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Mike Pence's confused response to the CBO report

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"Only in Washington," said Rep. Mike Pence, "can you spend a trillion dollars and say you’re gonna save the taxpayers' money.”

And only in Washington can such willful obtuseness be considered a professional attribute. You can believe that the savings in the Democratic plan will work as CBO thinks they will work, or you can disagree with that. But let's not pretend there's something complicated about the theory of spending money and saving money at the same time.

Let's say I own a graphics design firm. But all our computers are very old. A lot of time is wasted waiting for Adobe Photoshop to load and compute. So I decide to upgrade all of the computers. Costs a lot of money. But since my designers can now do more projects in a day, my firm is actually making more money. So yes, I can spend money and increase my bottom line at the same time. Investing in order to secure efficiencies is not a new concept.

The health-care example is a bit more complicated because the thing we are spending money on (coverage) is not the thing that's saving us money. But it's not that much more complicated. Let's say I want to hire new people at my graphics design firm. But first I need to make room in the budget. So I move our offices to a cheaper area of town, I stop providing free lunch for the staff, I raise prices slightly and I implement a variety of painful managerial changes that substantially streamline our operations. This not only pays for the new hires, but saves money above and beyond that.

No one would argue that these hypotheticals are impossible. Or, if they did, they would be out of touch with basic economic concepts to a truly unseemly degree. But that's what Pence is implying above. Presumably, he's just misleading his audience because it's easier to play to ignorance than to explain his actual critique of the bill. But that's not a good thing either.

Photo credit: Rep. Mike Pence's Flickr page.

By Ezra Klein  |  March 18, 2010; 1:25 PM ET
 
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Comments

Mike Pence is really, really dumb, and he really doesn't understand most of this. Read Matt Yglesias' take on his conversation with him.

That he is in a leadership position speaks volumes about the GOP.

Posted by: Mimikatz | March 18, 2010 2:19 PM | Report abuse

Here's Matt:

"The larger issue, however, is that Mike Pence is a moron, and any movement that would hold the guy up as a hero is bankrupt. You can see my colleague Amanda Terkel for more of the specifics on this, but I would refer you to this post from September about the earth-shattering ignorance and stupidity of Mike Pence. He has no grasp, whatsoever, of public policy issues. And yet I can only gather from the fact that his colleagues have elevated him to a leadership post, that a large faction of them are actually so much stupider than Pence that they don’t realize how dumb he is. But it’s really staggering. In my admittedly brief experience talking to him, his inability to grasp the basic contours of policy question was obvious and overwhelming."

Link, with the other links embedded:

http://yglesias.thinkprogress.org/archives/2009/01/mike_pences_ode_to_rush_limbaugh.php

Posted by: Mimikatz | March 18, 2010 2:23 PM | Report abuse

Am I wrong or is the savings from the direct student loan program change also included in this CBO preliminary score?

Posted by: lancediverson | March 18, 2010 2:25 PM | Report abuse

Mike Pence isn't really dumb, and he probably does understand most of this. However, Ezra is treating his comments as a substantive criticism of healthcare reform when it was intended as a easily digestible soundbite that scores political points.

It's a larger statement about the "out of touch" nature of Beltway politics meant to appeal to his base. Otherwise, it would not have been phrased like that. "Only in Washington . . . "

You don't start a substantive indictment of a piece of legislation with a broad criticism of the District of Columbia, or the nature of politics. If you're engaging in a bit of political theater, however . . .

Posted by: Kevin_Willis | March 18, 2010 2:26 PM | Report abuse

Republican lies about HCR. Wow, shocking.

Posted by: AZProgressive | March 18, 2010 2:29 PM | Report abuse

He was on CNBC this morning and said something like let's scrap this bill and start over on health care reform. The only thing he can come up with is buying insurance across state lines. That line must poll well in focus groups of low-information voters because they all say it - but do you think he would actually engage on crafting a new bill if we scrapped the one we have spent a year on already?

Posted by: luko | March 18, 2010 2:33 PM | Report abuse

The fact GOP leaders lie about the most basic nature of the bill (e.g. gvmt takeover of health care, death panels, socialism) tells me they are resorting to such extreme tactics because they know the CBO score is basically correct.

