Experts Reject Study From Koch-Backed Center Claiming Health Care Law Will Increase Deficit


Right-wing media are touting a study claiming the health care reform law will not lower the deficit, but rather increase it by more than $300 billion. In fact, economic experts dismissed the study by conservative analyst Charles Blahous, saying it uses "discredited arguments."

Study Claims Health Care Law Will Add More Than $300 Billion To Deficit

Study: Health Care Law "Is Expected To Add At Least $340 Billion And As Much As $530 Billion To Federal Deficits." According to a study by the Mercatus Center at George Mason University:

The Affordable Care Act (ACA) enacted in 2010 will significantly worsen the federal government's fiscal position relative to previous law. Over the years 2012-21, the ACA is expected to add at least $340 billion and as much as $530 billion to federal deficits while increasing federal spending by more than $1.15 trillion over the same period and by increasing amounts thereafter. These adverse fiscal effects are not everywhere understood because of widely circulated analyses referencing scoring conventions of the Congressional Budget Office (CBO) and the Medicare Trustees, which compare the health care reform legislation to a baseline scenario that differs from actual law.

Moreover, there is substantial risk that the ACA's costsaving provisions will not be enforced as currently specified. To avoid worsening the federal fiscal outlook, legislative corrections are required before the ACA's provisions become fully effective in 2014. Roughly two-thirds of the law's subsidies for health insurance exchanges must be eliminated to avoid worsening federal deficits and the entirety of their costs eliminated to avoid further increasing federal health care financing commitments. [Mercatus Center, 4/10/12]

Study Author Blahous: Conventional Health Care Analyses Involve "Double Counting" Of Proposed Medicare Savings. From The Washington Post:

President Obama's landmark health-care initiative, long touted as a means to control costs, will actually add more than $340 billion to the nation's budget woes over the next decade, according to a new study by a Republican member of the board that oversees Medicare financing.

The study is set to be released Tuesday by Charles Blahous, a conservative policy analyst whom Obama approved in 2010 as the GOP trustee for Medicare and Social Security.


"Does the health-care act worsen the deficit? The answer, I think, is clearly that it does," Blahous, a senior research fellow at George Mason University's Mercatus Center, said in an interview. "If one asserts that this law extends the solvency of Medicare, then one is affirming that this law adds to the deficit. Because the expansion of the Medicare trust fund and the creation of the new subsidies together create more spending than existed under prior law."


Blahous acknowledged that his analysis departs from budget conventions, which, he said, make sense for the most part. He said that in this case, however, those rules do not fully illuminate the financial impact of the health-care law, since they permit what conservative critics have dubbed a "double counting" of proposed Medicare savings. [The Washington Post, 4/9/12]

Mercatus Center Is A Koch-Funded Organization

Koch Foundation: Mercatus Center Has Been A Charles Koch Foundation Grant Recipient "For More Than 25 Years." From the Koch Family Foundations website:

For more than 25 years, the Mercatus Center at George Mason University, a Charles Koch Foundation grant recipient, has sought to bridge the gap that often exists between economic understanding and real-world decision-making. Mercatus applies scholarly research to problems facing policy makers. Bringing together a global network of scholars and experts, Mercatus provides policy makers with the economic tools to make sense of today's most pressing issues. [Koch Family Foundation, accessed 4/11/12, via Think Progress]

Right-Wing Media Echo Report's Claim Of "Double-Counting"

Fox Business Host Gerri Willis: "Blahous Shows The White House Is Double-Counting Some Of Its Savings." After echoing the study's claim that the health care law will add at least $340 billion to the deficit, Gerri Willis said: "All along, the administration has maintained the expansion of coverage for 32 million uninsured Americans could be paid for by raising taxes and cutting payments to Medicare providers. But Blahous shows the White House is double-counting some of its savings." [Fox Business, The Willis Report, 4/10/12]

Drudge Headline: "Obamacare Explodes Deficit." The Drudge Report linked to the Washington Post story with the following headline, "Obamacare Explodes Deficit":

[Drudge Report, 4/10/12]

Fox Nation: "White House Can't Refute New Obamacare Cost Study." Fox Nation highlighted the study in a post that included the White House's refutation of Blahous' study using the headline: "White House Can't Refute New Obamacare Cost Study."

[Fox Nation, 4/10/12]

Hot Air: Blahous Study Is A "More Detailed Explanation Of The 'Double Counting' Criticism." Highlighting Blahous' study, Hot Air senior editor Ed Morrissey said that the study "is a more detailed explanation of the 'double counting' criticism that arose during the ObamaCare debate over its scoring." [Hot Air, 4/10/12]

Experts Dismiss "Double-Counting" Canard as "Old, Discredited Argument"

New York Magazine: Study "Does Not Meet The Standards Of Your Typical University Economics Paper." In a post titled, "The Bogus Obamacare-Deficit Study," New York magazine columnist Jonathan Chait argued that Blahous' paper is "not even remotely legit" as it "was published by the Mercatus Center, a Koch-funded organization that produces some quality work as well as a fair amount of schlock that does not meet the standards of your typical university economics paper. This paper is an example of the latter." Chait continued:

