Health Care

The Budgetary Consequences of the President’s Health Care Overhaul

The President’s health care law is a budget buster. Claims of deficit reduction exclude the $115 billion needed to implement the law. The score double-counts $521 billion from Social Security payroll taxes, CLASS Act premiums, and Medicare cuts. It strips a costly doc-fix provision that was included in initial score. It measures 10 years of revenues to offset 6 years of new spending. There is no question that the creation of a trillion dollar open-ended entitlement is a fiscal train wreck.

- Democrats continue to distort the consequences of their budget-busting health-care overhaul. Claims of deficit reduction often cite figures from the Congressional Budget Office, which reported last year that despite $2.6 trillion in new spending, the legislation as written would reduce deficits by $143 billion over ten years. (view chart)
Source: Congressional Budget Office

- To hide the true cost of their health-care overhaul, the Democrats loaded the overhaul with gimmicks and double-counting – and the CBO must score what is put in front of it. But once these gimmicks are accounted for, the bill would add over $700 billion in red ink over the next decade, as health-care costs send the debt spiraling out of control.

- The CBO score did not include the cost of setting up and administering the massive overhaul, including the cost of hiring new health-care bureaucrats to run the new spending programs, as well as thousands of IRS agents to enforce the new mandates.

  • Accounting for these discretionary appropriations would add $115 billion to the bill’s ten-year cost, all but wiping out its alleged “savings.”
    Source: Congressional Budget Office

- The new law double-counts an estimated $521 billion in alleged offsets:

  • Social Security will receive an additional $53 billion in higher payroll tax revenue as a result of the new law. Instead of setting aside this revenue for promised Social Security benefits, the bill spends it on new subsidies.
    Source: Congressional Budget Office

  • Democrats claim they are extending solvency of Medicare by cutting $398 billion from the program, but they simultaneously claim that these savings will offset new subsidy programs. CBO has made clear these savings cannot be used twice.
    Source: Congressional Budget Office

  • The Democrats’ bill created the CLASS program, a brand new long-term care entitlement. Over first ten years, program would take in $70 billion in premiums, but instead of setting money aside to pay for future benefits, the bill spends the premiums on new subsidies. Senate Budget Chairman Kent Conrad called the CLASS Act: “A Ponzi scheme [that] Bernie Madoff would have been proud of.”
    Sources: Congressional Budget Office
    Washington Post

- The Democrats’ bill originally included the “doc fix” that CBO estimated would add $208 billion to the bill’s score. Democrats removed this provision to lower the bill’s CBO score, but promised doctors that they would enact the fix later, and did in fact pass a short-term prevention of cuts to physician payments last year, adding to the deficit.
Souce: Congressional Budget Office

- Add it up – $115 billion in discretionary costs, plus $521 billion in double-counting, plus $208 billion for a long-term doc fix (minus the $143 billion of claimed savings) – and the law would add $701 billion to the deficit over the next ten years.

- In addition to the smoke and mirrors used to hide the deficit impact of the trillions of dollars in new spending, the law creates a brand new open-ended health care entitlement that will – unless repealed – exacerbate the spiraling cost of health care, explode our deficit and debt, and forever alter the relationship between the government and the American people.

health care chart