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Discretionary spending and the Affordable Care Act

When the Congressional Budget Office assesses the cost of a bill, they look at mandatory effects. So if the bill says you have to give subsidies to everyone making less than $80,000, they figure out how much that is likely to cost and add it to the total. If the bill says you have to tax employer-provided insurance plans, they figure out how much that tax will raise and add it to the total. If the bill simply says that you can choose to fund something by taking another vote on it in the future, it doesn't enter the tally. It's a world of musts, not mays.

At the request of Rep. Jerry Lewis, the CBO has now estimated the "mays" of health-care reform, and with a price tag that shocked some folks: $115 billion. "If Congress were to approve all of this new discretionary funding authorized in the health-care bill, almost all of the administration's highly touted savings would be made null and void," said Jennifer Hing, spokeswoman for Republicans on the House Appropriations Committee.

That's true, at least in the first decade. But it's all about that "if." Aside from $10 or $20 billion of administrative costs, the estimate is based on items that are not currently funded and that may not ever be funded. It's up to the appropriations committees to make those decisions, and we don't know what decisions they'll make. Moreover, because discretionary spending is limited, new programs tend to compete with old programs (i.e., appropriators decide to spend $2 billion on a demonstration project in Medicare and take that money from somewhere else, which means net cost to the deficit is zero). So CBO doesn't count potential discretionary costs because they may or may not be real, just like it doesn't count savings that may or may not happen, because they can't be projected with any sort of certainty.

Bottom line? As has so often the case with health-care reform, there's plenty of evidence to argue that the bill will save very little money, and plenty of evidence to argue that the bill will save lots of money. Where you end up depends on how you weight different probabilities. But so far as discretionary costs go, it's worth saying that CBO always separates them from mandatory costs and people don't generally complain. It's only when bills get controversial that these quirks of the budget process are given such a sinister cast.

By Ezra Klein  |  May 12, 2010; 12:45 PM ET
Categories:  Health Reform  
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Comments

More importantly, either way it still *saves* money overall. It's a good sign that even though Republicans have spent 6 months ferociously searching for anything that can justify the party line: "the bill costs too much!", usually their best shot is, "it won't save as much as you say it will!".

Posted by: bigmandave | May 12, 2010 1:08 PM | Report abuse

has congress very often seen a spending measure they didn't like?

so let me get this straight Ezra you posted on Greek debt and how we're not in the same boat with the implied assumption that IF the economy in the US improves that our deficits will be fine.

So its fine to use IF and assume rosy economic forecast projections to assuage the debt concerns but now you use "IF" to your benefit?


While discretionary spending normally does compete with other programs it still goes UP and at a rather alarming rate as well.

Posted by: visionbrkr | May 12, 2010 1:24 PM | Report abuse

Bottom line? Vote out every democrat and we won't have to worry about the costs.

Posted by: obrier2 | May 12, 2010 2:21 PM | Report abuse

It is really amazing that you can keep posting this dribble day in and day out, keeping it really simple with analogies that drastically oversimplify the issue...

The idea that the federal government is going to pay a large percentage of health care costs for thirty million people and this will magically "save" money in the long run is just absurd.

Don't worry though! Most of America has no concept of basic mathematics!

This bill is jam packed with gimmicks specifically designed to game the CBO score. It is EXACTLY what Goldman and other investment banks did with ratings agency's credit models. They didn't create a product and send it off with fingers crossed, it was specifically designed to perform well under the known models CBO would use to score it. The only thing redeeming about it is the ingenuity that went into gaming the score...

Here are a two major points that Ezra and other dishonest liberals completely ignore because it’s so difficult to spin them, even to the less intellectually gifted among us:

1. Doc Fix - Hundreds of billions of dollars, can't get the score we want with it, screw it, just don't include it.

2. Cadillac Tax - We'll start it in 2018 so no one will care about it anytime soon, and we'll just count on the ignorance of the populace to understand how it works! Its not that difficult actually. Make sure the differential between premium inflation and what the tax is indexed to is nice and large, and what do you know, over time the tax captures...goodness...nearly everyone! Ezra won't talk about the fact that in 2030, the better part of the population will be paying "Cadillac Taxes" on their garbage health insurance. We don't need to talk about it though because everyone knows that come the 2018 mid-term election cycle, we'll just remove the tax and get reelected! Free Money!

This bill is simple:

It is a massive entitlement to low income citizens, and it uses all of the easy savings measures/taxes on the rich to pay for some of it. It is still going to cost an enormous amount of money, no matter which way Ezra tries to spin it. The reality of the situation is that while Social Security/Medicare/Medicaid are ticking time bombs that no one has dealt with, Democrats have passed an entitlement that will cost trillions over the coming decades. Any savings and taxes that will partially offset this new entitlement are no longer available to deal with the colossal disaster that our old entitlements plainly are.

What is most difficult for me to understand is how reasonable, educated people like Ezra can ignore facts and logic and just assume the rosiest of outcomes with absolutely no plan and all the numbers pointing to certain disaster.

