How Democrats Made More Than $1 Trillion Disappear From the Cost of Health Care Reform


"Some men just want to watch the world burn."

For weeks, Cato's Michael Cannon has been counting off the number of days without a full cost estimate for health care reform. Today marks day number 180. Yes, we've seen estimates that indicate the cost to the government (which are misleading by themselves), but what we haven't seen is an official estimate of the cost of the private sector mandates.

That's a big deal. Why? Because in 1994, the Congressional Budget Office did score those mandates, and they accounted for about 60 percent of the total cost. That means that the already-astronomical total we do see — $849 billion in the Senate — only represents 40 percent of the full cost.

That means Democrats haven't had to talk about a huge portion of the actual cost. By Cannon's estimate, the true cost of the House bill was $1.5 trillion higher than the figure we saw.

Some argue that we shouldn't count the cost of the mandate because it's private spending. That ignores the coercion involved. Think of it this way: If the government required that every adult pay the IRS a few thousand dollars, and then the government took that money and used it to pay a conglomerate of health insurance companies, there's no question that it would count as government spending. But if the government instead forces individuals to give their money directly to one of those insurance companies, it's not — yet there's really not much difference.

But the natural question here is why the CBO scored the full amount in 1994 but hasn't done so now. And, after examining a recent CBO memo, Cannon seems to have found an answer:

How is it that the CBO made the full cost of the Clinton health plan apparent to the public in 1994, but may now be revealing only 40 percent of the cost of the Obama health plan?

For some time, I've suspected the answer is that congressional Democrats have very carefully tailored their individual and employer mandates to avoid CBO's definition of what shall be counted in the federal budget. Democrats are still smarting over the CBO's decision in 1994.  By revealing the full cost of the Clinton plan, the CBO helped to kill the bill.

Since then, keeping the cost of their private-sector mandates out of the federal budget has been Job One for Democratic health wonks.  While head of the CBO, Obama's budget director Peter Orszag altered the CBO's orientation to make it more open and collaborative.  One of the things about which the CBO has been more open is the criteria it uses to determine whether to include mandated private-sector spending in the federal budget. 

…The Medical Loss Ratios memo is the smoking gun.  It shows that indeed, Democrats have been submitting proposals to the CBO behind closed doors and tailoring their private-sector mandates to avoid having those costs appear in the federal budget.  Proposals that would result in a complete cost estimate — such as the proposal by Sen. Rockefeller discussed in the Medical Loss Ratios memo — are dropped.  Because we can't let the public see how much this thing really costs.

Crafting the private-sector mandates such that they fall just a hair short of CBO's criteria for inclusion in the federal budget does not reduce their cost, nor does it make those mandates any less binding.  But it dramatically reduces the apparent cost of the legislation.  It is the reason we're all talking about an $848 billion Reid bill, rather than a $2.1 trillion Reid bill. If someone sold you a house, or a car, or a mutual fund this way, we would put them in jail.

NEXT: Reason Writers Around Town: Shikha Dalmia on the Demise of ReidCare

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  1. Today’s the Day. Donate to Rand Paul @ http://www.RandPaul2010.com

    Here’s why: https://reason.com/blog/2009/12…..nt_1483561

    1. Thanks a lot for these links, Rand Paul definitely deserves a donation!

  2. Well done. Unfortunately, it appears that the poster depicting Barack Obama in Joker makeup was more prophetic then I first thought.

    1. If someone told me before the election that Obama was an Al Queda plant bent on burning down America, I might have looked at them funny.

      I still might look at that person funny, but they have a lot more evidence these days.

      Obama is doing damage that Osama can only dream about.

  3. Couldn’t Congressmember request a full accounting from the CBO?

  4. Thank God that Our Betters lie to us to get what they want, for our own good. I’d hate to think we’d be able to make our own decisions based on facts; we’d just screw it up. Its better this way.

    1. I wonder how much of it is lying to us for cover, and how much of it is lying to each other? I mean, do our representatives REALLY understand the costs of the bills? It’s not like they’re really that smart.

  5. I think the Joker was just trying to fight inflation.

    1. The smart people at the Fed call it “sterilizing bond sales” or some such bullshit.

      1. I just started reading Coyote Blue last night.

  6. Somewhat OT, from Jeffrey Anderson at NRO:

    after nearly a year’s worth of debate, Obamacare has now been boiled down to its essence: a mandate that Americans pay trillions of dollars, funneled through Washington, to private insurers.

  7. Well, we *were* warned that some people only want to watch the world burn.

  8. So, after promising a transparent process, with legislation we can read well prior to voting occurs, and debates air’d on CSPAN, we get instead, back room deals, no transparency, lies, and accusations. All for a bill that can only be justified if we ignore all of the constitution except “provide for the general welfare…”.

    If this thing goes through, I hope it isn’t the tree trunk that breaks the camels back.

    1. Doesn’t “general welfare” mean “everyone?” This legislation harms many millions more than it will help. And even if “everyone” was helped, I can squint real hard and still not see where the Constitution
      empowers the Federal government to fund health care insurance.

  9. Of course the Dems are for transparency, they’re fighting hard to protect us (the lowely consumer) from hidden credit card fees.

  10. “We shall assume, for the purpose of this discussion, that two and two do no equal four.”

  11. …do NOT equal…

    stupid keyboard

    1. That’s OK. It sounded faux Scottish.

      1. You mean Sco’ish?

  12. There are those who try to tell us that we have to make a choice between reforming the health care system in this country and spending $2.1 trillion for 100 pounds of crap in a 50 pound bag. That is a false choice. It’s possible — no, it’s essential — that we have both.

  13. It wouldn’t be so bad if all that money was directed towards medical research, but it’s going first to insurance companies, second to hospitals (that can freely charge the insurers whatever the fuck they want), indirectly to patients with pre-existing conditions, and maybe somewhere down the line, some of it might end up going into R&D, after it’s lined the pockets of everyone along the way, insurance companies first.

  14. You have to know who to pay if you want to get anything passed these days.

    Unfortunately, The Public Interest is not one of those who must be paid.

    I’d love to see a system that fixed that little problem.

  15. I think it has become time to roll out a new vernacular for this type of discussion. Most people hear or read about a trillion dollars and don’t relate beyond simply a small number with a whole bunch of zeroes after it. It doesn’t sink in. However, if we frame the discussion in terms of cost, or liability per person or per household, it might sink in better. For example, people are desensitized to the significance of “12.1 trillion national debt”. If we do the math based on 300 million people and 2.65 people per average household, then 12.1 trillion becomes 107 thousand dollars debt per household. Ouch! That leaves a mark!

    1. Is the good news that at least the debt isn’t growing? No? Oh…fuck…

  16. This is typical of corruption in Washington, we must have term limits.
    I doubt that the founders of the US wanted career politicians who are still at it after 40 or 50 years in power.

    2 terms and that is it for Senators and Representatives.

    A 2 term politician will be less likely to game the system.

    It could still happen, especially if you bounce from Rep to Sen, but is harder to figure out.

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  19. Forget about who’s paying the subsidies. Most will drop out of the individual system because they are promised coverage when they need it. Paying the fine is a lot cheaper than buying insurance. instaed of insuring more americans we will have fewer.

  20. Union busting and health care reform are similar only when comparing parliamentary procedure. There is no comparison after that. I’m surprised at the shallow analysis, I expected better here.

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