Tuesday, March 8, 2011

Bush was right. Part 2.

At least Bush wasn't too scared to address the obvious...


Patrick_Landers said...

I'm responding to this tonight.

Patrick_Landers said...

Come on. When you first defended Bush’ foreign policy record, I thought that was ridiculous. So what if Bush came up with the brilliant and original idea (note the sarcasm) that the United States should spread democracy? What’s important is the question: how did he actually do on implementing his policy ideas and having successful outcomes?
Analogy: I could come up with the idea that we should cure cancer- but if I don’t discover the cure, then I don’t deserve the credit. Yet now Republican apologists are trying to claim Bush was a success because history is moving in the general direction he, like countless others before him, advocated. They don’t establish any evidence for his actions actually having a positive impact. They can’t show any casual link. That’s probably because if you actually look at his record on almost any policy area, you can see how he was an abysmal failure.
But now you are taking this argument to an extreme level by praising President Bush for being brave enough to “address the obvious” about entitlements. First of all, every politician talks about these problems, including Obama. You can’t make a contrast between them in rhetoric. In the end, that’s all only talk. Its actions that matter, so let’s analyze President Bush’s record on entitlements (and fiscal policy in general). I don’t know whether to compare it to napalm…or a hydrogen bomb…or what exactly- I’m not sure there is word strong enough to describe just how AWFUL he was on fiscal matters.
Some important context: President Bush was in office for 8 years, including 4 years when the Republicans controlled both chambers, and another 2 years when they controlled the House and had a 50/50 (roughly-speaking, it’s complicated) split in the Senate. So he had lots of opportunity. What did he do during this time?
1) Health care entitlements- Medicare and Medicaid. The true long-term cost drivers. You know from our health care class that Medicare costs are the same as those found in the private sector, and that Medicaid is actually cheaper than the private sector alternatives. Our health care entitlement programs are cost-drivers not because they are inefficient, but because the entire American health care sector is so flawed, inefficient, and expensive!!! Bush did nothing to address these rapidly accelerating sector-wide costs, even though as a country we were spending nearly twice as much per person as other developed nations and getting no better outcomes. CEPR’s tool at http://www.cepr.net/calculators/hc/hc-calculator.html shows just how important controlling sector-wide health care costs is to addressing our long-term fiscal situation.

Patrick_Landers said...

Bush didn’t even implement what the Republicans are attempting now- not reforming the overall system, but instead just setting caps on the health-entitlement programs (Medicare/Medicaid) which will over time turn Medicare into a second-class system and worsen the situation for Medicaid. The only advantage to this method is that it gets the costs off the federal budget’s books (which Bush could have used, since he turned Clinton’s balanced budgets into massive deficits for years during an economic boom).

Compare this to President Obama, who tackled the politically and policy-difficult problem of addressing private and public health care costs simultaneously. He successfully passed reforms that the CBO scored as reducing deficits by $143 billion over 2010-2019 and by about $1.3 trillion over the following decade. The Republican attacks on these CBO scores are completely fraudulent, and the Republican attempts to delay and defund health care reform will actually worsen our fiscal situation.

President Bush actually worsened the entitlement situation when he passed his signature domestic achievement of Medicare Part D (the Prescription Drug bill), which at the time the Congressional Budget Office estimated would add $395 billion to the deficit over its first decade (2004 through 2013). Medicare’s chief actuary pegged the net cost significantly higher at $534 billion over that same period. As part of the legislative process, Bush’s sr. Medicare official ordered the CMS actuary to not release his cost estimates, and by one government report threatened to fire him if he did. This was a deliberate attempt to withhold information from Congress as they deliberated President Bush’s proposal. Bush narrowly got his costly and problematic bill passed. Later, President Obama’s Affordable Care Act, at considerable expense, cleaned up the technical mess Bush’s doughnut hole left behind.

So President Obama did the responsible thing by enacting entitlement reform that cut costs and didn’t do so by hurting millions of children, elderly, and poor Americans who depend on public programs. President Bush on the other took the policy low-road and simply expanded an entitlement program at significant cost without fully paying for it.

Patrick_Landers said...

2) The other big entitlement program: Social Security, which by the way, is a MUCH smaller deficit driver than rising health care costs.

Similar to Reagan in 1981 (which led to the 1983 reforms of Social Security), President Obama created a bipartisan commission to study reforming Social Security. The President’s Fiscal Commission majority report and its two co-chairs have argued that Social Security should only be reformed to ensure solvency beyond 2037- when under current conditions it will have to reduce benefits by about 20%. They have said that Social Security should not be considered as part of a deficit reduction strategy.

(Sidebar: I love the Republican hypocrisy on the Commission. Republicans are now throwing heaps of glory on the report, including Paul Ryan. They neglect to point out that if the 3 House Republicans on the Commission had voted for the report, it would have come up for an automatic vote in Congress- which would have created such enormous political pressure that by this time we’d probably have enacted the Commission’s report . These same 3 House Republicans are now harping on and on about how great the Commission report is. Then why didn’t they support it in the first place? Talk about disgusting posturing for political advantage- and not being serious about tackling our problems.)

What did Bush actually do on Social Security? Oh right- nothing. His proposals failed in a fiery implosion in Congress- he got nothing done. But since this is Bush, I’ll grade him on a curve and look at what he proposed. Unfortunately- that doesn’t make him look good either. His proposals (which emphasized creating private accounts) would have increased the government’s borrowing, added trillions to the federal debt, and cut benefits. The additional debt created by President Bush’s plan would have continued growing as a share of GDP until 2044. Proponents characterized this as a “transition cost.” Its ridiculous that a problem that would not have begun to recede until four decades later was dismissed as simply a “transition cost.”

While President Bush’s plan emphasized private accounts, there were other Social Security reform plans at the time that would have restored solvency and not increased the debt and interest payments. A plan proposed by economists Peter Diamond of MIT and Peter Orszag of the Brookings Institution that avoided private accounts would have restored solvency and reduced federal debt every year.

Once again, the Bush Administration tried to limit and mislead public debate by not releasing the traditional 75-year analysis from the Social Security actuaries on the effect of the Bush plan on Social Security solvency. On Social Security Bush pushed the wrong reforms that would have hurt our debt situation for decades. In the end, this doesn’t really matter for your comparison because Bush didn’t get his reforms enacted. All talk.

Patrick_Landers said...

So let’s review: on entitlement programs Bush did two major things in his 8 years. He tried to reform Social Security, but that failed as the public and Congress realized he was going about it in a wrong way that would have actually hurt our fiscal situation for decades while still cutting benefits for millions of beneficiaries with low and modest-incomes (Btw, all serious Social Security reform proposals include benefit cuts- however, responsible plans manage to avoid adding the debt like Bush’s plan would’ve). On health care costs he expanded entitlement programs without paying for them fully- worsening our fiscal situation. All of these things occurred over the 8-year period of Bush’s Presidency in which he also pursued deficit-financed wars, massive tax cuts that disproportionately benefited the rich, increased our interest costs by running large deficits during an economic boom, and deregulated and under-regulated the housing and financial sectors which led to the worst economic downturn this country has seen since the Great Depression. Just two of these policies- extending the tax cuts and the wars in Iraq and Afghanistan — accounted for over $500 billion of the deficit in 2009 and will account for almost $7 trillion in deficits in 2009 through 2019 (including the associated debt-service costs).

Compare this to President Obama who enacted a major entitlement reform (implicitly) with the Affordable Care Act, which greatly reduces our deficits over the coming years. It does so by creating efficiencies system-wide across the health-care sector, not by cutting benefits and increasing costs for millions of Americans. Republicans characterized this as an assault on Medicare in an attempt to gain political advantage- part of their plan to lie and cheat their way into power by talking about the issues they consider substantive- you know, like death panels.

Obama has strongly addressed entitlement reform with health care reform in just his first two years, and is committed to doing more through the rest of his Presidency. Your link in ’08 shows Bush (at the frickin’ end of his Presidency that smarmy bastard) trying to cover up for his disastrous lack-of-control over the spiraling deficits and entitlement programs. While I hope Obama does more, your attempt to draw him in a negative light to Bush on entitlement reforms (and implicitly fiscal discipline) is wrong and inaccurate.

Patrick_Landers said...
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Patrick_Landers said...

P.S. I believe Obama would be working harder to address these problems seriously if it weren’t for current political conditions and Republic extremism. Many Democrats strongly believe we have to tackle entitlement programs and our deficits, because if we don’t our country will eventually hit a “wall” (debt crisis) that would force our hand in a way that would devastate most Americans the kind of government programs Democrats believe in strongly. Democrats know if they want an active government, they need to ensure it is based on sound fiscal footing.

The problem is that Paul Ryan and his House Republican cohorts wouldn’t even accept the President’s fiscal commission report, even though- I am telling you, it is a hard right-end of what even Moderate Democrats can accept. The political problem, as I see it, is that the distribution in Congress makes reaching an agreement very difficult in the foreseeable future. To move far enough right to attract enough Republican support around a plan for tackling deficits and entitlement reform, Obama would have to move so far right that would actually lose more Democrats than he gained Republicans. What Republicans are proposing right now (in a variety of ways) is so extreme- it will hurt the economic recovery in the short-run and in the long-run massively alter the fundamental the nature of government to the disadvantage of the vast majority of Americans. Democrats can (and should) never accept what most Republicans are pushing- it is extreme beyond relief. The Rivlin-Domenici proposal represents a true centrist approach to tackling our deficit problems. The President’s Fiscal Commission report (Bowles-Simpson, the one being discussed right now) represents a center-right option. Democrats should never move beyond its framework, and they should push for significant alterations within it to make sure we do deficit reduction and entitlement reform in a smart manner.

P.P.S. I agree with you in that I would like more from Obama because our fiscal problems are extremely serious. And I think on fiscal matters that Obama has taken a lot of foolish and politically expedient positions (refusing to rasie taxes on those making below $250,000- you can't have that and the protections for spending programs Obama wants). I think his current strategy is stupid. But I don't think the right strategy is for him to cooperate with the House Republicans as much as they are demanding- it wouldn't be triangulating to make a deal like Clinton did. Obama would pretty much have to switch parties in order to please these nutjobs. He'd have to become an 80's Republican (and I'm not talking about moderate ones, I'm talking about real solid conservative Republicans) just to negotiate with these people. That is completly unacceptable and intolerable. The Republicans' focus on domestic, non-security discretionary cuts (a fraction of the budget, not a long-term driver, and at incredibly low historical levels) is actually hindering the creation of a political environment of trust and cooperation that would allow for deficit reduction.

Patrick_Landers said...

There are lots of Democrats who want Social Security reform- it is an extremely important program and they want to keep it solvent indefinitely. But they are resisting tackling the issue because Republicans right now are refusing to accept even proposals that five years ago would have qualified as center or center-right. Social Security should not be used as a way to extract deficit reduction. It isn't the major long-term problem- system-wide health care costs are! That's an indisputable fact- and Republicans have proposed nothing serious to tackle this problem. All they want to do is "reform" probrams and allow for state-by-state innovation- which is code for get these programs off the federal budget books (improving our fiscal outlook on paper) and put them on state budgets. Smart states will struggle to address the underlying problems that cause fiscal problems, while Republican states will cut millions off from receiving health insurance and retirement security. THe polits of the current situation are so toxic that leading Democrats are scared Shi*less at what might happen if Republicans can get thier proposals enacted. They have shown no interest in seriously negotiating- all they want to do is dictate terms. And their terms would be a disaster for the country!!!

Patrick_Landers said...

Don't worry Megan- you are still one of my favorite Republicans. I just have a strong visceral reaction to frameing Bush as a role-model on entitlement reforms and fiscal policy. I may not be a spending hawk (wanting government spending to be at or below 18% of GDP), but I am a fiscal hawk (wanting government spending and revenues to be balanced)- and President Bush fails both of these litmus tests. The honest truth is there are no modern President who are great role models on these issues- President Clinton is easily the best, but I'd only give him a (very generous) B-. If you want to draw contrasts pointing out how Obama should do politically and policy-wise better on these issues, you should look at Clinton for guidance. Bush Sr. also did a good job (C+). But Bush Jr. (and to a lesser extent) Reagan are very bad examples on fiscal policy

TJE said...

Patrick, the legislative "crafting" of obamacare was all about gaming the rules for CBO scoring. If you really believe that obamacare will *reduce* the deficit by more than $1 trillion, I have a bridge in Brooklyn that I would like to sell to you.

Patrick_Landers said...

I would be happy to buy that bridge! :-)

I strongly stand by the CBO’s scoring that “Obamacare” will reduce the deficit by well over $1 trillion (in the second decade-you’ll note that I made this distinction clear in my original statement. Though I, like the CBO, think it will have significant cost savings in the first decade as well. Btw, the CBO actually estimates the savings as a % of GDP for technical-preference reasons- the trillion dollar figure is converting the % of GDP measure into dollar terms. But that’s not important).

In fact, I think the CBO likely underestimated the VERY REAL savings that “Obamacare” will result in. Many provisions of the bill are unscorable, though there is excellent reason to believe they will have significant savings. Alan Simpson (former Republican Senator from Wyoming) and Erskine Bowles both agreed at yesterday’s Senate Budget Committee hearing that there are significant cost savings included that people overlook because they aren’t scoreable. After all, “Obamacare” includes nearly every major cost-control and serious reform idea proposed in the last few decades, including many formerly-Republican ideas. If Obamacare were to fail, it would not only be an indictment of President Obama, but also much of the work from health economists of all stripes, and even many Republican health policy experts, from the last few decades. Did you know that several economists from Hamilton College have actually come out publicly with their support for “Obamacare’s” cost-savings? Not that this matters, I just thought it was an interesting human-interest aspect to this debate.

Now, I'd be happy to rebut your point about “gaming” and the crafting of the Affordable Care Act. I'd obviously prefer if you (and whoever else has an opinion) wanted to cite or state any specific concerns you have so I could work off that- otherwise I'll have to do all the work trying to compile a defense of every critique ever made. I have started this project, but I've decided I'm going to read a bunch of the criticizing editorials and reports again (I have stuff from Holtz-Eatkin, Cato, Heritage, WSJ, and others), post the links and their arguments to the blog, and then post my full rebuttal. Who knows- maybe this more detailed analysis will prove me wrong? However, I doubt this because I've been extensively following this debate and all of health care reform, so I'm well aware of the arguments. Still, this is such an important topic that I want to be thorough- I'll probably do it as a separate blog post. But I’d love to hear suggestions on “Obamacare” gimmicks people think exist.

That's just a preview of what's to come- hopefully starting tomorrow night. For now, I need to sign off- The CBPP President’s testimony to today’s Senate Budget committee hearing isn’t going to deliver itself for 8 a.m.

TJE said...


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PBM said...

Here's Ezra Klein on the supposed 10 years of taxes for 6 years of benefits. He says spending and taxing are low in the first 4 years and that they did produce a budget gimmick by starting the program in 2014. This allowed them to spend more annually in the 6 years that the law would mainly go into effect. Still a gimmick, but not the one WSJ, GOP, Fox News claim.

PBM said...

Here he is again on double counting. He's saying the the Obama administration double counts rhetorically by saying that money saved in one place can go into reducing the deficit, and strengthening Medicare. However, the CBO is separate from the administration, and its score does not double count.


PBM said...

I agree that down the road, it could become a burdensome entitlement program, but it seems to be the most efficient way to cover everyone in the system without a public option or single-payer system, both of which are off the political table. And, as Patrick pointed out, there are a whole host of pilot programs within this bill that cannot be scored but that could be very effective in keeping health care costs down in the future.

PBM said...

Here is the always eloquent and gracious Rep. John Shimkus, grilling HHS secretary Kathleen Sebelius on double counting.


His major point is that you can't count $500 billion in Medicare savings or cuts, and then also count that $500 billion into new health care spending. That seems to be a pretty stupid statement to me. The healthcare law takes $500 billion from Medicare and puts it towards this program. Pretty simple math that leads some House GOP members to start yelling "DOUBLE COUNTING."

TJE said...


PBM said...

OK, so that author's points are 1. the CBO can't always be right because there are unforeseen things in the future and many programs go over budget 2. that Obamacare's costs will expand over time, to a possibly unsustainable level in 75 or 100 yrs and 3. that if you included the doc fix in the bill, it would actually add to the deficit.

1. Yes, the CBO can't always be right, but it, along with the OMB, is the only real way to even get a sense of policies' effects on the economy and the debt. And, again, the Affordable Care Act has pilot programs that are unscorable that could be very helpful in keeping costs down in the future. The author here points out Medicare and how it has grown to be over original budget, but there could be things down the road that make Obamacare even less expensive. The author is just using one example to say "look where this is going to go" when that is disingenuous and we don't really know where health care reform will go. The only way we even know which direction it will go is the CBO.

2. I will concede point 2 to the author, but again this is the cheapest way to cover everyone in the current political climate, and I believe everyone needs to have adequate healthcare.

3. If the bill hadn't passed, we would still have to pay the billions of dollars for the doc fix. It is insincere for the author to tie these two things together because everyone knows we are always going to have to pay for the doc fix. If healthcare hadn't passed, then the doc fix would have still increased the deficit. The two are separate and are only brought together by authors like this one to try to make partisan points by bending budgetary facts in their favor.

PBM said...

Also, this is the description of the author and his upcoming book.

"Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, wherein you can learn more about the socialistic intrusions of Obamacare"

Take what you will from that.

Patrick_Landers said...

For now, a real quick response to Peter’s comments on his breakdown of the NRO article.

1. On this point, the NRO author is correct in pointing out that there is considerable uncertainty around CBO projections. This is true for anything the CBO looks at over such a long period (10+ years). This critique applies to all economic forecasts and projections. This isn’t a critique on Obamacare- it has to be considered a critique on the very purpose of the CBO itself, which is to provide “Objective, nonpartisan, and timely analyses to aid in economic and budgetary decisions on the wide array of programs covered by the federal budget.” The CBO is a highly-skilled technical institution using the best knowledge, models, and quantitative tools available, and these sudden attacks are clearly based on trying to gain partisan advantage and not raising a serious concern about CBO estimates. If the uncertainty of CBO estimates is a problem, then why haven’t Republicans raised these critiques about every long-term bill the CBO has scored since its 1974 creation? Instead they’ve regularly flaunted CBO scores and projections that suit their political objectivities and provided alternative analyses- there has never been such a targeted and all-out assault on this point ever before. Republicans have clearly gotten desperate.
In addition, the CBO periodically evaluates itself and has found that its past projections don’t tend to overestimate or underestimate costs. Sometimes they are too high, sometimes they are too low, but they aren’t consistently biased in one direction. So while there is uncertainty in the CBO’s projections- which they clearly state, it is no more than normal. Those projections have been accepted by both sides of Congress for years on numerous pieces of very large and complicated legislation, but now all of a sudden Republicans want to highlight this uncertainty and claim it cuts against “ObamaCare.” This argument either cuts against every bill or it cuts against nothing. Republicans right now are frothing at the mouth for the CBO scoring of President Obama’s budget because they think it will show limited deficit reduction. If we accept this NRO critique, we’d have to reject the CBO reports favoring Republicans in this case. In fact, we’d be frozen in inaction because we’d never be able to consider anything looking down the road by more than a few years because the uncertainty of projections would throw doubt on any change. Heck, we wouldn’t even be able to score current laws anything more than a few years in advance. Project deficits would disappear, because we wouldn’t be able to do any projecting under the kind of standard Republicans are duplicitously arguing we apply to health care. We need a non-partisan scorekeeper that keeps everyone honest, and the CBO is has been extremely successful at filling that role.

Patrick_Landers said...

2. Peter said he conceded the author’s second point, “that Obamacare's costs will expand over time, to a possibly unsustainable level in 75 or 100 yrs” (Peter’s words). I disagree. The cost savings from Obamacare will actually increase over time as we learn more and more about what is effective for controlling costs, including improving system coordination and integration to increase efficiencies. The CBO score reflects this in that it projects increasing savings over the second decade. This point is wrapped up in the 6-and-10 argument, because Republicans suggest that it takes 10 years of taxes to pay for six years of benefits (which Peter did a good job proving false) and not increase our deficits, implying that in future decades when we provide 10 years of benefits with 10 years of revenues Obamacare will surely add to the deficit. But this is false- it takes years to enact the kind of system-wide changes necessary to control costs, and health care reform does this so that deficit-reduction will actually increase over time.

3. The cost of fixing the SGR formula (Doc-fix) is entirely unrelated to health reform, as can easily be proved — all of the cost of fixing the SGR formula would remain if health reform were repealed. None of that cost can or should be attributed to health reform.

Patrick_Landers said...

To add onto Peter's discussion of the youtube video John Shimkus, I'd direct you to CBPP's blog post on this specific event ( http://www.offthechartsblog.org/%E2%80%9Cdouble-counting%E2%80%9D-on-health-reform-no-just-doubletalk/ ):

The Keypoints:

Secretary Sebelius didn’t call it “double-counting,” Rep. Shimkus did. Instead, she correctly noted that health reform’s Medicare savings have two separate positive effects — on Medicare’s finances and on the federal budget (i.e., helping offsetting the costs of other health reform provisions).

There’s no double-counting involved in recognizing that Medicare savings improve the status of both the federal budget and the Medicare trust funds. In the same way, when a baseball player hits a homer, it both adds one run to his team’s score and also improves his batting average. Neither situation involves double-counting.

By the way, CBO accounted for deficit reduction in exactly this way in previous Congresses, under both political parties. For example, the Balanced Budget Act of 1997 and the Deficit Reduction Act of 2005 (both of which were passed by Republican Congresses) included Medicare savings that were counted as both reducing the deficit and also improving the outlook for the Hospital Insurance trust fund. No one raised claims of double-counting when these bills were enacted.