Massive Taxes
Weak Currency
Inflation
Stagnant Growth

Thats going to be my generation's future.

Thanks!

Posted by: donopj2 | May 12, 2010 2:30 PM | Report abuse

@obrier2: "Bottom line? Vote out every democrat and we won't have to worry about the costs."

How does that work? While I don't for a second think that the Affordable Care Act will save money (I think it will cost money, and a pretty penny) the solution isn't to vote out every Democrat, unless we're planning on replacing them with unknown libertarians or conservative party candidates. The Republicans don't spend less money. Many Republicans are Big, Big Government "conservatives". Until Obama, the G.W. Bush administration was the biggest spending ever.

While I'm still for voting them out, that won't do much to stem our government's profligate spending.

Posted by: Kevin_Willis | May 12, 2010 2:34 PM | Report abuse

When do the PPACA "savings" begin to show up? If I recall correctly, the entitlement is (as Klein notes above) dramatically expensive during the first decade; however, the Medicare Trust Fund tapped by the PPACA disappears during the second decade. So again, when do any "savings" actually materialize?

Would it be acceptable to use the error of Gruber's model for Massachusetts to predict error due to the [Gruber] model for the US? That is, since the model is known to be invalid for a subset of the whole, would the Social-Democrat faction allow such known error rate to be used to predict the error rate for the whole?

Ultimately, there has to be some recognition that, when arriving at estimates of "savings" due to the PPACA, the incumbent Social-Democrats were either (a) wantonly incompetent or (b) deliberately deceptive. As elections approach, it will be interesting to hear incumbents explain whether it was incompetence or deception --

Posted by: rmgregory | May 12, 2010 2:47 PM | Report abuse

@donopj2

"Here are a two major points that Ezra and other dishonest liberals completely ignore because it’s so difficult to spin them, even to the less intellectually gifted among us:"

. . . and then you proceed to bring up the doc fix. In point of fact, Ezra has written on the doc fix issue at length, both in transcribed interviews with the originator of that complaint (Paul Ryan) and in additional analysis articles. Search this blog on the issue before claiming that the author here ignores this or that issue.

Posted by: JPhils | May 12, 2010 3:02 PM | Report abuse

WOW....Now who could have ever seen this coming.....DUH.

Posted by: rainman2 | May 12, 2010 4:02 PM | Report abuse

A story title from "The National Review Online says it all...You have to laugh to keep from crying. I also heard that Obama is now thinking of vetoing the bill after ramming it down our necks and then passing it with shady tatics. I wasn't going to say I told you so But what the hell..."I TOLD YOU SO"!!

Posted by: rainman2 | May 12, 2010 4:18 PM | Report abuse

rainman2, what the hell kind of post is that? What are you, in 2nd grade? What is Obama going to veto? The bill is passsed. Its over. Get on with your life.

Posted by: truth5 | May 12, 2010 4:43 PM | Report abuse

So Much For ObamaCare's Savings

more and more
more and more
more and more
more and more
lies from this administration its just astounding !!!!!

Posted by: yourmomscalling | May 13, 2010 3:51 AM | Report abuse

Under Health Care Reform, Medical insurance is a must, but you can easily find medical insurance for you under $40 http://ow.ly/1Jkvo

Posted by: talbertjo13 | May 13, 2010 7:21 AM | Report abuse

talbertjo13,


I thought those minimed crap plans were illegal now???

Notice to all: YOU GET WHAT YOU PAY FOR.

Posted by: visionbrkr | May 13, 2010 7:39 AM | Report abuse

donopj:"What is most difficult for me to understand is how reasonable, educated people like Ezra can ignore facts and logic and just assume the rosiest of outcomes with absolutely no plan and all the numbers pointing to certain disaster."

Because you have displayed neither. Your diatribe is not logical or factual; it is a GOP talking point stolen from the pages of Paul Ryan's budget plan.

Educated, reasonable people do not need to respond to dribble and fear. Perhaps you should run as a Republican for office; Republicans love fear and dribble.

Posted by: tfburke19 | May 13, 2010 11:25 AM | Report abuse

Kevin, what it will do is put everyone on notice that this bs has to stop. I hate the republicans more than the dems, but my wallet is voting this year.

Posted by: obrier2 | May 13, 2010 11:35 AM | Report abuse

BigManDave LOL Are you really that dense? Sorry to be so blunt. If you believe the Govt (Rep or Dem) can add or multiply correctly... I've got a great bridge that spans from NYC to Brooklyn you can have for a great deal... how about 5 bucks? Big Man you are the kind that Barnum was speaking of when a sucker is born every minute. Just wait till the Doc Fix gets added to this monster of a bill. This bill will have great grandchildren pinching pennies. Maybe even their great grandchildren. Always remember Washington DC is nothing but smoke and mirrors no matter who is office. Ezra nice spin.... keep kidding yourself. Your articles are amusing though.

Posted by: simmonsga | May 17, 2010 4:51 PM | Report abuse

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