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Is the Obama administration lying about the cost of health-care reform?


Among the moment's big right-wing talking points is that the CBO numbers for Obama's health-care reform are some sort of scam, and the bill will actually cost a lot more than is being projected. It's a nice story, but it's not accurate. What they're talking about is something entirely different from Obama's health-care effort. It's a Medicare reform that fixes a problem a Republican Congress created, and both parties have worsened. It would have to be fixed whether or not health-care reform was attempted this year, and once it is fixed, it will have no bearing on the success of health-care reform. It's simply a separate issue. Jon Chait explains:

More than a decade ago, Congress tried to control Medicare costs by restricting payments to doctors. But the reimbursement cut has proven unpopular. So every year, Congress appropriates more money to fill the hole and keep the doctors happy. Yet the pay cut remains on the books. So, admitting the obvious fact that the reimbursement cuts will never happen would, officially speaking, cost $247 billion over ten years.

Everybody agrees that it's a sham. Since the Democrats are trying to reform, and trim, how much Medicare spends, they planned to wipe the slate clean and just admit the obvious reality that the $247 billion is going to get spent.

Conservatives are attacking this as proof that health care reform is based on fraudulent accounting. See -- they're spending money they don't pay for! National Review calls this "offloading $247 billion in Obamacare costs onto a separate, standalone, unfinanced piece of legislation." But it's not "Obamacare costs." It's money that would get spent whether or not health reform happens. It would be fair to make this charge if Obama were using these illusory savings to cover the cost of the new spending in his health care reform, but he isn't.

So why is Obama getting attacked so bitterly over this? Because he's acknowledging it. It's the same thing that's happened to fiscal policy since he took office. The Bush administration hid the true fiscal picture with a plethora of accounting gimmicks -- keeping all war costs out of the budget, pretending the middle-class tax cuts would expire, and on and on. Obama has tried to make the budget reflect reality. Alas, reality is a bummer.

photo credit: Mark Wilson/Getty.

By Ezra Klein  |  October 20, 2009; 10:31 AM ET
Categories:  Health Reform  
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Next: Why legislation is so long


I was hoping you were going to touch on this topic.

Here's the point:

We spend $300 billion annually on drugs, and they're giving up $80 billion over the next 10 years for reform.

We spend $500 billion annually on hospitals, and they're giving up $130 billion over next 10 years for reform.

We spend $150 billion annually on insurance company administration, and they are being forced to accept changes on the order of $100 billion over the next 10 years for reform.

Doctors? We spend $500 billion annually on them. They aren't giving anything up for reform. There is $250 billion in automatic cuts already on the table, and because the politics are difficult with doctors, NONE of it is on the table. Even with most policy experts believing that compensation linked to outcomes/quality is one of the most important elements to true health reform. Is it really that unfair that when Obama is looking at meaningful cuts to the whole industry, he's held accountable for caving on automatics cuts for doctors that are already in the same ballpark as every other major sector of the health care industry? Its a fair criticism. Period.

Posted by: wisewon | October 20, 2009 10:55 AM | Report abuse

Sort of off topic but Ezra I've been meaning to know that scary looking graph of the deficit? You know how it shows the deficit going off the cliff this year? Is part of that the fact that war spending has been brought back on budget (like your example above) and that it doesn't go directly to debt anymore?

That graph gets a lot of play. And the whole "Obama has the biggest deficit in the history of all mankind - maybe the universe" theme is getting a lot of msm attention right now. Somebody needs to get a different graph out there...


Posted by: luko | October 20, 2009 10:56 AM | Report abuse

It also really gets to the overarching issues with costs in healthcare. The SGR (which is the issue at debate on the Medicare cuts), when developed, was a reasonable approach to limiting cost growth. Except that it wasn't politically feasible. As are a number of things in the current legislation-- projecting bundled payments at a point earlier than the health system will be able to do without parallel delivery system reform, cutting back on payments to hospitals that provide indigent care when the Massachusetts experience shows that its more complicated to do that in practice-- there are a number of things that reasonable people would assume, just like SGR-- that it could be reasonable, but folks who really follow this stuff knows that it just ain't happening politically.