More recently, Republicans — including Speaker John Boehner — have proposed cuts in Social Security benefits, which they say would both extend the life of the Social Security trust fund and reduce the budget deficit.

They don’t call that double-counting.

TJE said...

You both seem to be putting great faith in pilot programs and the willingness of future Congresses to impose cost controls. Are we all agreed that CLASS is a fiscal time bomb? Are you confident in the numbers projected for subsidized insurance? (Many think it will be much higher.) Did you anticipate that HHS would already have granted 1000 waivers? As Hayek demonstrated, social engineering is a "risky business."

PBM said...

OK, on pilot programs there are 2 things I know that are leading me to my conclusion. The first, is that this bill includes all sorts of programs that people have thought up over the past 10-20 years to address inefficiencies and costliness in our health care system. While not all of these will work, I'm hopeful that many of them will. The second is that last year in my Politics of Public Policy class with Professor Milstein we discussed the birth of the USDA and the agricultural pilot programs that came with it. These programs were at first called "costly government mandates" and people reacted by saying that government had no place in agriculture. But after the programs were up and running, they made U.S. agriculture much more efficient. More crops were grown on smaller swaths of land, and the industry was more effective. So that's where my faith in pilot programs comes from.

On the CLASS act, I can see how one could come to the conclusion that it is a fiscal time bomb, but I think the law hands a lot of power to HHS to fix the law if it becomes a burden. I would be more hesitant if Congress kept the power over the program because we all know that there is never really appetite in Congress to curb entitlements. I am confident in HHS though to make sure this program remains fiscally responsible and doesn't add to the deficit.

I'm not as familiar with the numbers projected for subsidies or the waivers, so Patrick will have to make points for those, but I think overall that the debate should be on fixing the health care law not repealing it. Some might ask, "why pass something that has flaws to begin with?" My answer is that thats how Washington is. Nothing ever comes out perfectly, and this bill was probably even more imperfect because Republicans relied on flat-out distortions of truth during the debate rather than actual substance. I know some Republicans don't think everyone deserves health care, or doesn't think the government should be involved in health care, but that debate is over now. What we should do now is make the law better. Defunding it will do the opposite, and I know the GOP doesn't have an alternative that would cover everybody. There are problems with all laws, that doesn't mean they shouldn't be passed at all. The legislative process should involve reworking them to make them better, but with the amount of partisanship in Washington right now, that process is non-existant. It's either make new laws and regulations, or repeal and cut old ones.

Now to get back to the original topic of Bush. I didn't follow that when it was going on but I find Patrick's summation pretty horrifying. Nothing Obama has done has been nearly as bad as the covering up and near firings that occurred during the Pt. D debate under Bush. If you want to talk about "jamming bill down our throats," then I think the most appropriate time frame would be from 2001-2008. Obama's plan was debated for almost 2 years, no CBO, OMB, or Medicare actuary scores were covered up, and the GOP had ample time to make arguments against it. Unfortunately, those arguments mainly dealt with death panels and government takeovers, rather than real issues and problems within the bill.

Ryan Karerat said...

I'm going to leave aside the original argument here, because I think for the most part we can all admit the absurdity of celebrating a politician for speechifying on our big issues while not acting on them (if we disagree on that, I suppose Obama is automatically in the Top 5 of our presidential pantheon as a result of all those great campaign speeches, amidoingitright?).

I did want to harp on a somewhat minor point though:

TJE wrote
"You both seem to be putting great faith in the.... willingness of future Congresses to impose cost controls"

I see this argument raised all the time, and I've never quite understood the logic. The implication seems to be, "How could you possibly enact this policy and then assume that Congress would actually pay for it?!?"

Now, I know that pessimism over the state of political discourse in our country is rampant, and I share much of it. But it still seems to be ludicrous to fault President Obama for acting on our deficit issues in a way that tackles the more systemic problems (ie. healthcare rather than say... attacking political gimmes like NPR and other non-discretionary programs as a means of supposedly moving this country towards solvency) because he is actually acting responsible about the issue. Which is, in a way, what is being done when you say, "I can't believe you would think Congress would enact cost-controlling measures." Well, in a way, I can see what you're saying. In today's Congress, even common-sense compromises are at risk, I think we all see that.

But if a sticking point in this debate is, "You're assuming Congress will enact cost-controls," I feel almost as if the country is already lost (hyperbole I know, but just roll with this for a second). Basically inherent in that argument seems to be the idea that Congress isn't capable of following through on any sort of meaningful reform. So, if I'm following this logic correctly (and there's always a strong chance I'm not), what it appears we're doing in the end is antagonizing someone for taking on a policy issue in a serious way, because there are people out there who are always going to be unserious about it. By enacting reform that puts in place straighforward mechanisms that guide use towards a sounder budget situation, we are already ahead of the previous status quo. It's almost as if some people were expecting Obama to reform health care by simply waving his hand and wishing away all of the inherent flaws in the system. Of course he had to count on Congress to put in further cost-controls down the line. It's not weakness to do so, it's dealing with the realities of dealing with a system that has long-term flaws.

Any long-term domestic policy reform would likely have to include provisions for future Congresses to activate certain spending measures, unless we wanted to incur all those costs in a one-year period under the Congress that originally passed such a bill into law. If they do not follow through, I don't think that's a failure of the president or actors who made that law happen in the first place. I think it might just be indicative of the fact that we were screwed either way. The more and more I see the way in which 'the American people' engage their political institutions, I see a country that demands small government in their right hand and then calls for bigger government in their left hand. Lower taxes and lower spending, but don't you DARE cut any of those government programs over there! Fix the deficit! But don't change a thing!

