Early in the process of drafting the recent health care overhaul legislation, Democrats realized that they had a spending ceiling: Somehow, they would have to coax the official price tag of the final legislation down below the trillion dollar mark. So they started bailing. They threw out a proposed update to Medicare's physician's reimbursement system and fiddled with the numbers until the headline figures were in an acceptable range. In a major speech, President Obama promised the law would cost "around $900 billion over 10 years," and the final tally was close enough: According to the Congressional Budget Office, the gross cost of the law's health coverage provisions came in at $938 billion for the first decade.
But what Democrats didn't highlight was that the first decade as scored by the CBO was not actually the first decade in which the law was fully operational. The major coverage provisions do not kick in until 2014, and neither do the associated costs. Yet the CBO started the clock on its cost estimate in 2010, meaning that the initial estimate really only looked at the cost of six years of coverage (2014 through 2019). As I pointed out several months before the law passed, the true cost of paying for the law's coverage expansions over a full decade was more like $1.8 trillion—well above either the unofficial ceiling in Congress or the president's public estimate.
Now that we're closer to 2014, those costs are plain to see. Indeed, the cost of a full decade could hit $2 trillion. The Congressional Budget Office released updated estimates for the health law yesterday and reported that the gross cost of the coverage provisions between 2012 and 2022 is expected to come in around $1.76 trillion. That's an 11 year estimate, but it still only looks at nine years of fully expanded coverage; 2012 and 2013 add just $9 billion to the tab. But coverage in 2022 alone clocks in at $265 billion, a little more than the $250 billion cost projected for 2021. Add another year like that to the tally and the total skips past the $2 trillion mark.
All this is separate from whether the law reduces projected federal budget deficits. The law also includes a variety of tax mechanisms intended to raise revenue and Medicare payment tweaks designed to reduce spending by a little more than the cost of the expanded coverage provisions. The CBO sticks by its assessment that the law will reduce the deficit on net. But there are good reasons to be skeptical of those projections as well, especially now that we now have evidence that President Obama signed off on health reform budget gimmicks.
Read Philip Klein, who makes a similar point at The Washington Examiner.
Here's a great song about big numbers: