The true cost of the health-care bill, cont'd: An interview with Rep. Paul Ryan
Rep. Paul Ryan is the ranking member of the House Budget Committee. Accordingly, Republicans charged him with making the case against the administration's health-care bill at the Blair House summit. Those remarks can be read here. A few days later, I posted a critique of Ryan's argument. A few days after that, he responded (pdf). Rather than continuing to fire missives at each other, we spoke this morning about the bill's impact on the deficit. What follows is a transcript of the call, with extremely light edits for clarity. And before we start, let me thank Rep. Ryan for being willing to engage on this issue at length.
Ezra Klein: Let’s begin at the beginning. In your comments at the summit, you said that "the bill has 10 years of tax increases, about half a trillion dollars, with 10 years of Medicare cuts, about half a trillion dollars, to pay for six years of spending. Now, what's the true 10-year cost of this bill in 10 years? That's $2.3 trillion." I read that as suggesting the bill was hiding its fiscal irresponsibility in the second decade, when in fact, the revenues and savings grow faster in that decade than in the first.
Paul Ryan: The problem with the Blair Summit is they give you five minutes to get your points out. So I had to cram what is really 15 minutes of a presentation into five minutes. There's a broader point I was trying to make here, which is that size of government matters. It would matter if we had $50 trillion in spending increases even if we had $51 trillion in tax increases. The big number matters because it tells you how much we're taking out of the economy.
EK: So let me focus on that number. People don’t know how to put $2.3 trillion over 10 years in context. A better way to do this would be to look at one year, and to look at percentiles. In 2019, the bill spends about $200 billion. But some of that money is money that government is already spending and is simply redirecting to this purpose. The new money it spends is $133 billion.
To put that in perspective, in 2019, the federal budget is projected to be $5.4 trillion. So we’re talking about an increase in federal spending of 2.4 percent. And that 2.4 percent increase will cover 31 million people. Now, I think you can say that’s worth it or not worth it, but put in context, it reads very, very differently than just letting $2.3 trillion hang out there.
PR: Look, we already spend more than twice as much per person on health care as any other industrialized country. But we're not getting our money's worth. Right now, we're projected, without this legislation, to spend another $4.5 trillion just from the government on health care for people under the age of 65. Is throwing another $2.3 trillion on top of that the answer? And I'd respectfully say it's not the answer.
The answer is to spend our money more efficiently and intelligently. But this is not doing that. At the end of the day we're building on top of a system that needs to be reformed itself. If more government control over our health-care resources were the answer, we wouldn't have all these problems in Medicare and Medicaid themselves.
EK: There are two things worth saying about that. First, to cover the uninsured, if we believe we need to do that, there'll always be at least a one-time increase in expenses. And two, it's hard to say that government spending is the problem when the countries you're saying spend half as much all do much more of their spending through the government. But let's get into the double-counting issue. If I understand your argument right, you're not saying the Congressional Budget Office is double-counting this money. You're saying the administration and other Democrats have made arguments in which they double-count the money. I agree with you on that. But just so we're clear, CBO's number are still solid.
PR: CBO just scores what's in front of them. So let's just go through it point-by-point. When you raise Social Security's tax revenues, you also raise benefits. More coming in taxes says more benefits are being obligated CBO says you can only count that money once. If you're counting it as offsets for this bill, you're increasing unfunded obligations for Social Security. CLASS Act is another example: These are premiums for a benefit. You're counting these premiums for this benefit as offsets for another spending project, you're creating unfunded benefits. That's double counting. We're increasing obligations and we're not setting aside those dollars for those programs.
So when I hear Sebelius and others say that we're extending the life of Medicare with this, that can't be claimed if you're also using these premiums for offsets. That's disguising the true fiscal picture that's being painted here. The American people are hearing that if we pass this legislation it will improve our deficit situation. I'm saying that's not true because we're increasing these obligations and spending that money elsewhere.
The topper of this issue, which goes to the difference in our opinions, is that if you basically believe that we need the government to assert itself in this sector, then you have to global budget and, ultimately, ration. And that's just not the path we want to get on. We believe in a decentralized system where individuals bring market forces to bear.
EK: This is where I think we end up in different places. The philosophical differences are all fair enough. But insofar as the double counting goes, the double counting is an issue of how some Democrats are talking about this. And I agree with you. Saying that the money will do two things at once is out of line. But what I want to make sure is clarified here is that the numbers people are using from CBO are not afflicted by that rhetorical overreach. When CBO says the bill will save this much money, it really will, at least according to the best estimates.
PR: I'm not disagreeing with that. But I think CBO is omitting other fiscal effects that are not in the bill -- unless we plan on cutting doctors 21 percent next month. Unless we plan on doing that, then we're not truly capturing the fiscal effects.
EK: But now we're not talking about double counting. We're talking about the doctor's fix in Medicare.
PR: Right. And I think you and I simply don't agree on this.
EK: That's probably true. But let's just have some basic background here so we start on the same page. We're both talking about the sustainable-growth-rate formula. That was a doctor payment formula proposed by Bill Thomas, the Republican chair of Ways and Means, in the Balanced Budget Act of 1997.
PR: Republican Congress, bipartisan deal, signed by Bill Clinton.