Heaven forbid someone comes along who actually proposes a policy that, gasp!, PAYS for itself through cost controls, he must be some sort of idiot not living in reality...

Megan said...
This comment has been removed by the author.
Patrick_Landers said...

To start: I know that I am extremely wordy and I will have multiple blog posts here that are largely, but not completely, repetitive. However, I thought it was important to be comprehensive on debating this very serious topic of health care reform’s deficit savings (removed from the initial blog post’s discussion of Bush’s record on entitlements). Eventually I transition to completely new stuff (well, for this blog chain at least). I clearly marked when this begins. Okay here goes:

First of all, I think it’s very interesting to note that many of these articles (like most of the critiques of “ObamaCare’s” deficit reduction and CBO scoring) criticize CBO’s overall finding while citing specific elements of the CBO score that they think are valuable and worthwhile- presumably because they support their assertion that “ObamaCare’s” deficit reduction is a sham. While this point doesn’t defend the Patient Protection and Affordable Care Act (PPACA, or ACA for short), it illustrates an important factor that we have to keep in mind when debating health care reform, proposed entitlement programs changes, and deficit-control. Namely, that many Republicans have proven their lack of seriousness and ability to have an adult discussion on these important questions. They have instead tried to twist everything to their political advantage, likely in part, I would argue, to distract public attention from the abysmal record of Republicans on deficit control, entitlement reform, and health care (which unreformed in America is a major drag on our economy with the oversized costs it places equally on the private and public sectors.)

Second, in my reading of the articles posted and others I have reviewed online, I came up with a list of about a dozen frequently made criticisms. Professor Eismeier recently mentioned four that I break down as 1) Pilot programs may not work, and any savings they might find will not be implemented by Congress because it is unwilling to inflict pain. 2) The CLASS Act- both as a gimmick for the short-term scoring and as a long-term concern 3) HHS has already approved over a thousand waivers- a first signal of how “ObamaCare” underestimated certain factors and is going to fail. 4) Certain CBO assumptions like how many people will use the exchanges are particularly uncertain and may prove to be wrong. Critics argue that the CBO underestimated how many people use them and get subsidies as private employers drop millions from employee-provided health insurance.

I’ll quickly move to those, but first I think it’s important to quickly recap the first-round of claims that I think Peter and I have already successfully refuted. (So he doesn’t feel slighted- I left Ryan from this sentence because his post is related to the first of the claims most recently raised by TE that I’ll address more fully in a little bit). If after these reviews, people still have concerns- feel free to let me know.

Patrick_Landers said...

Ok. There are 4 claims that have been addressed so far. A honest reading of the arguments will show that all four are easily rebutted (Feel free to skip over these next few posts if you just want to jump to my rebuttals of TE’s most recent claims about “ObamaCare):

1) Ten years of revenues are used to pay for six years of benefits- a gimmick which inflates “ObamaCare’s” deficit reduction.

Peter pointed out that this gimmick isn’t the gimmick Republicans generally claim it is- this disparity between years where revenue is raised and years where the government spends money was designed to keep the size of the bill down under $1 trillion, not to inflate the deficit savings.

[To clarify, the size of the bill refers to how much in revenues the bill raised and how much it spent- how much economic activity it involves. The net effect of these components (revenues and reduced outlays offsetting the new costs) is how we get the deficit reduction. Essentially, the bill moves around $800+ billion on both sides of the ledger combined (the size, or “cost” as Republicans sometimes refer to this figure), which results in $143 billion in deficit reduction from 2010-2019. (Sorry for that explanation- I just think all of this is super technical so I wanted to take a swipe on clearing-up any confusions people might have. I doubt I did a good job, but at least I tried). ]

Ok, back to rebutting this point about “6-and-10.” So Peter pointed out how that the gimmick here wasn’t used for “gimmicky” deficit reduction. I then pointed out how the Republican argument is designed to make people think that in future decades when there are 10 years of revenue AND spending increases, “ObamaCare” must add to the deficit. In fact, the CBO has scored ACA as having increasing cost savings in the outer years because its most important cost-saving measures phase in and produce larger savings over time. There’s a good chance that if PPACA had been implemented sooner (still 10 years of revenue, but now 7 or 8 or 9 of spending), there could have been greater reduction in the first decade because more of ACA’s savings potential could have been realized sooner rather than later. However, a political need to keep the size of the bill below $1 trillion and a practical need to give states, HHS, businesses, sector stakeholders (providers, insurers, etc.) the American people, and the IRS more time to prepare and plan for these reforms is what caused this “6-and-10” factor.

In fact, elements of the plan based on ideas previously considered the Republican alternatives (state exchanges vs. a national exchange, individual mandate versus a single-payer model) increased the need for delaying implementation and creating a “6/10” split. (Btw, I’ll be happy to cite specific Heritage Foundation reports arguing for those types of provisions like state exchanges and individual mandates if necessary) In conclusion, it’s quite clear that THERE IS NO “6-AND-10” YEAR EFFECT BEING USED BY OBAMACARE TO INFLATE ITS DEFICIT REDUCTION NUMBERS.

Patrick_Landers said...

2) CBO “double-counted.”

Peter and I once again both contributed to this rebuttal. Like any entitlement reform that reduces deficits, health care reform reduces spending costs for these programs (for Medicare mostly by reducing MedicareAdvantage overpayments and adjusting provider fee-for-service payments to reflect economy-wide increases in productivity, for Medicaid by reducing prescription drug costs so that they are more in-line with what private purchasers pay for these drugs, and for both by cutting the money these current programs pay out to hospitals for treating the uninsured because now there will be far fewer uninsured). The Medicare trust fund is strengthened as its period of solvency is extended.