So yeah, everybody agrees this Medicare thing its a sham. Just like the "fall back provisions" from Feder et al. would be a sham. Just like bundled payments will be a sham. Just like health IT funding without meaningful standards is a sham.

Posted by: wisewon | October 20, 2009 10:57 AM | Report abuse


nice backpedaling.


you're correct but I expect that givebacks are already happening to hospitals too. see below:

I saw this a couple weeks back and was disgusted. The President trumped up the meeting with all the "players' back in May and now everyone's jumping ship and what this will result in is the Titanic turning back around towards the iceberg as Senator Snowe put it. We're putting a band aid on a gushing wound and it won't do a thing.

No matter how you slice it Ezra this reform will NOT reduce cost, it will increase it so in the end AHIP (for all of its partisan talk) will have been absolutely correct. Blame Republicans, Blame Democrats, blame whomever. The end result is it will cost more, cover less and be one big mess and the Congress and Nation will have wasted a full year for absolutely nothing.

Posted by: visionbrkr | October 20, 2009 11:16 AM | Report abuse

Ezra- If there's no political will to cut docs in Medicare why would there be a political will to cut docs or hospitals through a public plan that pays at or close to Medicare rates? We should stop pretending that any public plan would include a cut to doc or hosp payments don't you think?

Posted by: mbp3 | October 20, 2009 11:25 AM | Report abuse

it also amazes me that people like Pelosi and Waxman think they have a clue about how to restrain costs in healthcare spending. These are the same ones that would be flying around in 500 million dollar NEW jets in the middle of the greatest economic downturn since the Great Depression if not for the absolute sheetstorm that it created back in the summer. Sure Republican's do it too and they're not exempt from being idiots. Government CANNOT restrain medical costs, (ie ration care). It simply cannot be done, has never been done and will never be done. Once liberals realize this point and realize that the money isn't growing on trees maybe they'll join us all back in reality.

Posted by: visionbrkr | October 20, 2009 11:25 AM | Report abuse

the Private Jet argument kills me. A provate jet is the fastest way to get from point A to point B. It's a GOOD thing if Pelosi takes a private jet home to her district for a day trip to a town hall and then takes it back to DC the next day. Do we really want Pelosi/Reid/McConnell/Boehner/whoever to miss a vote because they're stuck on a layover flying commercial? And anyway- how many direct flights are there from DC to each congressman's district? I'd venture to guess if Kent Conrad want to get anywhere in his state efficiently he has to fly private.

Posted by: Quant | October 20, 2009 11:41 AM | Report abuse


they needed 8 new jets totaling $550 million dollars though? I'm not debating that they need to live "better" than the rest of us because of their position in government, and to get back and forth from their constituents and votes in Congress but I'm just concerned about the cost. You can't tell me there weren't "other" "old" jets lying around that could have been used. This is not a partisan issue because Republican's that do that deserve crap too but when you come into office in an "I'm going to clean up this mentality" and then you do the same thing you really look foolish.

I admittedly don't know the price of a private jet but is it $70 million dollars per? Can't they get a better deal on it and if they can't how can they expect us to believe that they'll get a better deal on our healthcare dollar???

And I'd be curious to know that since the flak they took they didn't get the jets exactly how are they slumming it? They're not hitchiking back and forth from their districts to Washington are they, LOL!

Posted by: visionbrkr | October 20, 2009 11:54 AM | Report abuse

Number of questions here Ezra:

