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Posted at 5:14 PM ET, 01/ 3/2011

File under 'can't win'

By Ezra Klein

During the Bush administration, Democrats made a big deal of the Republicans' tendency to pass big initiatives without paying for them. The tax cuts, for instance, went right onto the deficit. So too did the Medicare Prescription Drug Benefit. The Democrats promised that they'd be more responsible. They'd pay for their big projects.

When health-care reform came around, they made good. They cut $500 billion from Medicare, handing conservatives a potent attack line. They introduced a tax on high-value health insurance plans, infuriating their union supporters. They didn't just pay for the bill: They overpaid for the bill, packing it with enough spending cuts and revenue increases to cut the deficit by more than $100 billion in the first 10 years, and then used the momentum of the bill to get liberals to sign off on cost controls, like an independent board designed to control Medicare's costs, that they'd have never countenanced in normal times.

So what do the conservatives who style themselves fiscally responsible say about this effort? "Democrats knew that passing the health-care bill would make it harder to balance the budget, because we used up the easiest, most obvious tax increases and spending cuts on expanding health care coverage," writes Megan McArdle. Democrats "spent budget offsets needed to address our long-term spending problem" complains Keith Hennessey. Points for creativity, at least: You need to work hard to make the very act of finding ways to pay for your spending seem like a calculated plan to increase the deficit.

McArdle says Democrats "knew" what they were doing here, but having spoken to a couple of them, I assure her they didn't: They actually thought that doing the fiscally responsible thing and passing more-than-fully offset legislation that also included an array of attempts to cut health-care spending over the long term would be considered, well, fiscally responsible. Fools!

By Ezra Klein  | January 3, 2011; 5:14 PM ET
Categories:  Health Reform  
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Next: Government on the scale, Part III

Comments

Ezra, health care opponents have gone over this a billion times. We have a huge structural deficit. The most obvious way to close that deficit is by cutting health care costs and using the money to pay down the deficit. The Democrats do the good work of cutting health care, but instead of using most of htat money to pay down the deficit, they use most of the money to set up a new entitlement. Now, we have basically the same huge structural deficit we had before (cut a little on the margins) but many of the obvious ways to save money to pay for the deficit are gone.

I know you understand this. Why not admit it instead of keeping on playing hte game of "the republicans did it worse!"

Posted by: jfcarro | January 3, 2011 5:33 PM | Report abuse

I have no desire to quibble over the other details of the CBO score, or the CBO scoring process in general, so I will not use the "CBO estimates are too optimistic" or "planned cuts won't happen" approach. For now let's just assume all of that is well and good, and bill as written pays for itself. But how can you seriously advance the "they overpaid for it" argument, when 100% of that supposed $100B deficit reduction is accounted for with CLASS Act revenues and additional Social Security revenues? Both of those things create an equivalent future liability, neither of them in any way represent a net gain to our finances.

If you want to argue that PPACA was deficit neutral, while I might disagree with you, it would require making my own assumptions about the future. In other words, we'd both be guessing and/or assigning different levels of confidence to someone else's guesses, so we're unlikely to get anywhere. But both of those things (CLASS Act/SS revenue) by definition do not improve the budget situation.

The CLASS Act is designed to have actuarially equivalent premiums and benefits over its life. Any initial surplus on a cash basis is exactly offset by a matching future deficit. This is not an assumption, this is not skepticism about future government action, this is definitional based on the design of the entire program. That wipes out $70B of your supposed deficit reduction. The rest of it is from additional SS revenue as employers replace benefits with salary. Those extra dollars paid entitle people to more benefits in the future, albeit outside of the 10 year window. But the somewhat arbitrary nature of the 10 year window should not lead one to misleadingly represent something like the CLASS Act as a program that saves money.

The "10 years of taxes, 5 years of benefits" line of attack during the debate on reform was not entirely accurate, but in the case of the CLASS Act, social security, and claims of deficit reduction, it is the perfect description. If you want to say PPACA is deficit-neutral, fine. Reasonable people can disagree. But claiming deficit reduction in the face of these facts does serious harm to your credibility.

Posted by: ab_13 | January 3, 2011 5:37 PM | Report abuse

Geez, cutting Medicare was a terrible idea, only thing dumber would be to cut Social Security. It wouldn't matter if the money went to HCR or deficit reduction, its a punisher on election day.

Consider this-- 2006 midterms, senior vote was split between Dems and GOP evenly. 2010 midterms, GOP had +23 advantage among seniors. Their number one issue was the Medicare cuts.

Senior voters seemed motivated by concerns about the health care law and punished incumbent Democrats accordingly. The bill cut $500 billion from Medicare programs...
http://www.politico.com/news/stories/1110/44802.html

The GOP isn't stupid, they're reading the polls and realize it was the very popularity of entitlements that cost the Dems the House. Clearly the smart play going forward would be to cut Medicare and Social Security but pin the blame on the Democrats. They'll probably pull it off too because the WH has chained itself to this "fiscally responsible" nonsense.

Posted by: beowulf_ | January 3, 2011 6:03 PM | Report abuse

Remind me again why you and other people with heads pretend that the strikingly dim Megan McArdle is a serious commentator?

Posted by: RobK_ | January 3, 2011 6:07 PM | Report abuse

Ironically, it's quite unfortunate the Democrats are serious about "fiscal responsibility" and balancing the budget. Since the federal government can simply create money at will, it is not financially constrained by deficits or debt, nor does it require tax revenues to pay for its services (why would it, since it can pay for its activities by press a button on a keyboard?) In fact, the government should almost certainly never balance its budget or run a budget surplus but rather run permanent deficits. This allows for private savings (a government surplus would necessitate private deficits or debt, excluding trade), which on balance is better than the alternative since government is not financially constrained by the possibility of bankruptcy or insolvency and so therefore faces no deleveraging pressure, which is not true for the private economy.
Republicans are certainly hypocrites when it comes to "fiscal responsibility" and balancing the budget, but that's probably better for the economy than the Democrats seriousness and honesty about the issue. What Democrats should have done is spent a bunch of money right away implementing health care reform, deficit financed, and watched the economy improve as well as their electoral prospects and forgot about all these misguided nostrums about the need to reduce the budget deficit and debt.

Posted by: jjlwmd | January 3, 2011 6:39 PM | Report abuse

So now we've gone from a freedom infringing program to a new entitlement?

And since when does creating a market driven exchange while cutting wasteful gvmt programs (Medicare D) an entitlement?

You people just hate Obama. There's no substance to your whining.

Posted by: lauren2010 | January 3, 2011 6:41 PM | Report abuse

"They didn't just pay for the bill: They overpaid for the bill, packing it with enough spending cuts and revenue increases to cut the deficit by more than $100 billion in the first 10 years..."

Ezra contiues to perpetuate the myth. This number has already been debunked several times, and the ACA even as passed will not reduce the deficit....and that's not just right-wing hyperbole talking.

"Revised" cost estimates by the administrations own folks since the ACA was passed have quietly revised the bill to where now anyone who can do math can conclude that the ACA will add to the deficit, not reduce it.

But Ezra is simply a poly-sci major, so math isn't his strong suit....

Posted by: dbw1 | January 3, 2011 6:44 PM | Report abuse

I'm not really sure I'm buying the premise that there are fiscally responsible conservatives. Any of those should be screaming about the fact that paygo is about to be junked this week. Paygo has its faults but it's the only method that's controlled the deficit since 1980.

Cutting subsidies from Medicare part D is not an obvious cut and I don't know in what political environment the cut would otherwise be on the table. The cut goes directly against a Republican goal to establish non-government alternatives to Medicare which is a core goal. It also harms seniors who like the benefits and insurance companies who like the customers.
Lots of Republicans won on Democrats cut Medicare, but I don't know of any who won on we should cut Medicare and improve the deficit by a very small amount per year.

Furthermore, in the no health care reform world, the pent up demand for health care reform would still have to be considered as a risk to the deficit.

Posted by: windshouter | January 3, 2011 6:52 PM | Report abuse

lauren2010:
"You people just hate Obama. There's no substance to your whining."

I've pasted these numbers of 'substance' several times on these boards over the past few months, and no left-winger yet can argue them. These are numbers released AFTER the ACA was passed, that anyone with a working knowledge of a calculator can use to conclude that Ezra's continued insistance of using the ACA talking point of "deficit reduction" impact is a lie. Want to take a shot at trying to disprove this argument of 'substance'? Good luck....

1) +$115 billion (at least) of cost for adminstration of the ACA left out of original bill. I quote the AP article "Costs could go higher, because the legislation authorizes several programs without setting specific funding levels."

2) +216 billion (at least) extention preventing Medicare cuts. The ACA pretended that 21% cuts to Medicare funding would occur June 1. They didn't, as every conservative knew they wouldn't. And Democrats just extended these cuts again. Everyone knows NO party (Dem or GOP) will ever actually allow the cuts to occur, because then doctors would drop Medicare patients in droves.