The financial status of the Medicare (or Social Security) trust fund is a different matter, distinct from CBO’s estimate of the impact of the legislation on the budget deficit. The Administration is merely (and accurately) making the strong rhetorical argument about recognizing that health care reform’s Medicare savings improve the status of both the federal budget and the Medicare trust funds. In the same way, when a baseball player hits a homer, it both adds one run to his team’s score and also improves his batting average. Neither situation involves double-counting.

CBO accounted for deficit reduction in exactly this way in previous Congresses under both parties, and will have to do so in the future on any entitlement reform (including the Medicare, Medicaid, and Social Security changes Republicans are considering proposing). Consider this 1997 press release from the Senate Republican Policy Committee making this very same case about the Balanced Budget Act- it talks about how it helps the deficit and “It also extends the life of the program’s funding mechanism, the Medicare trust fund.”

Republicans were right when they made this argument then, and Democrats are right now when they make this argument about health care reform. Health reform’s Medicare savings have two separate, positive effects — on Medicare’s finances and on the federal budget (i.e., helping offset the costs of other health reform provisions). Health reform affects Social Security in a similar manner to a much smaller degree. THE SKILLED CBO EXPERTS DID NOT DOUBLE COUNT, AS ANYONE FAMILIAR WITH BUDGET ESTIMATES KNOWS.

[Sidebar: This point shows just how far certain, formerly reasonable, Republican experts like former CBO director Douglas Holtz-Eakin have intellectually prostituted themselves for political advantage. (For those of you who don’t know, Holtz-Eakin is a Republican nominee who served during a Republican-controlled Congress who beat back conservative claims on dynamic effects of tax cuts by disproving them, and had CBO score gay marriage to show that is saved money). If they are willing to publicly make an argument like this, one so easily refutable if you know (which they do) how budget scoring has been done for decades under SENSIBLE and EXACTING rules established by cooperation between both parties and the independent, nonpartisan CBO, then there clearly is no limit to how far they are willing to go in an attempt to score political points. While there are legitimate concerns about CBO’s score (namely that there is the normal degree of uncertainty around much of it), the fact that these experts are willing to make such a demonstrably false argument for blatant political purposes shows the major motivator of Republicans on health care reform. Namely, how can they twist the situation to their political advantage?]

Patrick_Landers said...

3) “ObamaCare” maliciously and wrongly ignored the costs of the “doc-fix” which health care reform should have included.

Peter and I rightly pointed out that if health care reform hadn't passed, we would still have had to pay the billions of dollars for the doc fix. The cost of fixing the SGR formula (Doc-fix) is entirely unrelated to health reform, as can easily be proved — all of the cost of fixing the SGR formula would remain if health reform were repealed. None of that cost can or should be attributed to health reform. THEY ARE COMPLETELY SEPARATE ISSUES. It is extremely fraudulent for critics to attempt to tie these two things together. Health care reform did not use budget process gimmickry and Democratic instruction to the CBO in order to ignore the doc-fix.

4) There is considerable uncertainty about CBO scoring- so of course we can’t trust their estimates on “ObamaCare.”

Critics are right when they point out that CBO scoring is an inexact science at this time- and that there is a great deal of variation around their estimates. However, this critique applies to all economic forecasts and projections performed by anyone looking anything more than a few years into the future. This can’t just be a critique of “ObamaCare.” – but that’s what Republicans are doing here because they never bring these concerns up with other forms of legislation that they liked. This attack cuts against every study Republicans use by the CBO or anyone else to argue for a whole host of policy changes they want. Republicans are once again bringing up a problem they have ignored for decades, all in the pursuit of political advantage. With this point they are certainly not trying to add anything constructive to the process of projections and scoring.

The fact is that the CBO is the scorekeeper we need to keep both sides honest. The CBO values its independence highly and resists political pressure. It is an extremely rigorous institution employing very, very smart people using the most advanced quantitative tools and economic knowledge accepted in the field. They have evaluated themselves repeatedly and found that there is no predictable bias to their estimates. CBO may have overestimated health care reform’s deficit savings- but there’s a similar chance they underestimated the cost-savings. We simply don’t know now with certainty what it’s going to be like in 10 or 20 years from now. HOWEVER, THE CBO DOES THE BEST JOB POSSIBLE AND ITS RESULTS DO SIGNIFY WHAT THE PAST EVIDENCE SUGGESTS IS MOST LIKELY TO HAPPEN WITH HEALTH CARE REFORM. It will result in over a $100 billion in deficit savings by 2019, and in the decade after it will save approximately $1.3 trillion.

Critics who only bring this uncertainty argument up about “ObamaCare” are being disingenuous and hypocritical in the extreme. Once again, critics are making an argument for self-serving political reasons. While there are differences of opinion about the deficit impacts of health care reform, it’s important to note that people are disagreeing with high-quality CBO estimates based on strong evidence. I find CBO’s estimates very convincing, and I believe firmly that there are more opportunities and potential for cost-savings that the CBO wasn’t able to score because it didn’t have enough past evidence to feel comfortable making estimates which they know are so critical to the political debate. All of this unscored potential likes on the cost-saving side. We shouldn’t be pulling back on health care reform- we should be accelerating it. With this action of not scoring areas where there is little relevant past work, the CBO prevented people from making claims about CBO-scores not based on evidence. Once again, the CBO studiously protected their reputation and integrity.

Patrick_Landers said...