If the CBO was in fact partisan and/or incorrect, the GOP would simply make those arguments and prove them. Their problem is they can't make those arguments, hence, the childish histrionics.

It is clear to me, an ex-Ronald-Reagan voting republican and USAF veteran, that the GOP since circa 1994 is not really interested in solving problems, and instead desires simply to create chaos in the hope they can get more power (hence the impeachment too).

Posted by: Lomillialor | March 18, 2010 2:48 PM | Report abuse

The analogy is even easier than that. The federal budget this year is 3.55 trillion. Mike Pence would like to reduce the size of the government by some amount, but presumably not to 0 since he likes things like having armed forces and interstate highways and chairs in his Congressional office. So let's say he wants to reduce federal spending by 10% for next year. Will he attack himself for saying that there's no way you can talk about spending 3.2 trillion dollars as saving money?

Posted by: _SP_ | March 18, 2010 2:51 PM | Report abuse

Healthcare reform does not have to be this compliated or expensive. What is in the House now is simply payback to the left for their efforts to elect a progressive/socialist president. But, times are a-changing.....the writing is on the November wall!
2010...WITHUG DOUBT, VOTE THEM OUT!!

visit: http://eclecticramblings.wordpress.com

Posted by: my4653 | March 18, 2010 3:13 PM | Report abuse

The comments here are really hitting the nail on the proverbial head. It tells me all I need to know about the health care bill, and about the GOP, that the Republicans virtually never offer any substantive criticism. Instead it's all bogus soundbites and scare tactics. They've had a year to make their argument, and they've failed. Whether Pence is playing politics, or whether he has a substantive understanding of the issues is really beside the point at this stage.

Posted by: simpleton1 | March 18, 2010 3:21 PM | Report abuse

"Only in Washington," said Rep. Mike Pence, "can you spend a trillion dollars and say you’re gonna save the American People from Saddam”

That is GOP Philosophy. The more you think about these GOP folks, one start realizing what a ghastly politics they are doing. First you spend, spend without bothering; open unnecessary wars, ignore necessary wars and when someone is putting forward a proposal which does not increase deficit you start complaining (after all herculean efforts of misinformation campaign). We understand that they are Opposition and hence they do all this. If this is all the beneficial work they can bring to American people, I would say let them remain in Opposition itself for a while.

Posted by: umesh409 | March 18, 2010 3:22 PM | Report abuse

Only in Washington can one produce a budget report -- and pass a bill -- without ever considering cost of implementation. The interesting part is that, at some point, those implementation costs will need to be authorized...

Posted by: rmgregory | March 18, 2010 3:27 PM | Report abuse

Was his next line, "At a time when millions of Americans have to tighten their belts to stay afloat, our government should be tightening its belt, too"?

Posted by: randrewm | March 18, 2010 3:29 PM | Report abuse

Of course, the real answer is that the cost savings will never take place, so, in effect, the reform will cost lots and lots of money. Taxing the cadillac plans will never happen and the Medicare savings will never happen -- aside for that, it's a wonderful proposal for reducing the deficit. If you aren't confused, you don't understand the situation.

Posted by: mdfarmer | March 18, 2010 3:41 PM | Report abuse

*Mike Pence isn't really dumb, and he probably does understand most of this. *

What evidence do you have of this? You suffer from an excess of nihilistic cynicism. Not everyone is as cynical as you are. In fact, lots of people who aren't that bright and don't spend much time analyzing policy or developing the ability to do arithmetic rise to high places. I think you would like to believe that the Republicans you vote for are "evil geniuses," but in fact among their members of the House, many of them are just very mean people who aren't that bright and don't get out much.

Posted by: constans | March 18, 2010 3:44 PM | Report abuse

All of you think Mike Pence is just dumb but that's not the point. He just got confused today and selected the wrong dress from Mitch McConnell's closet. Never wear the pink one Mike! Blue is a better color for your lovely eye shadow.

Posted by: edfunk1 | March 18, 2010 3:51 PM | Report abuse

Well, I'm not sure there's anything obtuse about highlighting that the $1 trillion in plan costs is paid for, at least in part, by raising taxes. In the short term, we won't realize savings to taxpayers and our overall heath care spending will increase. But I am persuaded that we'll be getting alot in exchange for the extra spending -- by covering another 32 million Americans and that the reforms will over the long term bend the cost curve.

Posted by: wswest | March 18, 2010 3:51 PM | Report abuse

I don't think that Democrats would attempt to deny benefits and aid to millions of citizens in order to "destroy" a Republican president.

Posted by: Bertilak | March 18, 2010 4:16 PM | Report abuse

simpleton,

you're right. We can absolutely cover 31 million more people for much less cost. Why didn't I consider that. Makes complete sense.

I love how Dems can suspend the laws of Mathematics.

Posted by: visionbrkr | March 18, 2010 4:17 PM | Report abuse

Mr. Klein: You're shameless. You can't really believe that the federal government can shore up Medicare by taking $500 billion from Medicare to subsidize other entitlements and then claim the government is "strengthening" Medicare.

What a pack of lies you're peddling! We're not this stupid.

Posted by: ElmerStoup | March 18, 2010 4:26 PM | Report abuse

does anyone consider the fact that if you're going to say its deficit neutral that it depends on what your baseline is?

oh forget it. Party on. Just don't whine when the bill comes due.

Posted by: visionbrkr | March 18, 2010 4:28 PM | Report abuse

I have heard from people with personal experience in the matter than Mike Pence is a profoundly, profoundly stupid man.

Posted by: antontuffnell | March 18, 2010 4:43 PM | Report abuse

The GOP has great wordsmiths. The reasoning is bogus, but the language SOUNDS compelling.

All style, no substance.

Posted by: JPRS | March 18, 2010 4:44 PM | Report abuse

"But first I need to make room in the budget. So I move our offices to a cheaper area of town, I stop providing free lunch for the staff, I raise prices slightly and I implement a variety of painful managerial changes that substantially streamline our operations."

Or if you're Congress, you'd claim you'll do those things in 10 years, or you'd claim you'll do those things even though you've said before that you'd do them but have pushed back the due date over and over and over and over again. And Ezra Klein would lap your claims right up.

Posted by: ostap666 | March 18, 2010 4:46 PM | Report abuse

JPRS:

Please point out what is wrong with making the argument that CBO always underestimates costs (for instance, CBO estimated the new Capital Hill visitors centerit would cost $70 million; it ended up costing over $600 million)?

Posted by: JakeD2 | March 18, 2010 4:55 PM | Report abuse

"simpleton,

you're right. We can absolutely cover 31 million more people for much less cost. Why didn't I consider that. Makes complete sense.

I love how Dems can suspend the laws of Mathematics.

Posted by: visionbrkr | March 18, 2010 4:17 PM | Report abuse"

Crazy, ain't it? There's a whole world out there full of alternative ideas, strategies and practices. Some of them actually work better than ours do, too. In fact, there are some foreigners who have have standards of living just as good as ours, only they've figured out how to spend half as much as we do on health care for twice the results. You'd be amazed.

Posted by: simpleton1 | March 18, 2010 5:12 PM | Report abuse

Jake
Nothing's wrong with making the argument that the CBO always underestimates costs. The problem, as I understand it, is that there was general agreement ahead of time to use CBO numbers to evaluate this particular piece of legislation. It was a foregone conclusion that one party or the other was going to be unhappy with how those numbers came out. But that doesn't mean that if you're unhappy with the score you get to start over. As I tell my kids, part of being an adult is learning to deal gracefully with disappointment.

Posted by: TomServo | March 18, 2010 5:15 PM | Report abuse

Kind of like you can "save" Medicare by taking 500 billion out of it to pay for Obamcare.

Posted by: RobT1 | March 18, 2010 5:16 PM | Report abuse

RobT1: "Kind of like you can 'save' Medicare by taking 500 billion out of it to pay for Obamcare."

Except that you can. There are studies showing vast discrepancies in Medicare spending among similar demographic areas which produce no better results. So there's clearly room to save money without affecting service. Read Atul Gawande's piece "The Cost Conundrum" in The New Yorker, http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande.

Posted by: dasimon | March 18, 2010 6:20 PM | Report abuse

mdfarmer: "Of course, the real answer is that the cost savings will never take place..."