3) + $20 billion - only $5B of funding over 4 years was included in the ACA for the so-called "high-risk" pools to be administered by states. The administrations own experts predicted in May that this cost would be approx $5B PER YEAR. I copy the link to the labor-union run "National Institute for Health Reform" that predicted this cost could run as high as $134 BILLION !!!!

I suspect lauren, like most liberals, will run from the fray when confronted by reality. They don't do too well when presented with facts that don't line up with their HuffPo talking points....

Posted by: dbw1 | January 3, 2011 6:56 PM | Report abuse

ab_133:
"But claiming deficit reduction in the face of these facts does serious harm to your credibility."

I hardly ever listen to Mark Levin, but just happened to have him on an hour ago when he was skewering our beloved mis-guided, passionate, but under-educated-on-economics Ezra. I was stunned that this national radio host happened to be talking about the uninformed diatribes of the WaPo blogger above just as I ran across his show on the radio.

In other words, don't worry; Ezra doesn't have much credibility to worry about 'harming'.

Posted by: dbw1 | January 3, 2011 7:06 PM | Report abuse

Seriously, dems should just have just fritttered away a surplus, passed an un-funded $500 billion health care plan, started two wars they had no idea how to win (and one which they started for no rational reason!), and given a huge tax cut to top earners. Oh, and whined and wailed about earmarks and other trivialities.

Then newspapers would talk about how they are" deficit hawks" determined to" shrink government" and" rein in spending."

Posted by: theorajones1 | January 3, 2011 7:11 PM | Report abuse

Yeah, as if the Republicans were going to cut Medicare by $500 billion anyway.

Those fogie Tea Partiers love small government as long as it's not their government.

Posted by: RichardHSerlin | January 3, 2011 7:57 PM | Report abuse

Quite honestly, none of the commentators -- including Ezra -- have much credibility with me regarding cutting the costs of health care. It's estimated that CMS could save over 2 BILLION annually if it could negotiate drug prices as the VA does.

That should be the *starting* point for any and all discussions about reducing Medicare spending. Yet neither Ezra nor his pundit buddies ever mentions it.

Posted by: Athena_news | January 3, 2011 8:03 PM | Report abuse

Quite honestly, none of the commentators -- including Ezra -- have much credibility with me regarding cutting the costs of health care. It's estimated that CMS could save over 2 BILLION annually if it could negotiate drug prices as the VA does.

That should be the *starting* point for any and all discussions about reducing Medicare spending. Yet neither Ezra nor any of his his pundit buddies ever mentions it.

Posted by: Athena_news | January 3, 2011 8:04 PM | Report abuse

Dbw

The system we have now substantially improves access to health care for all Anericans at what is basically, give or take, no extra cost to the country.

But the saboteurs will indeed try to break the system, and may succeed.

I have no doubt if we had two parties that worked together to make the system work AND reduce costs, we'd easily succeed.

However, we only have one such party, and it ain't the GOP.

Posted by: lauren2010 | January 3, 2011 8:14 PM | Report abuse

dbw1:

There are two issues involved here. Is the money allocation of ACA adequate for it's purported benefits? In some peripheral ways as you've shown, probably not. But for purposes of the deficit calculation, lets say, does paygo work, the specific question is is ACA helpful to the deficits. The examples you've cited don't really matter because if new money is not allocated by a future Congress, the money needed won't be spent.

Lets say Congress passes a missile defense bill and allocates $30 million per year. The actual cost of a working defense system might be $300 billion per year. The law's means are inadequate to its ends, but that's not uncommon and doesn't mean we'll spend $300 billion a year on missile defense.

Pure entitlements are different of course, but that's not what you were talking about.

Posted by: windshouter | January 3, 2011 8:43 PM | Report abuse

I wonder how regular people, who work 40hrs a week and do not have much time to peruse this issue , can understand all this , when experts are so divided on what is fiscally good or bad policy .
It seems to me that Pres. Obama and the Dems made deals with the private insurers , and as with any Public -Private alliance the Public side will be stolen from to finance the profits of the Private one .
Expanding Medicare should have been the goal , no one can get away with speaking ill of Medicare ! Expand SCHIP to age 26 , expand Medicare down to age 50 and keep cost controls tight . Yes Doctors are going to scream , so where are they going to go ... Cananda ...

Posted by: sligowoman | January 3, 2011 9:07 PM | Report abuse

Athena: "...Yet neither Ezra nor any of his his pundit buddies ever mentions it."

