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CBO: Health care legislation to cost $115B more than estimated
Old 05-12-2010, 11:06 AM   #1
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CBO: Health care legislation to cost $115B more than estimated

Here's a shocker: The CBO now says that the new health care law will end up costing $115 billion more over the next 10 years than they previously estimated. Remember that claim that the law would reduce the federal budget deficit? That claim was bogus to start with (since, among other sleight-of-hand, it counted as revenue money that was supposed to be used to pay for later LTC payouts. I guess we'll just cross that bridge when we come to it). Anyway, the CBO says the vast majority of the claimed reduction in deficit will instead be needed to pay all the new IRS enforcement agents, etc to run this new bureaucracy.

We'll be seeing more reports like this one.
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Old 05-12-2010, 11:09 AM   #2
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Is this little surprise shocking to anyone ? What government program doesn't underestimate the costs ? Is it even newsworthy ?
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Old 05-12-2010, 11:50 AM   #3
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"Only" $115 billion? That's a drop in the bucket to this Administration...........
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Old 05-12-2010, 12:29 PM   #4
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This still doesn't address the fact that the healthcare bill has six years of programmatic expenditures yet 10 years of revenue collection. I think year 11 just may have a shocking realization that the revenues can't keep up with the costs on a 1:1 basis.
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Old 05-12-2010, 01:04 PM   #5
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This still doesn't address the fact that the healthcare bill has six years of programmatic expenditures yet 10 years of revenue collection. I think year 11 just may have a shocking realization that the revenues can't keep up with the costs on a 1:1 basis.
This is one of those things that isn't true, but everyone seems to believe it is.

The tax increases don't go into effect for several years and are designed to hit at the same time as the increased expenditures.

Here's the CBO projections. Go to page 19 and you'll see this (in billions) . . .

Year Spending Revenue
2010 4 -3
2011 5 3
2012 -5 5
2013 -28 27
2014
6 57
2015 44 65
2016 86 83
2017 92 89
2018 90 95
2019 90 104
  
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Old 05-12-2010, 01:26 PM   #6
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Originally Posted by Gone4Good View Post
This is one of those things that isn't true, but everyone seems to believe it is.

The tax increases don't go into effect for several years and are designed to hit at the same time as the increased expenditures.

Here's the CBO projections. Go to page 19 and you'll see this (in billions) . . .

Year Spending Revenue
2010 4 -3
2011 5 3
2012 -5 5
2013 -28 27
2014
6 57
2015 44 65
2016 86 83
2017 92 89
2018 90 95
2019 90 104
  
If things work out this way, that is good news. Thanks for pointing that out. I was not aware that projected revenue roughly tracks projected spending (with even a little wiggle room) in the latter half of the 10 year period.

But I would have to dig in that document a little deeper to see how the coverage costs in 2017-2019 remain basically stationary at around 90 billion a year. The number of insured projected to be covered by employers during that period remains constant (-3 million under the policy versus status quo). I was under the impression that runaway insurance premium costs were forcing more and more employers to reduce coverage (which may not be an option under the new policy beyond a certain point) or eliminate coverage. If costs keep escalating and the penalty/fee for not offering insurance does not escalate, at some point employers may say it isn't worth it to offer insurance and the penalties are cheaper.

Similarly, how can the costs of the policy remain flat from 2017-2019 if the cost of medical insurance premiums continue to grow much faster than the rate of CPI growth, yet the insured's share of premiums is indexed to CPI (poverty level income is tied to CPI??). The government will pay for the subsidy to make up the difference between premium cost and insured's co-share. In that CBO doc, on Page 21 they show the average cost of the subsidy starting at $5,200 in 2015 and gradually increasing to $6000 in 2019. That works out to a 3.67% average annual geometric growth rate in subsidy amount. Slightly higher than the 2.5-3% I assume they use for CPI, but much lower than historical medical insurance premium growth rates.

Does this policy somehow control the cost of health insurance premiums over the next 10 years such that we will only see CPI+1% growth in insurance premiums? If so, great! I remain skeptical.

Crap, I have been sucked into a healthcare debate!
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Old 05-12-2010, 01:55 PM   #7
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Similarly, how can the costs of the policy remain flat from 2017-2019 if the cost of medical insurance premiums continue to grow much faster than the rate of CPI growth
Looks like the offset is from lower Medicare fee for service payment rates.

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Does this policy somehow control the cost of health insurance premiums over the next 10 years such that we will only see CPI+1% growth in insurance premiums? If so, great! I remain skeptical.
If I recall, CBO didn't give a lot of credit for most of the cost control measures in the bill because they couldn't model things like "comparative effectiveness" initiatives.
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Old 05-12-2010, 02:03 PM   #8
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Originally Posted by Gone4Good View Post
This is one of those things that isn't true, but everyone seems to believe it is.

The tax increases don't go into effect for several years and are designed to hit at the same time as the increased expenditures.

Here's the CBO projections. Go to page 19 and you'll see this (in billions) . . .