Well if that's the attitude, then we shouldn't take any action because we're going bankrupt anyway. That's deficit nihilism and ends the debate, so we shouldn't even bother arguing.

Furthermore, the evidence is that most Medicare cuts have "stuck." http://www.theatlantic.com/business/archive/2010/03/are-medicare-cuts-a-big-fat-lie/36852/ The exception is the 1997 "doc fix," but that's going to be a problem whether or not this bill passes. So if this bill helps, it's worth passing.

If Medicare was so generous, we wouldn't have providers complaining about the reimbursement rates.

Posted by: dasimon | March 18, 2010 6:27 PM | Report abuse

Awe c'mon, Ezra. It's easier than that.

Let's just say you normally buy five new pairs of boxer shorts every year to replace the oldest ones in your drawer with the holes in them, at an average cost of $7 per pair. Then one year on a whim you decide to try a 5-pack of briefs instead, for only $20. As long as it's a given that you're going to be buying underwear, you just saved yourself $15 bucks (*and* got better support and freedom of movement in the bargain) even though you did of course spend money in both cases.

It's grade school arithmetic. No wonder Republicans can't do it. I mean face it, we're talking about people who think you can reduce the federal deficit by cutting taxes while increasing spending. It should come as no surprise to anyone that they're easily confused by simple math problems.

Posted by: CalD | March 18, 2010 6:27 PM | Report abuse

"simpleton,

you're right. We can absolutely cover 31 million more people for much less cost. Why didn't I consider that. Makes complete sense.

I love how Dems can suspend the laws of Mathematics.

Posted by: visionbrkr | March 18, 2010 4:17 PM | Report abuse"

Crazy, ain't it? There's a whole world out there full of alternative ideas, strategies and practices. Some of them actually work better than ours do, too. In fact, there are some foreigners who have have standards of living just as good as ours, only they've figured out how to spend half as much as we do on health care for twice the results. You'd be amazed.

Posted by: simpleton1 | March 18, 2010 5:12 PM | Report abuse


WOW!!!! Simpleton I had no idea they adjusted the bill to match European style? I can't believe I didn't hear about that.

We're negotiating drug prices???

We're telling doctors how much they can charge for each procedure they do?

WOW!! You're right this is a great cost cutting bill!

How could i be so dumb.

Posted by: visionbrkr | March 18, 2010 6:47 PM | Report abuse

JakeD2,

The CBO doesn't ALWAYS underestimate cost. When it comes to health care its assumptions tend to be conservative:

/////////////////////

Medicare enacts the prospective payments system (PPS) for reimbursing inpatient hospital stays.

-- The CBO projected total Medicare spending will rise to $60 billion in 1986.

-- Actual Medicare spending in 1986 was only $48 billion.

Medicare begins paying skilled nursing facilities and home health care services a set fee per patient.

-- The CBO projected a 9.1% reduction in Medicare spending.

-- The actual savings turned out to be 50 percent greater in 1998 and 113 percent greater in 1999 than the budget office forecast.

The Medicare Modernization Act created Part D prescription drug coverage.

-- The CBO projected that spending on the drug benefit would be $206 billion.

--Actual spending was nearly 40 percent less than that.

http://www.nytimes.com/2009/08/26/opinion/26gabel.html?_r=2&ref=todayspaper&pagewanted=all

//////////////////////////////

The CBO also assumes that some of the experiments in the bill -- such as electronic records, new payment procedures, etc -- will yield $0 savings.

Odds are many of the experiments won't pan out, but some will. The net of $0 savings seems unlikely.

Even if it turns out that the estimates are off on the cost side of the equation, they would need to be way off in order to create deficits. I applaud the Dems for working hard to create a bill that actually has a very high probability of reducing the deficit while simultaneously expanding coverage to millions and providing much needed consumer protections in a part of the market where abuses routinely take place.

Unlike W's tax cuts or Medicare Part D or the War, the Dems have actually made a serious effort to pay for a bill on the basis of something other than debt.

Part of the story here too: If the GOP had stepped up to the plate, there's a pretty good chance that the deficit reduction side of the equation could have been even stronger (e.g. more aggressive negotiation of rates in Medicare Part D; limits on payments to medical suppliers; maybe even the inclusion of a genuine public option).