1. First of all, even if you are quite a late to this issue; it is good that you have started to address this issue. I hope you continue doing this since it is probably the single most important issue remaining in the health care reform.
2. When Peter Orszag created the first budget for Obama, he included Iraq and Afghan war and that was right. Obama argued that keeping those war costs outside the budget was wrong and he did not want to play the Bush games. That was right. So did Obama include these $250Billion payments to doctors over the period of 10 years? As far as I know, NO; but I can be wrong. If left aside, why? And how are those supposed to be outside the preview of current Health Care Reform? What guarantee do we have that tomorrow many such costs will start getting funded outside the preview of Health Care Reform framework?
3. The most obvious point is what you are ignoring (do I dare to say willfully?) - ability of Congress to stick to cost cutting commitments in Baucus bill? Let us for a minute believe that we want to make a clean start here. The question is what is new in legal arrangements given by these bills which will ensure that indeed Congress will not be able to play the games as like Medical Care costs? Until we do not see those mechanisms, people have every right to disbelieve Congress and Obama and claim that this whole Health Care Reform is on wrong footing.
4. Past Administrations and Bush were wrong in not accounting these Doctor bills of Medicare. Bush was wrong to pass the unfunded Trillion dollar Medicare Drug benefit (again supported by Dems then). But the 'drunkard behavior' of past Administrations is no license for Obama to continue the same. Politically Obama reaped benefits of not being Bush (nothing wrong in that and that all is good); but then this also brings the responsibility of not using short cuts what Bush used.
5. Finally, look Ezra this President made the political decision of undertaking Trillion Dollar Health Care Reform in the midst of Great Recession. He did not go first for employment generation, improved tax collection and budget deficit reduction. We all accepted this being Obama's prerogative and we accepted his leadership here. Even a school child understands why this White House does not talk about deficit because Obama wants Health Care Reform and that is going to cost good money. But what we cannot tolerate is yet another under funded or fudged financial commitments on the books of Fed.

Republicans do unfunded Trillion Dollars wars. What do Dems do then? They undertake Trillion Dollar underfunded domestic reforms! That simply does not work out.

Come clean Ezra, come clean. Don't take the cool aid of 'deficits don't matter' and whatever GOP says is wrong. We know that Conservatives are all 'naked'. But that does not mean we want Obama to keep on being less honest in these crucial matters.

Posted by: umesh409 | October 20, 2009 12:08 PM | Report abuse

I'm less concerned about the cost than about the non-reform that is going on. I'm not in favor of spending anything at all on any of the bills under consideration because they are more about health insurance than they are about care.

The fact that our legislators (and so many of the social commentators like Ezra) have bought into the phony notion that pushing financial products will improve either the health or the financial security of the country speaks to how profoundly off track we are.

Talking about competition in the health care market -- with or without a public option -- is a diversion. No successful national health plan places "competition" at the top of its list of priorities. In fact, the data in this country shows that the more insurance companies there are in a market, the *higher* the costs. Competition among insurers strengthens the positions of the hospital and doctors, lowering the negotiating power of the insurers.

If we want to ensure that every legal resident has access to treatment when it is needed and in a mode that does not bankrupt him, his family, or his country, we need to stop talking about how to get insurance companies and start talking about how to effective finance the care people need.

Posted by: Athena_news | October 20, 2009 12:11 PM | Report abuse

"Government CANNOT restrain medical costs, (ie ration care). It simply cannot be done, has never been done and will never be done."

I dunno, Great Britain seems to be pretty good at it. Although to be fair they've had some problems doing this themselves lately too.

Posted by: nklein1553 | October 20, 2009 12:13 PM | Report abuse

"So did Obama include these $250Billion payments to doctors over the period of 10 years? As far as I know, NO; but I can be wrong."

You're wrong, he did include this in his budget.

Posted by: wisewon | October 20, 2009 12:13 PM | Report abuse


part of the reason they can constrain costs in England (and the rest of the industrialized nations) is that the US' pharmecutical industry for example is subsidizing their prescription costs. Also we're not seemingly willing to tell U.S. doctors that they don't need to make 7-10x more than doctors outside of the US. Its special interests that don't let it happen. Sure we could get rid of private insurance companies and "do it" like those countries but that would be a really really short-term fix and not address the true problems of costs.

Posted by: visionbrkr | October 20, 2009 12:19 PM | Report abuse

*Government CANNOT restrain medical costs, (ie ration care). It simply cannot be done, has never been done and will never be done.*

The entire argument *against* health care reform from opponents is, "It will ration care!" So which is it? If government can't ration care, then that's the end of the argument against reform.