Year Spending Revenue
2010 4 -3
2011 5 3
2012 -5 5
2013 -28 27
2014
6 57
2015 44 65
2016 86 83
2017 92 89
2018 90 95
2019 90 104
You are drinking the Kool-aid from Congress. Sebelius herself said yesterday in regards to the large increase in spending that Congress "has always done" discretionary spending, and "will continue to do so". So, basically, she brushed it off. Also, the projections are based upon increased tax revenues that can't be counted on. Do you really think that folks that make over $250,000 K aren't going to figure out how to avoid the tax? That businesses, in response to punitive taxes on employees that don't buy health care, aren't going to reduce positions and headcounts? Seems the govt thinks that all the folks who create jobs are a bunch of dummies who will just buck up and pay for Obamacare because, as Joe Biden says, "It's patriotic to pay taxes"...........
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Old 05-12-2010, 02:10 PM   #9
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Looks like the offset is from lower Medicare fee for service payment rates.
So around year 3 when the fees get even more painfully low, the doctors (and AMA lobbyists) will cry uncle loud enough for Congress to hear. Then we have a "fix" enacted that costs a little more (well into the tens or hundreds of billions) to get the medicare reimbursement rates to something resembling costs of providing service.

Or we get a lot of unnecessary milking of the medicare claims. Like "come see me monthly so I can renew your Rx" and the visits consist of "is your XYZ condition still the same as last month? Ok/good/here's your Rx/bye bye".

Maybe we will have a 2 tier de facto system of (a) medicare docs and (b) non-medicare docs. The medicare docs keep costs to the bone and do a very high volume practice (think assembly line), and the full fare paying customers get to see non-medicare docs and get to use a waiting room and a restroom, and get to talk to the actual real doctor, etc. Not that there is anything wrong with that as long as I'm in group (b).
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Old 05-12-2010, 02:14 PM   #10
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You are drinking the Kool-aid from Congress. Sebelius herself said yesterday in regards to the large increase in spending that Congress "has always done" discretionary spending, and "will continue to do so". So, basically, she brushed it off. Also, the projections are based upon increased tax revenues that can't be counted on. Do you really think that folks that make over $250,000 K aren't going to figure out how to avoid the tax? That businesses, in response to punitive taxes on employees that don't buy health care, aren't going to reduce positions and headcounts? Seems the govt thinks that all the folks who create jobs are a bunch of dummies who will just buck up and pay for Obamacare because, as Joe Biden says, "It's patriotic to pay taxes"...........
Um, OK. But that has nothing to do with what I said. My only comment was that the timing of the revenues and expenses are in sync.
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Old 05-12-2010, 02:38 PM   #11
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Um, OK. But that has nothing to do with what I said. My only comment was that the timing of the revenues and expenses are in sync.
ESTIMATED timing of revenues and expenses........
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Old 05-12-2010, 03:13 PM   #12
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The tax increases don't go into effect for several years and are designed to hit at the same time as the increased expenditures.

Here's the CBO projections. Go to page 19 and you'll see this (in billions) . . .

Year Spending Revenue
2010 4 -3
2011 5 3
2012 -5 5
2013 -28 27
2014
6 57
2015 44 65
2016 86 83
2017 92 89
2018 90 95
2019 90 104
  
And a highly "selective" 10 years those are, too. Starting with 2010 (HELLO--CBO, the year is almost 1/2 over. Oh, you're just doing what the bill's sponsors directed).

If you start the clock in 2014 (when the huge money spigot opens up) the ten year cost of this thing is over 2 trillion dollars. That figure was before the latest CBO upward revision.

How accurate will these estimates really be? In 1967, the House Ways and Means Committee estimated that Medicare would cost $12 billion by the year 1990. The actual cost was nearly 10 times higher--$110 billion. 'Nuff said.

2012 is going to be a very important year.
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Old 05-12-2010, 04:11 PM   #13
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And a highly "selective" 10 years those are, too. Starting with 2010 (HELLO--CBO, the year is almost 1/2 over. Oh, you're just doing what the bill's sponsors directed).

If you start the clock in 2014 (when the huge money spigot opens up) the ten year cost of this thing is over 2 trillion dollars. That figure was before the latest CBO upward revision.
Regardless. The statement that they're using 10 years of revenue and only 6 years of expenses is false. Absolutely, positively, demonstrably false. I'm making no other point.
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Old 05-12-2010, 04:17 PM   #14
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ESTIMATED timing of revenues and expenses........
Um, the law is pretty specific about when taxes and benefits increase.
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Old 05-12-2010, 04:56 PM   #15
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Regardless. The statement that they're using 10 years of revenue and only 6 years of expenses is false. Absolutely, positively, demonstrably false. I'm making no other point.
Okay, let's look at those first four years (2010-2013). Do expenditures match revenues, or do revenues exceed expenditures to make the whole mess look better (over the already skewed 10 year window selected)?
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According to the Joint Committee on Taxation -- Congress' bipartisan judge of revenue impacts from proposed laws -- the tax provisions collect minimal revenue for 2010, $2.9 billion for 2011 and $5.5 billion for 2012. They only start getting big in 2013, when revenues increase to $31.9 billion, eventually peaking at $86.9 billion in 2019.