EK: Absolutely. The formula proved very flawed, nobody expected it to do what it's done.
EK: And since then, the Congress has stopped it from cutting doctor payments seven times since then. I went back through the record, and you voted for five of those delays.
PR: Oh, yeah! I think we should fix the thing. Don't get me wrong.
EK: And I agree. But if it exists completely independently of health-care reform -- and if it was developed in 1997, that has to be true -- how can it be properly understood as part of the cost of health-care reform?
PR: Here's my challenge to that. These bills had the doc fix to begin with. And if you're going to say that Medicare savings can be counted as health-care reform, then the Medicare spending issues should go in there as well. You can't say I'm going to take out $467 billion in savings from Medicare and apply it to this entitlement and then I'm going to exclude the doc fix. If you're going to count the Medicare spending as an offset in this bill, you have to count the Medicare spending as well. It's in the same program. And that to me is what's cynical about this gimmick.
EK: But I want to make sure we're clear on one thing: You and I don't disagree that if we don't do health-care reform, if not a person gets covered and this bill is soundly defeated, we still have to handle SGR.
PR: Yes, I agree with that. But you would have your point if they weren't taking money from Medicare to pay for this program. If Medicare's a pay for, you can't just count the savings and not the spending.
EK: What confused me about your point on that is that yes, Democrats are proposing new savings in Medicare to fund their bill. But Medicare also has lots of existing debts and obligations. You wouldn't say that Medicare's expected deficit 20 years from now is part of the bill. I agree that the SGR fix was in the House bill originally, because they figured that as long as they were doing a big health-care package, we should get this done, too. But people often attach a lot of priorities to one big legislative initiative. That doesn't mean they're the same thing. Then your party began hammering them, and you can argue it was cynical that they took it out, but they took it out because Republicans were cynically hammering them having it in there.
PR: You and I both know why they took it out. It made the numbers look bad.
EK: Absolutely. But they had to do the fix because Republicans passed this bill in 1997.
PR: But Bill Clinton signed the damn thing into law, and the American Medical Association asked us to do this.
EK: We agree. Everyone's hands are dirty on this.
PR: I'm going to go back to my original point though. Doc fix was in. Medicare is part of this debate because Medicare is a funding mechanism for this new entitlement. And if that's true, then all the Medicare iterations Congress is dealing with are part of this. You can't say: "I'm going to get money from Medicare for this new entitlement but I'm going to exclude the doc fix." You can't have it both ways.
EK: I think this is important because it's where you get most of the money in your argument from, so let me try and do this one more way and then I'll let you have the last word on this. It’s like I have a house with a leaking roof. I need to fix that roof, and it might make sense for me to do that when I buy a second house. But the argument you're making is that it is properly understood as part of the cost of the second house, because I'm using the first house for collateral or something. I think you make a solid point saying that if they had it in there in the beginning, they shouldn't have reversed course. But what happened there is that the were trying to fix a big problem that both parties created, and Republicans basically said, sorry, we're not helping you on this because we don't want your health-care reform bill to pass, and by the way, we're going to attack this as part of the cost of the health bill. And Democrats said, fine, if you're not going to help clean this up, then we can leave it be and both of us can do it later. It didn't make any sense to let Republicans use a problem they'd passed into law to drag the health-care bill down.
PR: I'd probably just make my same point again, so I won't rehash it. I see your point and you see mine, so I think we just fundamentally disagree. But what we ought to do is really fix Medicare and do the SGR thing in that context. That's my problem at the end of the day. We got these entitlements going bankrupt already. We don't need another one on top of it.
Look, I believe we need to do health-care reform. And the employer-tax exclusion is the place to go. That is a huge driver of health inflation, no one has the guts to take it on, and what's a crime in my mind is that I think people in the administration would agree with this. I think economists would agree with it. That's where we should go to fund health-care reform. But we're not. Because of politics. And unfortunately, we're creating a fiscal house of cards instead. We're not dealing with the entitlements that are unfunded right now. We're creating a new one.
EK: But on the exclusion, Max Baucus wanted to fund reform through the exclusion. And the administration, which had attacked John McCain on his attempt to repeal the exclusion, were ready to go with him. They didn't get any Republican support on that, though. If Bob Bennett and four Republicans had come to them and said, look, if you go hard at the exclusion, you have my vote, they could've gone hard at the exclusion.
PR: There's a distinction though. The Patient's Choice Act that I have doesn't repeal the exclusion and put the money in a new government spending program. It takes the money and gives it to the individual. There's a very big difference of opinion here. You don't end the exclusion and have the government spend it on a program. You give it to every individual. But the point I'm trying to make is we spend enough on health care. We don't need to do more. We need to do what we do more efficiently and effectively.
EK: Last question. On the question of whether we can trust Congress to implement modest cuts. If you don't think government can abide by even the modest spending cuts in this bill, then where are we left? We're going to need to do much more than this bill. Your bill does much more than this bill. But if Congress can't do what it says it's going to do, what's the point in talking about any of this at all? If none of the policies can be implemented, then we're going bankrupt.
PR: I can't disagree with what you just said.
Photo credit: J. Scott Applewhite/AP
March 4, 2010; 2:02 PM ET
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