I’m looking for a non-political answer here, or at least as non-politcal an answer as I can get on this issue. According to the CBO’s estimates, the healthcare bill under consideration will cost $940 billion, but save $138 Billion.
Um, Whisky Tango Foxtrot? How can this plan both cost money and save money? Where do the saving come from?
Here ya go:
H.R. 4872, Reconciliation Act of 2010
Estimate of direct spending and revenue effects for the amendment in the nature of a substitute released on March 18, 2010 (pdf)
“… he was all against the banks but all for the bankers … that he had thoroughly tested (but unspecified) plans to make all wages very high and the prices of everything produced by these same highly paid workers very low; that he was 100 per cent for Labor, but 100 per cent against all strikes …”
A letter explaining the platform of Senator Windrip during his presidential campaign – It Can’t Happen Here by Sinclair Lewis, 1935.
First of all, budget predictions are notoriously difficult. Even if the guy doesn’t have any political bias, it’s hard to predict GDP ten years from now (which affects how much will be raised in taxes), etc. And even if you could predict that, at some point in the next ten years Congress will almost certainly change the tax rate (either up or down), which pretty much destroys your predictions.
There’s also questions like “sure, my taxes will be raised to pay for health care for people who can’t afford it now…but on the other hand, they’re currently already able to just go to the emergency room even if they can’t afford it, and I’m already indirectly paying for that with higher insurance costs. So really, it’ll be a wash”. If your taxes go up but your insurance costs go down, do you include that in the cost of this new program?
And do you want to try to factor in things like “better health care means fewer people will die before retirement, so they’ll work longer and pay more in taxes” – logically, that kind of stuff will affect the budget, but it’s really really hard to do accounting for factors like that.
But as for the specific numbers you quote – you’re confusing two things. One number is how much it costs to fund the program – ie, new money being spent solely on this program (regardless of whether it creates savings in other areas or not). The second number is how much it saves on the federal deficit when you factor in all those savings from other areas. IE – the new package costs money, but those costs are paid for in the form of new taxes and cost savings (such as closing a Bush-era loophole in medicare that allowed private companies to skim money off the top from medicare payments). The cost savings plus the new taxes add up to more than enough to offset the spending increase, so the federal deficit actually goes DOWN.
what do you mean by political answer?
The bill assumes tax increases. It also assumes cuts to Medicare spending.
Some years ago, there was a bill called the Medicare Sustainable Growth Act, that also assumed cuts in Medicare. They were going to cut Medicare by a certain amount every year to keep the costs from rising. Total amount of cuts actually made: $0.
It is especially difficult because the trend is the opposite of what you posit - better health care means more costs, overall, because more people live into retirement.
This is similar to the counter-intuitive but true notion that eliminating cigarette smoking would increase health care spending, overall. Assume a heavy smoker, consuming three packs a day for thirty years, who then dies of lung cancer at age 50. Lung cancer is a relatively inexpensive death, because there is relatively little that can be done in most cases - if you are symptomatic, you are going to die. Also, if you die at age 50, you never collect from Social Security, which saves the government money, nor do you have a chance to cost money treating your high cholesterol, replace your hip, treat your glaucoma, etc.
Now assume he never smokes. He then has a greatly enhanced change of living to age 78, and costing money for treatments for his chronic but non-fatal diseases of old age. Factor in also the fact that the government never collected any of the taxes smokers pay on their cigarettes.
(A bunch of other stuff removed to keep this in GQ).
Regards,
Shodan
Does this mean, to be true to an ideologically pure Republican ethos, that you should make plans to die in a low cost manner whilst you are healthy in body and mind?
Of questionable truth, even if you assume that in between 50 and 78 you make zero positive contribution to GDP, taxation or society.
No, it means that people who die without incurring a lot of health care costs tend to save the system money. This has nothing to do with ideology - it’s just how the world works.
No, actually it is true.
You don’t have to assume that they made zero contribution, only the fairly obvious fact that people retire, and that old people tend to have higher helath costs than young ones do. Medicare premiums do not cover the whole cost of the program, obviously, and most retired people collect more from Social Security in a year than they pay in during that same year.
I would have thought the above was too obvious to require a cite.
Regards,
Shodan
Well. . . one starting point for the accuracy for these numbers would be to look at past predictions and how they actually panned out. Just a guess is that the results would be all over the board, but you never know.
I’ve recently heard a Republican congressman (sorry, I don’t remember his name) claim that the “savings” are the result of double-counting certain changes. Specifically, he said that the $500 billion in Medicare savings are counted twice: once as a reduction in expenses, and again as a reduction in the deficit, under the assumption that the savings will be used to pay down the national debt. I don’t know if that’s true, but his Democratic opponent didn’t contradict him; the Dem just said that that was an accepted procedure for the Congressional Budget Office.
If the first claim (double-counting) is true, then it certainly seems like some “creative accounting” was used. After all, if I save $100 and use it to pay off a debt, I don’t get to double that amount and say I’ve really saved $200. I haven’t saved anything at all, in fact; the money has been spent to eliminate the debt.
And if the later claim (it’s normal) is true, then I think I’ve figured out why our government is so fucked up financially.
The problem is that, by necessity, they are based on “assuming nothing else changes” which of course never happens and it is all a complex system and congress is going to continue enacting laws that impact the original assumptions.
Plus they’re comparing one hypothetical to another and looking at the difference. So they may prove correct on the cost of a program enacted by may have been wrong on the costs of not enacting so at best (and best never happens) only one half of the comparison can be validated.
[QUOTE=Diceman]
I’m looking for a non-political answer here, or at least as non-politcal an answer as I can get on this issue. According to the CBO’s estimates, the healthcare bill under consideration will cost $940 billion, but save $138 Billion.