Posted by: constans | October 20, 2009 12:31 PM | Report abuse

Okay, commentator 'wisewon' says Obama included $250Billion Medicare Doctor underfunding as a cost in his budget. Let one more confirmation come in and we move on. I accept I am wrong there. This means GOP is on one more lie. They need to be 'called out' here in White House terminology.

Then other questions remain - how do we do any meaningful reform when such big items are not included in the 'framework' whereas expectation is people believe that all subsequent items are going to be within that framework? In the end it is really about the confidence in Congress in their ability to stick to costs and Congress cannot be the political arbitrator here. The new kid on the block is the occupant of the White House and he will have to be arbitrator here. In other words, people will believe Obama when he talks arrangements of iMAC and other as ironclad cost controls than Congress. Congress simply does not have any credibility here.

Posted by: umesh409 | October 20, 2009 12:32 PM | Report abuse

"part of the reason they can constrain costs in England (and the rest of the industrialized nations) is that the US' pharmecutical industry for example is subsidizing their prescription costs."

That is not true. Most basic pharmaceutical research is underwritten by the government, not the companies who product and sell the drugs. US pharmaceutical companies spend more on marketing than they do on research. They could cut out all the mass marketing ads and still be profitable--just not as profitable as they are now.

Posted by: Athena_news | October 20, 2009 12:46 PM | Report abuse


It wasn't my intention to argue that we should get rid of insurance companies. You're absolutely right in arguing that if we want to expand coverage all of the stakeholders are going to have to make some sort of a sacrifice or else cost growth will overwhelm us all. However, I don't see why that sacrifice can't be negotiated through some sort of a democratic process. Your absolute charge that government can never do anything to contain costs leads me to believe that you prefer a purely market driven solution. However, as Kenneth Arrow and many others have pointed out for nearly forty years now, the market for health insurance is deeply flawed. As it stands now the way we contain cost growth is by pricing an increasingly large number of low income individuals out of health insurance. Personally, I feel that has to change. But I'm not an expert so I can't claim any real knowledge about how that change should be affected. However, experiences in other countries leads me to believe that the government will be part of the solution.

Posted by: nklein1553 | October 20, 2009 12:56 PM | Report abuse

wisewon, Ezra and others - if this cost of $247Billion is part of the Budget, why is Senate pushing a separate bill? Or is it part of multitude of appropriation bills which still have to be debated which in the end make the budget? (Like for example defense bill, which is a separate but then is part of the budget.)

How is the cost applied in the current year? Simply $24Billion per year?

I trying to dig further with Senate bill documentation for this MI Dem Stabenow's bill.

Posted by: umesh409 | October 20, 2009 1:30 PM | Report abuse

Finally, both 'wisewon' and Ezra will have to argue against this WaPo Editorial, which rightly criticizes, what is going on:

So it does not seem as easy as like I accepting the mistake for assuming $247Billion not part of Obama Budget

Posted by: umesh409 | October 20, 2009 1:37 PM | Report abuse


the government (because of the existence of Medicare and its popularity) cannot help but be part of the solution, I agree to that, but in my opinion it should be the regulatory watchdog as opposed to a major player in the solution. How can the government say (and this question goes to you to constans)"individuals can have coverage for this but not for that". Its one thing if you're telling Medicare patients they can't have a physical paid for but what happens when costs rise and they have to decide who gets mammograms and who doesn't? And in God forbid the worst case scenario who gets cancer treatment and who doesn't. There is a finite amount of money and an infinite amount of those wanting care. When I said the government cannot ration care for its people I meant "politically". I think that's been borne out already by the example of the SRG issue here. The government doesn't have the intestinal fortitude to stand up to rich doctors how are they going to stand up to a patient that needs care and survive politically. Will they go to Oregon's system of a healthcare lottery?? There are no good answers here.

Posted by: visionbrkr | October 20, 2009 2:44 PM | Report abuse

*Government CANNOT restrain medical costs, (ie ration care). It simply cannot be done, has never been done and will never be done.*

The entire argument *against* health care reform from opponents is, "It will ration care!" So which is it? If government can't ration care, then that's the end of the argument against reform.

