florida, who has earned himself a reputation recently as a rabble-rouser, said that Democrats had done themselves a disservice by focusing on economic arguments. 

"We have wasted so much time talking about bending the cost curve, people have no idea what that means," Mr. Grayson said. "Why would you want to bend a curve? It's already bent."

So Mr. Grayson is focusing on another number — the 44,789 Americans that he says die every year for lack of insurance. "The messaging was just wrong, and now it's right," Mr. Grayson said. "We are saving people's lives and saving money. That's what really matters."

Now, some may think it's useful for a Democrat to be adopting an aggressive, moralistic tone on health-care reform, but the problem is that at least half of Grayson's primary claim just isn't true. 

Let's leave aside for a moment Grayson's blustery claim that the bill will save lives (which is impossible to verify: even if you accept his lives-lost statistic, there's no way to account for long-term future losses due to reduced medical R&D); his idea that the bill will save money is just wrong, at least by the traditional definition in which "saving money" means "spending less." Even if you take the CBO at its word that reform will cut the deficit (a sketchy claim that even the CBO seems to know is unlikely) cutting the deficit isn't the same as spending less. It's entirely possible to cut the deficit and yet still spend more. 

It's true that the reform bills, as written, produce some savings by cutting certain types of Medicare expenditures. But that money is then repurposed to help pay for subsidies so that lower-income people can buy insurance. And that money only pays for some of the new expenditures in the bill. The rest comes from either a surtax on expensive insurance plans (in the Senate plan) or a new tax on couples who earn more than a million dollars a year and individuals who earn more than $500,000 a year (the House plan). Either way, what these bills do isn't save money. Instead, they spend more, but also bring in more revenue through new taxes, theoretically resulting in a lower deficit over the long haul.