Blahous is the Republican trustee for Medicare, so that title offers the hook for a paper he writes that, by adopting some mighty odd hypothetical scenarios, says that Obamacare will boost the deficit. Blahous's government position gives the claim enough juice that it can be pitched as a "study" by a government official, as opposed to just another Republican-authored polemic, which would never receive such prominent or relatively credulous coverage. The next step is for conservatives to adopt Blahous's figure as the "true" figure -- but of course never to apply his strange assumptions to the GOP budget or to any other proposal -- and browbeat the media into citing that alongside the CBO figure, for "balance." [New York, 4/10/12]

Democratic Medicare Trustee: Blahous' Charge "Remains As Misleading Today As It Did Earlier." Democratic Medicare Trustee Robert Reischauer said of his colleague's study:

Under accepted CBO and OMB scoring practices, legislated reductions in Medicare HI [hospital insurance] spending both reduce the deficit and strengthen the HI trust fund. That has been the case under both D and R Congresses and administrations. Chuck's "revelation" is not a new charge. Some argued this point when the ACA was enacted. It remains as misleading today as it did earlier. [New York, 4/10/12]

CBPP Economist: Blahous Study Presents "Old, Discredited Arguments About The Budgetary Effects Of Health Reform." Center on Budget and Policy Priorities senior fellow Paul Van de Water wrote that Blahous "guss[ied] up old, discredited arguments about the budgetary effects of health reform. But his paper adds nothing new to the debate." Van de Water continued:

Blahous claims the Congressional Budget Office's cost estimate for the health reform law "double-counts" a considerable portion of the law's Medicare savings. By subtracting these savings, Blahous asserts that -- contrary to CBO -- health reform increases the deficit.

But there's no double-counting involved in recognizing that Medicare savings improve the status of both the federal budget and the Medicare trust funds. The outlooks for the budget and for the Medicare trust funds are two different things; some changes in law may affect one and not the other, but other changes affect both.

CBO estimates that health reform will modestly reduce the federal budget deficit. The Medicare actuary says that health reform will extend the solvency of the Hospital Insurance trust fund by eight years.

That's no different than when a baseball player hits a home run: it adds to his team's score and also improves his batting average. Neither situation involves double-counting.

CBO has accounted for deficit reduction in exactly the same way in previous Congresses, under both political parties. Until opponents of health reform latched onto the notion, no one accused CBO of faulty accounting.

CBO has accounted for deficit reduction in exactly the same way in previous Congresses, under both political parties. Until opponents of health reform latched onto the notion, no one accused CBO of faulty accounting.[Center on Budget and Policy Priorities, Off The Charts, 4/10/12]

Former CMS Director: Blahous Is "Simply Arbitrarily Abandoning A Standard That The Non-Partisan CBO Uses And Has Used For Years." Former Center for Medicare and Medicaid Services director Donald Berwick criticized Blahous' study, saying: "The economist who's coming up with this new standard, he's simply arbitrarily abandoning a standard that the non-partisan CBO uses and has used for years." [Talking Points Memo, 4/11/12]

Economist Dean Baker: "There Is No Double-Counting In This Story." In response to charges of "double-counting" in 2009, economist Dean Baker wrote at the time:

The reality is that the government faces multiple budget constraints. Savings in the Medicare program allow it to meet two of them.


The targeted savings would reduce spending in the program. According to Medicare's chief actuary, these savings would give HI enough money to pay its bills through 2026 rather than the 2016 date when the program is now scheduled to face a shortfall.

Since Medicare is included in the overall budget, savings in the Medicare program also reduce the budget deficit. If there is a concern that we can only finance health care insofar as we are able to keep the budget deficit within certain limits, then the savings in Medicare will relax this constraint also.

There is no double-counting in this story. The government's budget is structured so this multiple constraints must be met. Savings in the Medicare program will allow for this. [The American Prospect, Beat The Press, 12/29/09]

Wash. Post's Kessler: "It's Simply A Case Of Looking At The Same Money At Different Ways." From a Washington Post Fact Checker post on claims of "double-counting" of Medicare savings:

You may have $1,000 on deposit at a bank. Those are certainly your assets, but the bank looks at that money differently: money to make more loans. It's the same $1,000 but it is counted differently on your books and the bank's books.

A similar thing is going on here. The health care law reduced predicted expenditures for Medicare by nearly $500 billion, resulting in budgetary savings that the law uses to help pay for the health care changes. That's the money in the bank; it means the U.S. government will not need to set aside as many Treasury securities to fund Medicare.

Meanwhile, because Medicare spending has been reduced, the solvency of Medicare has been extended. That's the other side of the ledger -- the bank's view, so to speak. The accounting for Medicare solvency is a different matter than the current spending in the budget, though it has implications for the long-term budget health. [The Washington Post, 3/14/11]

Despite Changes In Cost Estimates, CBO Maintains Health Care Law Lowers Deficit

CBO: Health Care Reform Lowers The Deficit By More Than $100 Billion. In March 2011, the Congressional Budget Office and Joint Committee on Taxation issued a joint report saying that "[o]n net, CBO and JCT's latest comprehensive estimate is that the effects of the two laws on direct spending and revenues related to health care will reduce federal deficits by $210 billion over the 2012-2021 period." The CBO subsequently determined that the Obama administration's decision to indefinitely suspend implementation of the portion of the Affordable Care Act that enacted the CLASS Act lowered the deficit savings of the Affordable Care Act by $83 billion. [Congressional Budget Office, 3/30/11, 10/31/11]

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