Posted by: JPRS | March 18, 2010 8:52 PM | Report abuse

Okay I'll bite. The CBO scoring is wrong. This will be an extremely expensive piece of legislation.

Steve

Posted by: FatTriplet3 | March 18, 2010 9:06 PM | Report abuse

BTW, I agree that Mike Pence is as dumb as a bag of hammers.

Steve

Posted by: FatTriplet3 | March 18, 2010 9:07 PM | Report abuse

I am an independent and I am trying to make it through the bill and trying to look at everything with an open mind, but apparently most people here just want to call people names instead of argue the points on the basis of their content. I assume calling Mike Pence a Moron makes you smarter.

Posted by: wbdcorp | March 18, 2010 9:53 PM | Report abuse

If it was not destroying our country, I would think all this back and forth by the politicians, sucking the drones was funny. People find it so easy to turn on the tv. and get their talking points from the talking heads. Would you be for this bill and the power that will be given to new government departments if Bush was pushing it.

Posted by: wbdcorp | March 18, 2010 9:59 PM | Report abuse

wbdcorp,

The short answer is, Yes.

The worst that would happen in the unlikely event that W. and the GOP passed this kind of legislation is that they would appoint political hacks to the relevant agencies so that the consumer protections wouldn't be enforced.

From a consumers perspective there are few reasons to object to the bill. From a taxpayers perspective the only reason to object to this bill is if you have a very high income and you have to pay more taxes on your Medicare benefits.

If you're over 65 and pulling in $200K or $250K a year from your investment income, odds are you're probably doing OK. A little extra in taxes won't put you in the poor house.

If you're someone who is healthy, young, uninsured, and you have an income over $50K you will now be required to purchase insurance.

The net impact would likely be at least $800 to $1,200 per year. Not insignificant, but on the other hand, if you get hurt, or become seriously ill, at least it means that taxpayers won't be left holding the bag for your care at the emergency department.

This bill primarily effects those in the individual insurance market.

For those of us who fall into that category, this bill means that our coverage can't be rescinded because an insurer doesn't want to pick up the tab for a serious illness; it means we can't be denied insurance on the basis of pre-existing conditions; it means that insurers will be required to spend at least 80 percent of their revenue from premiums on health care (that's money that isn't being spent on ads, or lobbying, or any other overhead category that isn't related to providing health care); it means that insurers will need to cover a basic level of services.

If you lose your job and COBRA extensions run out, it means that you and your children won't need to worry about having basic health care coverage while you're looking for work (in some states, today, if you own your home you won't meet the eligibility requirements for Medicaid).

For a lot of people this means that the chance that they will die from easily treated diseases, or be bankrupted due to a medical emergency is significantly reduced.

Plus the measure is likely to significantly reduce the national debt.

Posted by: JPRS | March 18, 2010 10:26 PM | Report abuse

Does anyone have any information about how much of an effect on premiums the high risk pool individuals will have once they have to be transitioned to the exchange in 2014? As cited in this subsection: Secretary shall develop procedures to provide for the transition of eligible individuals enrolled in health insurance coverage offered through a
high risk pool established under this section into qualified health plans offered through an Exchange.

Posted by: wbdcorp | March 18, 2010 11:11 PM | Report abuse

"You can believe that the savings in the Democratic plan will work as CBO thinks they will work, or you can disagree with that. But let's not pretend there's something complicated about the theory of spending money and saving money at the same time."

Right, but you're ignoring the common perspective that $406B is new taxes. That's why we need to see the trillion dollar costs, and then see how they plan to pay for it. $130B of the savings is from cutting Medicare Advantage, which is going to push people into Part B, which comes straight out of the budget (although at least we'll be cutting the premium subsidies on Part B for those that don't need it.) $40B of the savings is for home health care cuts, which seem reasonable. The $20B cuts to hospital payments is where some idiot progressives have claimed a huge part of the savings are going to come from- not having hospitals have to donate care to the uninsured. What we'll find is that much of that private charity is now being paid for by the government.

The timing difference between the imposition of the taxes and the costs also distorts the estimate, but really, I barely even trust quarterly estimates from most of the companies I deal with.