Indeed, of the total $409.2 billion in increased taxes over the 10-year window, only 10 percent of that amount is raised in the first four years -- the period when, according to Republicans, the government is collecting taxes without providing care.

Meanwhile, on the coverage side, it's true that the cost increases significantly four years after enactment. According to CMS's Office of the Actuary, the first four years account for about 1 percent of the 10-year cost of increased coverage.
During the first 4 years, 10% of the revenue for the 10 year window is collected, but only 1% of the total expenditures are made.

1% is close enough to "nothing" for argument's sake. Anybody trying to make this "1% isn't the same as nothing" argument into a substantive point should probably go easy on the "absolutely, positively" hyperbole. "Ten years of taxes for six years of spending" is not far off.

In any case, it's the trajectory of the spending and the dishonest accounting that is cooked into the estinates that is a far bigger issue than the number of years over which it is made.
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Old 05-12-2010, 10:33 PM   #16
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Um, the law is pretty specific about when taxes and benefits increase.
The law can be as specific as it wants, however, the taxes are estimated receipts of the legislation. DO you really think that a lot of people who now makes $250K or more a year aren't going to find a way to get under that number? Because I do. Some of the smartest people I know are small business owners. It's not like they hire stupid CPAs to help them limit their tax liability either.
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Old 05-13-2010, 08:47 AM   #17
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During the first 4 years, 10% of the revenue for the 10 year window is collected, but only 1% of the total expenditures are made.
Those number look reasonably similar to the CBO numbers I posted, so no problem there.



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1% is close enough to "nothing" for argument's sake. Anybody trying to make this "1% isn't the same as nothing" argument into a substantive point should probably go easy on the "absolutely, positively" hyperbole. "Ten years of taxes for six years of spending" is not far off.
But here you're way, way off track. 10 years of revenues and 6 years of expenses would look more like 100% of revenues and 60% of expenditures. Versus 70% of revenues and 61% of expenditures. This isn't even in the same ballpark. More like 7 years of revenues and 6 years of expenditures. If you think a 42% overstatement of revenues is "close", OK, but that seems like a very large miss to me.

But we also forget that the CBO said deficit reduction will be greater in the second decade, not smaller. But then I forget that the CBO is only to be believed when they say things you like (as in the justification for this thread).
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Old 05-13-2010, 08:49 AM   #18
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The law can be as specific as it wants, however, the taxes are estimated receipts of the legislation. DO you really think that a lot of people who now makes $250K or more a year aren't going to find a way to get under that number? Because I do. Some of the smartest people I know are small business owners. It's not like they hire stupid CPAs to help them limit their tax liability either.
My comment was over timing of the sources and uses of funds. Period.
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Old 05-13-2010, 09:58 AM   #19
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More like 7 years of revenues and 6 years of expenditures.
That's a fair characterization. And it will be fairer still when people start quoting the "ten year cost" for this program starting in 2014 rather than starting in 2010.

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But then I forget that the CBO is only to be believed when they say things you like (as in the justification for this thread).
First, the recent CBO estimate is not something I "like." Can anybody be happy that the CBO's re-appraisal is showing that the new law is going to cost us even more than we thought? I respect the CBOs estimates in full appreciation of what they sometimes are--politcal tools to sell a particular point of view. The CBO usually does a good job of doing what they are asked to do, but often what they are asked to do is intellectually dishonest (as in this case). It is not true that the deficit, when fairly measured (e.g. including NPV of future obligations incurred for LTC, etc) will decline as a result of this law. If we also include only the most widely accepted assessments of future political reality (e.g. Congress will not hold the line on Medicare payments), the picture is even more bleak.

Given that we both agree that for the first few years the expenditures and revenue growth (i.e. higher taxes) are minimal, let's take a look at the real ten year cost of this thing--starting with the year things really start moving downhill: 2013. The CBO says those costs exceed $2 trillion dollars. Where will we get that money? From this tax on "millionaires" (many are actually small businesses filed on the owner's 1040. This tax will be bad for employees of those businesses) and by cutting the already broke (and broken) Medicare program.

And what about that second decade? Even with all the preposterously optimistic assumptions the CBO was forced to make, and even including the bizarre way they were forced to look at the deficit (e.g. not tallying the costs of the new CLASS provisions, etc)--even with all of this the CBO did not say that the law will necessarily reduce deficits during the second decade. Concerning impact on the deficit 20 years from now, the CBO said the changes in the reconciliation bill would
Quote:
“further reduce federal budget deficits in that decade, with a total effect that is in a broad range between zero and one-quarter percent of GDP.”
Zero is zero. And with all the "magic" that was baked into that projection, "zero" is gonna be a lot worse than zero. In fact, if they now subtracted the recently identified additional costs of this program, I guess they'd have to adjust their window of "deficit savings" to some amount slightly less than zero, right? That would mean the CBO should now be saying that the law might increase deficits in the second decade--which is what we all know already.
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Old 05-18-2010, 09:50 PM   #20
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None of these projections factor in that the demand for subsidies will absolutely dwarf the projections and that the size of the subsidies will be far greater than projected.
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