Um, Whisky Tango Foxtrot? How can this plan both cost money and save money? Where do the saving come from?
[/QUOTE]
This is one of the main problems Democrats are having selling the bill. People understand that the bill expands coverage and spends lots of money doing it. But it’s much harder for us to wrap our heads around the fact that it will save money overall, at the same time. I found a good way of imagining it is that it’s like replacing your windows with double-glazing: you spend $500 on the new windows, which are nicer, stronger and harder to break into, and worth having in themselves. But over the next 10 years those new windows will also save you $1,000 on your heating bills.
In terms of “where do the savings come from”: they come from a whole range of things. The main two are new taxes and savings in Medicare. The bill cuts taxes for a lot of people but it also creates a bunch: there’s a new 10% tax on sun tanning beds and an excise tax on “Cadillac” insurance plans, among others. The savings in Medicare include paring back on Medicare Advantage and instituting a Medicare Commission which will recommend future savings that will become law without Congress needing to vote to confirm them (although Congress can overrule them if it chooses to). Medicare is funded by the government, so obviously any savings made in Medicare are savings for the government. There’s some other savings as well - the bill gets a small amount from the savings made by the student loan reform for instance - but taxes and Medicare savings are the main two sources of funding.
Hence the bill is predicted to spend about $940 billion, but it is predicted to save about $140 billion over the first ten years and about 0.5% of GDP over the second ten years, which is about $1.2 trillion.
[QUOTE=Diceman]
I’ve recently heard a Republican congressman (sorry, I don’t remember his name) claim that the “savings” are the result of double-counting certain changes. Specifically, he said that the $500 billion in Medicare savings are counted twice: once as a reduction in expenses, and again as a reduction in the deficit, under the assumption that the savings will be used to pay down the national debt. I don’t know if that’s true, but his Democratic opponent didn’t contradict him; the Dem just said that that was an accepted procedure for the Congressional Budget Office.
If the first claim (double-counting) is true, then it certainly seems like some “creative accounting” was used. After all, if I save $100 and use it to pay off a debt, I don’t get to double that amount and say I’ve really saved $200. I haven’t saved anything at all, in fact; the money has been spent to eliminate the debt.
And if the later claim (it’s normal) is true, then I think I’ve figured out why our government is so fucked up financially.
[/QUOTE]
The Congressman you’re thinking of is probably Rep. Paul Ryan (he’s the one who initially launched this line of attack anyway, a lot of others have picked up on it). His attacks on the bill have been very clever, and some of them are fair criticisms, but some of them are very disingenuous. One criticism you’ve probably heard is over the “doc fix”, which is basically a problem that will cost a lot of money to fix. Congress accidentally created the problem in 1997, and it’s a problem that exists completely independently of Obama’s health care reform, but Ryan has essentially argued that because it’s a problem to do with health care, it must be part of the cost of Obama’s plan. It’s a ridiculous attack but he’s made it stick.
The “double counting” criticism you mention strikes me as more legitimate: the CBO said the bill makes savings in the Medicare trust fund account, which savings are used to keep Medicare solvent and to guarantee future payments. But whenever a government trust fund runs a surplus it is required to purchase federal bonds with that surplus, which on paper reduces the deficit. But those funds will be redeemed in future to make Medicare payments. Does that count as a form of double-counting that wipes out the bill’s savings? Personally I don’t know. A lot of good but liberal-leaning commentators have said it is a bit of a labelling trick but that it doesn’t affect the bill’s overall savings, which seems to be the conclusion of the non-partisan CBO as well; the conservative-leaning commentators I’ve read just say “it’s a trick, there’s no savings in the bill!”, which seems a bit unlikely to me, but no one has explained to me why they’re wrong. I don’t know myself and I’ve yet to read a good explanation of the issue from someone I trust.
Hmmm. This is starting to sound like the “surplus” in the Social Security fund, which in fact was spent years ago and replaced with bonds. They insist that the money is there when we need it (which will be in the next few years, by current estimates) but in order to redeem the bonds, they’ll have to either raise taxes or cut the budget. So the money isn’t really there after all.
Given our goverment’s history with its finances, I’m inclined to side with the critics until someone can explain why I shouldn’t. :dubious:
If they’re real bonds, yes it is; interest and payback is figured into the budget like any other expense. Of course, they pay it back by borrowing more money instead of stopping deficit spending, so when the SS fund can’t loan it on renewal, they’ll have to go elsewhere. (Beijing?). Which will result in higher interest rates all around as the US dollar become shaky.
On the plus side, as the US dollar shrinks in value compared to other currencies, there is a much larger amount of money out there (in US dollar terms) to borrow. The interest rates will just be too high. The laws of economics are like squeezing jello - push too hard here and something pops out there to compensate.
Well, the problem for me is that those critics have an agenda. Republicans have an electoral interest in seeing Obama and the Democrats fail. They’re incentivized to call the bill fiscally irresponsible no matter what its content is, and as such, most of the criticisms of the bill’s fiscal responsibility I’ve heard from them have been bogus: two primary examples being the “doc fix”, which has nothing to do with the bill, and that the bill “pays for 6 years of spending with 10 years of taxes”, which implies that the bill will run a deficit in the long term, which it will not.
I have not yet heard a critic that I trust say that this issue of “double counting” is a genuine problem for the bill. The CBO didn’t find a major problem with it, and I probably trust them more than anyone in the debate. For that reason, personally I’m inclined to side against critics who I know have inflated a number of bogus ‘criticisms’ against this same health care bill which have been refuted. But you’re right that it seems like a dubious issue - I’d be very grateful if anyone could explain (or point me to an explanation) of whether the critics are actually right or wrong when it comes to the “double counting”.