Well, gee, you are clearly wrong. Look at the below link (and/or following excerpt) from an older Ezra post....

Seems Ezra clearly talks about the need to negotiate drug prices, and indeed the House Dems tried to get it enacted, but the Senate conservatives nixed that idea.

http://voices.washingtonpost.com/ezra-klein/2009/11/recipe_for_a_better_bill.html

"While the bill that emerged from the Senate Finance Committee renews the Bush administration's megabucks gift to the drug companies by continuing to prohibit Medicare from negotiating drug prices with them, the House bill authorizes those negotiations."

Posted by: lauren2010 | January 3, 2011 9:25 PM | Report abuse

--*The system we have now substantially improves access to health care for all Anericans at what is basically, give or take, no extra cost to the country.*--

Klein likes to prattle about how DeathCare will enhance the *government's* bottom line, but what he never mentions is all the money to be sucked out of the private economy in the process. Your "no extra cost to the country" is rank gibberish, and dishonest, to boot.

Posted by: msoja | January 3, 2011 10:02 PM | Report abuse

--*It's estimated that CMS could save over 2 BILLION annually if it could negotiate drug prices as the VA does.*--

The "2 BILLION" would presumably come out of drug company coffers, so, which would you prefer?

A. Drug companies start laying off people now.

B. Drug companies curtail research and development.

C. Drug companies move overseas.

D. All of the above

Posted by: msoja | January 3, 2011 10:07 PM | Report abuse

"Seems Ezra clearly talks about the need to negotiate drug prices, and indeed the House Dems tried to get it enacted, but the Senate conservatives nixed that idea.",- lauren

Umm...that was over a year ago. Since the bill was passed, Ezra has moved to defending the "savings" to be achieved through hoping that the bill will change behavior.

Posted by: Athena_news | January 3, 2011 10:31 PM | Report abuse

"The system we have now substantially improves access to health care for all Anericans at what is basically, give or take, no extra cost to the country." - lauren

Only someone who has never seen universal care in practice would even claim such a thing. As the Massachusetts experience shows, getting insurance doesn't improve access. Insurance is not about patient care; it's about ensuring that providers get paid.

Posted by: Athena_news | January 3, 2011 10:37 PM | Report abuse

Athena

Your assertion that he never talked about the issue was wrong, as I proved that to be the case. No big deal.

But Ezra has done much more than suggest the law reduces costs by merely changing behavior. I think you need to pay more attention to details of his posts.

I think, for example, you will find that Ezra believes much more needs to be done to reduce costs.

What is defensible in the current law is that it is better than the system in place before the current law was enacted. The current law is woefully inadequate as a permanent solution, but brings us one step closer to a better system. I don't think Ezra has ever said or implied differently.

Posted by: lauren2010 | January 3, 2011 11:16 PM | Report abuse

msoja : "Klein likes to prattle about how DeathCare will enhance the *government's* bottom line, but what he never mentions is all the money to be sucked out of the private economy in the process. Your "no extra cost to the country" is rank gibberish, and dishonest, to boot."

What money will be sucked out of the economy? The money people will voluntarily pay as premiums to insurance companies so they can save their own lives by finally having quality health insurance?

The CBO confirms everything Ezra says. The bottom line is indeed improved with this new law and it may very likely save your sorry whining butt someday if you get cancer or heart disease and your insurance company wants to throw you off the plan to save money.

You are just a nihilistic ideologue who has no concern about the real health problems faced by millions of sick Americans who have been abandoned by the GOP and the insurance industry. You are no better than a communist or a terrorist by the way you willfully risk or disregard other's lives. People like you are responsible for the deaths of countless Americans who are too sick or too poor to get life saving health care.

You will never find ONE seriously ill American who would call this law "DeathCare".

DeathCare is what we had BEFORE this law. And you are just too stupid or too politically motivated to admit it.

Posted by: lauren2010 | January 3, 2011 11:28 PM | Report abuse

Athena dear

Must I correct you yet again? Do you ever tire of uttering nonsense?

It is estimated by the CBO that the new law will cause 33 million currently uninsured Americans to get insurance and to get health care. That is called improved access.

Posted by: lauren2010 | January 3, 2011 11:31 PM | Report abuse

msoja

How about "E - you don't know what you are talking about and all you know how to do is repeat GOP fear mongering".

You will always be a servile mail clerk because you your rich employer has you fooled that the risks of moving up in the world or getting better pay are just too overwhelming for you and may cause you to lose your job and make you lose everything. People like you don't realize there are actually very smart people out there who could actually help you if you would simply stop reacting to fear and instead showed a little trust and courage and try to understand what people like Ezra are trying to explain to you.