Posted by: constans | October 20, 2009 12:31 PM | Report abuse

MY GOD, I'm not against reform. I'm just FOR the right type of reform. The one where EVERYONE'S accountable. How many times do I have to say that to you???

Posted by: visionbrkr | October 20, 2009 2:46 PM | Report abuse


people already hate insurers. They play the "bad guy" real well I think we'd agree. Let them do their job, eventually ration care (when we get to that point) on means determined by federal regulators. Let them tell the patient on a statin that they can't have Crestor that they need to have a generic statin as an example. Tell people that they have a list of 5 cardiologists to go see in their town instead of 30. Let them go back to the 90's where cost containment worked.

The other option is rein in doctors, hospitals, pharma and those that are actually charging their prices for their services but no one seems to be too willing to do that either do they?

Posted by: visionbrkr | October 20, 2009 2:51 PM | Report abuse

Visionbrkr, under my private, for-profit health insurance plan I can't go to just any doctor. I can't get Crestor instead of a generic. I can't even get the generic at my local pharmacy. My doctor has to send my routine lab work to a specific vendor, and not to the one she usually uses, even though the price would be the same.
Strictly speaking, I could do those things but I would end up paying the full cost out of my own pocket. The "choice" I have is to do it their way or to pay myself. Maybe I could "choose" a different insurance plan? Nope. Employer provided, no choice.
Could you explain how government micromanagement and rationing would differ in practice from what we have now?

Posted by: tl_houston | October 20, 2009 3:33 PM | Report abuse


That's why I was in favor of the Wyden Free Choice Ammendment (as was Senator Ensign (R) before Demcrats scuttled it. Under that proposal all Americans could be on the exchange and in your instance you could possibly pay a little more in premium costs to get the freedom of choice you desire.

Also it could be structured in such a way that it didn't destroy the employer system we have now (if that's what the leadership wants). Employers could buy and sell employees' costs on the exchange in a menu format.

For example if your premium was say $700 a month for your family for the plan you have now and $800 a month for the "better plan" that didn't give you those issues and let you have Crestor etc then Your employer would just be charged $800 and they would charge you your employee portion of that amount.

That idea keeps the insurers intact, gives people choice of a myriad of options and allows them to pay to "buy up" to better coverage when they want it. But democrats shot it down because unions and big business shot it down. THey'd lose a large measure of control and they can't have that.

Also theoretically it would give insurers more bargaining power with providers so I'm sure docs and hospitals wouldn't like it as much. Oh and it would increase competition which i think we're all in favor of.

Posted by: visionbrkr | October 20, 2009 4:58 PM | Report abuse

and why do you care what vendor the doctor uses for your labwork? I could understand your other concerns but that one I don't get.

Posted by: visionbrkr | October 20, 2009 5:00 PM | Report abuse

I am sorry but if you were to ask 10 Americans if what the government pays doctors a factor in the cost of health care and should it be addressed in a comprehensive Health Reform Plan, my guess is that 9 out of 10 would say yes it is and yes it should be addressed.

But nice try.

Posted by: cautious | October 21, 2009 1:24 AM | Report abuse

Medicare’s worrisome 15% premium increase this year draws needed attention to the reality that cost containment has not been a major focus of our continuing health care reform debate. In large part, this is due to the Administration’s efforts to build support for needed reforms by limiting their financial impact on various powerful health care constituencies such as physicians, pharmaceuticals, and our nation’s hospitals in order to achieve the laudable goal of increasing the percentage of Americans with adequate health insurance. However, in light on Medicare’s projected insolvency by 2016 and the inexorable growth in our nation’s general health care costs, this strategy does insure that divisive budget battles and squabbles over costs will be with us for some years to come. Inevitably, all of America’s health care providers must accept lower reimbursement to save our system from budgetary disaster; we owe it to the patients we claim to serve.

James B. Rickert, MD
President, Society for Patient Centered Orthopedics

Posted by: jrickert1123 | October 21, 2009 4:17 PM | Report abuse

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