That said, it's a million miles better than the Medicare Part D- even though this is only adding another $38B to those costs. It proves to me that government can only work with fiscal responsibility while we have the parties at each other's throats. The Democratic opposition during the Bush II reign was so weak, we let him drag us into a useless war.

Now we need to start pushing HSAs so that we have actually have real mechanism to control costs based on how much we value the treatment, not how much they want charge.

Posted by: staticvars | March 18, 2010 11:13 PM | Report abuse

I also want to know if anyone thinks that that after we spend 5,000,000,000 on the high risk pool for 4 years if the secretary would then deny people with pre-exsisting conditions as stated in this section:
LIMITATIONS.—The Secretary has the authority to stop taking applications for participation
in the program under this section (high risk pool) to comply with the funding limitation provided for in paragraph

Posted by: wbdcorp | March 18, 2010 11:22 PM | Report abuse

wbdcorp,

With respect to the limitations on the high risk pool, I understand the language to say if the $5 billion of funds in the pool is exhausted, no more applicants will be accepted. My sense is that this would only apply to people with incomes 133% or more above the Federal Poverty Line (otherwise they'd have coverage under Medicaid expansion).

With respect to the impact on rolling over the high risk pool into the exchanges, I haven't been able to find current information. However, based on the CBO's scoring of the Senate bill back in late November, it sounds like they anticipate the cost of premiums being 7 to 10 percent lower than they would otherwise be without the reforms. This is due to the influx of relatively healthy purchasers into the risk pool (e.g. right now the non-group health insurance market trends about 2 years older than the group market; the net impact of new enrollees into the exchanges is that the median age of the risk pool drops by 5 years.)

(bottom of page 17)

http://www.cbo.gov/ftpdocs/107xx/doc10781/11-30-Premiums.pdf

AP reports the following:

The self-employed: Starting in 2014, self-employed people and those whose employers don't offer coverage would be able to pick a plan through a health insurance exchange, like a supermarket. It's modeled on the federal employee health program available to members of Congress, with a range of private plans. Small businesses could also join.

More than 30 million people would buy coverage through state exchanges, and nearly 6 in 10 would be eligible for help with their premiums. The new tax credits would be computed according to income and other household characteristics. The money would go straight to the insurer. To consumers it would look like a discount — generous for lower-income families, less so for those solidly in the middle class.

For example, a family of four making $44,000 would pay $2,763 in premiums —about 6 percent of its income— for a policy worth $9,435.

But a similar family making $66,000 would have to pay $6,257 in premiums, close to 10 percent of its income. That may be less than a mortgage, but it's more than a car payment.

http://www.msnbc.msn.com/id/35876568/ns/health-health_care/

Posted by: JPRS | March 18, 2010 11:52 PM | Report abuse

Correction on the Medicaid eligibility -- I believe the limit may be raised to 150 percent of the Federal Poverty Line. So if the $5 billion fund was exhausted in the high risk pool, those below 150 percent of the FPL would still have some insurance coverage.

I imagine if the $5 billion fund was close to exhaustion too that there might be some political pressure to provide supplemental funding until the exchanges came on line. But this is just a guess.

Posted by: JPRS | March 18, 2010 11:58 PM | Report abuse

Sadly I failed to notice this...

'However, the CBO “score” does not include the additional $350 billion or so in additional Medicare costs that Congress will approve in a separate “Doc fix” bill.

“I love numbers. They’re so precise,” Pelosi said.'

I am assuming someone as intelligent as Speaker Pelosi is aware of the difference between accuracy and precision, in which case that could turn out to be a top ten cynical comment of this debacle.

Posted by: staticvars | March 19, 2010 12:18 AM | Report abuse

staticvars,

The "doc fix" is a bogus issue. Every year since 2002 when the measure comes up to a vote, Congress simply patches up the short-fall anyway. It perpetuates a kind of fiction by not accounting for the increase as part of the 10-year budget.

Btw, the allocation in the House this past Fall was for $210 -- not $350 billion.

It's also worth noting that Pelosi didn't create the "doc fix". The budgetary mess is Gingrich's brainchild. Congresses since 2002 has simply punted on making the hard choice of accounting for the payments in a transparent way (or eliminating the measure and paying the political consequences).

Posted by: JPRS | March 19, 2010 12:50 AM | Report abuse

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