Posted by: lauren2010 | January 3, 2011 11:37 PM | Report abuse

Megan's right. A fiscally responsible party would have tried to paid for all of the goodies we already had before signing up to buy more.

The Republicans are worse than the Democrats, but both are awful!

Posted by: staticvars | January 4, 2011 12:01 AM | Report abuse

The first new rule says you HAVE to have insurance. Both my husband and I have pre-existing conditions, and although the new bill says we can't be denied coverage because of it. So far, the cheapest health insurance we've been able to find is called "Wise Health Insurance" search for it online if you are pre-existing conditions.

Posted by: tracystewart03 | January 4, 2011 2:21 AM | Report abuse

--*The money people will voluntarily pay as premiums to insurance companies*--

Mandate == voluntarily pay. Don't you think you lose any argument and any credibility right there?

If you have to twist words to their opposites, and lie even on the simplest aspects of things, doesn't that tell you anything about the nature of the monstrosity you are trying to promote?

Posted by: msoja | January 4, 2011 8:23 AM | Report abuse

--*[T]ry to understand what people like Ezra are trying to explain to you.*--

So, you don't think taking two billion dollars a year out of the pharmaceutical industry will have any impact on employment, research, development, or even whether individual drug companies choose to do business in the United States?

I mean, in the pile of ad hominem you delivered, you didn't bother to even refer to the any of the implications I raised. Why is that?

Maybe you'd like to explain what the decade and a half intrusion by the government into the vaccine market has done there. We've gone from dozens of U.S. located participants down to maybe one or two, and the vaccine supply is increasingly tenuous. Is that what you want for all medicines?

Posted by: msoja | January 4, 2011 8:31 AM | Report abuse

"Must I correct you yet again? Do you ever tire of uttering nonsense?" - lauren

Your condescension would be easier to ignore if it were not so prevalent among the uninformed who blindly support the ACA. You assume that anyone who criticizes the plan is just too stupid to understand what is good for themselves and the country.

Insurance does not equal care, it equals payment for provider. The fact that more people will be insured doesn't mean that they, or those who are currently insured without care, will get the care they need. While the discussion focused on how to get hospitals paid for indigent care, Ssudy after study has shown that the majority of non-urgent ER visits are in fact covered by insurance.

And more insurance does nothing about making costs affordable for the country.

As with so much else in this country, the finance industry framed the discussion and resultant policy.

Posted by: Athena_news | January 4, 2011 9:52 AM | Report abuse

lauren2010:
"The system we have now substantially improves access to health care for all Anericans at what is basically, give or take, no extra cost to the country."

False, on two counts. First, the ACA necessarily adds levels of federal bureaucracy that previously did not exist, and does not eliminate any levels elsewhere (either at the federal or state levels). That means costs incurred by taxpayers to administer the ACA will rise; how anyone can say the ACA comes with 'no extra cost' boggles the mind of this financial analyst.

Second, the ACA did nothing to provide extra health care. Two examples:
1) I have a relative who runs a non-profit health clinic in a large city. Uninsured people could get care at her clinic, or thousands of other similar non-profit clinics that existed to provide care to the uninsured. The ACA merely moves these patients to other clinics and hospitals.

2) to the side of the entrance on the wall of one of the country's largest hospitals in my state is a plaque that informs entrants that those below the poverty lince may qualify for free care, and those up to 200% of the poverty line may qualify for subsidized care...using existing STATE and local programs.

I simply seek to dispell the myth that the ACA will provide more health care access than what previously existed. The ACA merely seeks to centralize the control of funding for this care by reforming the insurance/payment side of the industry. The ACA does not create more doctors, clinics, hospitals, etc.

And, as a conservative I would argue the ACA may actually have the unintended negative consequence of REDUCING health care access. Yes, your read that correctly. If the ACA has it's way and Medicare fees are cut 20%+, guess what happens....lots of doctors and clinics will suddenly refuse to see Medicare patients, and Medicare patients will have fewer places of 'access' for their care.

But negative unintended consequences are not new to progressive ideology, so I assume you may have already been aware of that particular likely outcome....

Posted by: dbw1 | January 4, 2011 11:46 AM | Report abuse

The Democrats are pathologicial liars when it comes to health care costs. Just look at the SCHIP program which ballooned from about $.5 billion a year to about $6 billion a year over the course of a decade.

Posted by: krazen1211 | January 4, 2011 1:14 PM | Report abuse

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