Reply #4: It's not really $138 billion

[jeanpalmer]

even by the CBO's own estimate. The CBO only scored what was in the bill. It left out costs that will be appropriated in future legislation to implement the PPACA. For example, it estimates IRS costs at $5-$10 billion and HHS costs at $5-$10 billion. It estimates the cost of grants and other future funding to be "at least $50 billion." These items reduce the official deficit reduction to $68-$78 billion. And then: "A third category of discretionary spending is explicit authorizations for a variety of grant and other programs for which no funding levels are specified in the legislation. CBO has not yet completed estimates of the amounts of such authorizations." Who knows how much that will be. see p. 11 http://www.cbo.gov/ftpdocs/113xx/doc11379/Manager'sAmendmenttoReconciliationProposal.pdf

The CBO also notes on p.14: "Those longer-term calculations reflect an assumption that the provisions of the reconciliation proposal and H.R. 3590 are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation. For example, the...mechanism governing Medicare’s payments to physicians has frequently been modified...and legislation to do so again is currently under consideration by the Congress. The reconciliation proposal and H.R. 3590 would maintain and put into effect a number of policies that might be difficult to sustain over a long period of time. Under current law, payment rates for physicians’ services in Medicare would be reduced by about 21 percent in 2010 and then decline further in subsequent years; the proposal makes no changes to those provisions." The CBO then lists other assumptions regarding costs that clearly it thinks may be unrealistic.

The PPACA is like any other plan -- change the assumptions and the costs change. Is it realistic to assume that Congress will keep the 21% reduction in payments to physicians, when it has always voted an increase in the past? And yet these unrealistic assumptions are what produce the deficit reduction. But still, the CBO is technically correct in its deficit reduction estimate because it only makes an estimate for the PPACA. If the PPACA reduces the deficit by $138 billion, but subsequent related legislation increases it by $138 billion, technically the PPACA reduces the deficit by $138 billion. It's called accounting gimmickry.

Regarding Medicare savings, using these savings/taxes to fund the PPACA prevents their use in the future to fund Medicare. They can only be spent once on one item -- they can't be used to fund both Medicare and the PPACA (the double counting problem). To the extent that the PPACA uses Medicare savings/taxes to fund itself, it robs Medicare of a future funding source.

President Obama has stated that the biggest drivers of the deficit are Medicare and Medicaid. Medicare just recently went into defict, meaning it's taking in less than it's paying out. The Medicare trust fund is projected to be exhausted in 2017. And yet the PPACA takes funding sources that could/should be used to buttress Medicare solvency and spends it to subsidize the mandate. Obama's deficit Commission, if/when it considers Medicare, will not have this funding source available to reduce the cost of Medicare and will probably have to look at cuts in Medicare to come up with its deficit reduction. So this seems to be a case of robbing Peter to pay Paul.

The CBO acknowledged this problem in its letter to Rep. Ryan. It noted that PPACA Medicare savigs and tax increases over the 10 year period amounted to $398 billion. But the estimated budget surplus/deficit reduction is only $138 billion, which means that the non-Medicare portion of the Act runs a deficit of $260 billion ($398 billion - $138 billion). p.4 http://www.cbo.gov/ftpdocs/113xx/doc11376/RyanLtrhr4872.pdf

What this means is that as Medicare needs additional funding, the government will have to sell bonds instead of using these taxes/savings, which will already have been "spent" mostly on mandated insurance subsidies. And that will drive up future deficits.