It’s NOT a Moderate Bill…

As some Democrat talking points being circulated in recent days attempt to characterize the health care takeover as a “moderate” bill, I think it’s worth examining this argument from a fiscal perspective.  Specifically, the enacted bills (the Senate bill and reconciliation combined) spend nearly as much as the original measure introduced in the House (HR 3200) that many experts viewed as fiscally irresponsible – and mask the spending through a series of budgetary gimmicks and timing shifts.

The chart below demonstrates how spending on health coverage provisions changed during the legislative process – and does so based on CBO estimates of the bills’ first six years of implementation, to use a standard measure of spending.  It contains two important caveats.  First, the spending examined covers the costs of the Medicaid expansion, health insurance subsidies, and small business tax credits ONLY – it doesn’t include other mandatory spending (e.g., the prevention and wellness trust fund, temporary high-risk pool funding, etc.) or discretionary appropriations.  Second, the Finance Committee Chairman’s Mark implemented the coverage expansions in July 2013, as opposed to the rest of the bills, which stuck to a January implementation date; I used 2014 as “Year 1” for purposes of the chart below.

Source: CBO Scores of Legislative Proposals

Several things are clear from the chart:

• From the time Chairman Baucus introduced his Chairman’s Mark, the health “reform” price tag in the Senate rose and rose at every step of the legislative process – such that the bill that passed the Senate was actually more costly than the bill that passed the House on a like-for-like basis. (The House bill had a higher price tag solely because its coverage expansions started in January 2013, not January 2014.)
• Even though the Senate bill actually spent more on coverage subsidies than the House-passed measure, House liberals still deemed this expense insufficient, and insisted on even more government spending on subsidies in the reconciliation measure.
• The reconciliation measure’s $921 billion in spending on subsidies far exceeds BOTH the score of both the House-passed AND the Senate-passed bills on a like-for-like basis.  In fact, if the effects of an increase in Medicaid reimbursements – which CBO included in the cost of the Medicaid expansion in its score of HR 3200, but later distilled into a separate line-item for subsequent legislation – are removed, the enacted measures spend nearly as much as the House-introduced HR 3200, which Blue Dog Democrats decried as too costly.

This analysis logically raises the question of how a measure nearly as costly as HR 3200 could not increase the deficit – as CBO claimed would be the case with the legislation introduced in the House in July.  The answer lies in four provisions included in the law not included in HR 3200:

• A reduction in the growth of health insurance subsidies – but only in the years after 2018, once President Obama leaves office;
• Implementation of the “Cadillac tax” on high-cost insurance plans – which the Administration, under pressure from labor unions, delayed until 2018, again after President Obama leaves office;
• A board of unelected bureaucrats ordered to make additional cost reductions in Medicare beginning in 2015 – the third year of a potential Obama second term; and
• The omission of an adjustment to Medicare physician payments included in HR 3200, but removed from the health law due to its high cost – meaning that physicians will continue to face a 21 percent payment decrease in Medicare payments later this year, and further reductions thereafter.

If the first three provisions were removed from the law, and the “doc fix” provisions re-inserted, CBO admitted that the legislation WOULD in fact increase the deficit.  So essentially, the Obama Administration has decided to rely on its successor Administrations and Congresses to do what this Congress could not – find ways to pay for this unsustainable entitlement in the long term.

So for those claiming the legislation is a “moderate” bill, the question can reasonably be asked: How does the law’s immoderate reliance on budgetary gimmicks in order to achieve anything approaching balance (on paper at least) signify a responsible approach to governance?

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