We have now addressed four claims made multiple times across the articles that have been linked to this debate. All four have easily been proven false or invalid. Some of these points were so easily dismissed that it throws into question the intellectual integrity of certain experts making these claims- since they should know better. This fact doesn’t bode well for their other points.


(My writing will get sloppier from this point on- I’m too tired to reread and edit, so the next few posts are going to be rough and imperfect). Profressor Eismeier listed four additional claims- due to time constraints, I will only fully address 1 of them tonight

1) Claim: “Pilot programs may not work, and any savings they might find will not be implemented by Congress because it is unwilling to inflict pain.”

As I said previously, health care reform includes a multitude of pilot projects and innovation incentives (some of the unscored) that many economists believe have significant potential for resulting in cost savings (aka deficit reduction) while actually improving care quality. These ideas are drawn from health policy experts across the ideological spectrum- the strategy PPACA takes can be compared to throwing almost everything and that the wall and seeing what sticks. I suspect Professor Eismeier wasn’t arguing that it’s likely that all of these pilot projects will fail and turn out to be ineffectual. After all, that would be a stunning condemnation of most of the work performed by policy experts in the last few decades. Many of these ideas cut in opposite directions, so it almost seems illogical that every one of them would fail. Many of these pilot projects and studies are based on some past evidence and very strong theoretical arguments. Some of them will turn out to be successful- many of them we already seeing as being successful- these projects will just us the best way to go about achieving these ways of reducing costs while often improving quality.

Patrick_Landers said...

The whole point of health care reform was to fundamentally change the system and market structure to realign incentives of the many players (consumers, providers, insurers) to reward competition and innovation. I’ll just discuss one potential reform that has great potential. Under current fee-for-service systems health providers like Duke Medical Center actually lose revenue when they improve health outcomes for treating heart attacks for instance. A hospital can do a better job of treating a patient the first time and reduce their likelihood of needing to return for treatment. However, providers often make profits on each unit of sales, so when they reduce their volume by improving initial treatment outcomes, they are hurting their bottom-line. This is why experts have proposed a variety of alternative pay-structures. Each of these comes up with its own set of problem, but experts have developed the Accountable Care Organization (ACO) model which draws upon the well-established successes of health care providers like Kaiser Permanante, Geisinger Health System, Intermountain, and the Mayo and Cleveland Clinic groups. These providers, which the ACO model and its supporting provisions in PPACA hope to promote other providers copy, provide integrated and coordinate care that allows for the provider, payer, and patient to have incentives to make better care decisions that cut costs AND improve outcomes. More integrated care systems like the ACO model will be able to take fuller advantage of the coordination-savings provided by implementing electronic medical records (EMRs, or also EHRs). These groups will be able to incentive providers, payers, and patients to take advantage of cost-savings resulting following evidence-based medicine (which health care reform studies more) These structures mitigate our current fee-for-system which encourages an oversupply of costly specialists when more primary-care physicians focused on real preventative medicine would improve outcomes and cut costs. ACOs and other reforms are designed to find painless cost-reduction strategies that don’t cut outcomes or benefits.

However, Professor Eismeier I think was questioning whether Congress would be willing to implement these ideas full-scale, since they (its implied) have costs. But as my ACO example showed, much of health care reform was supposed to find costs savings that also improved outcomes- aka painless reform. This is important, because the system-wide rising costs of American health care are so much more per person than what we find in any other developed nation’s system, all of which provide universal coverage at the same time! These costs are not only worsening the fiscal situation of Medicare and Medicaid (Which then interacts with the effects of the baby-boom), but they also having an adverse impact on private businesses. They don’t want to cut health insurance for their workers, but its becoming so costly now that they can’t and still make profits. Since we don’t ensure universal insurance coverage, people are locked-in to jobs they’d leave if the weren’t so focused on keeping their health insurance. We spend over 17% of our GDP on health care in this country (this includes private and public sectors). Other countries spend 12% or less and get the same or better outcomes. This shows how inefficient our system is. If we improved our system and made it more efficient, we’d free up massive amounts of resources on the private and public side for more cost-effective opportunities. If we can tackle this underlying, system-wide inefficiency problem with American health care- it’s a huge win-win. Health care reform provisions, including many pilot projects are designed to do just that.

Patrick_Landers said...

This strategy of health care reform-which tackles the underlying problem in a largely painless way compares with the other options our nation faces because of our fiscal problems. We have to control our deficits. There is no way do that feasibly without tackling Medicare and Medicaid. You could cut massively Social Security, Defense, discretionary domestic non-security spending, and raise taxes- and you still wouldn’t solve our long-term deficit problem. We have to control Medicare and Medicaid spending- which is problematic because costs system-wide are so high. There are only so many ways we can tackle Medicare and Medicaid costs- we can either tackle the underlying problem of the entire health care sector- which will reduce costs without sacrificing benefits for these programs. Or we can pursue the Paul Ryan, Republican approach of setting spending caps/turning them into vouchers, block-grants, etc. which will either require cutting millions of mostly either poor, elderly, disabled, or children off from health insurance, or require turning these programs into second-tier systems compared to private alternatives as we cut benefits massively while those people wealthy enough to afford insurance in the private market are still able to pay for the traditional high-quality care America provides to the lucky majority in this country who get health insurance. Providing health insurance is important because it creates incentives for individuals to make smart decisions and get early, good, more “efficient” health care and not really on emergency rooms. The medical profession’s code of ethics (and federal law) requires treating the uninsured even if they can’t they pay, so when the ranks of the uninsured massively increase under these proposals, costs would just simply go to the rich as their premiums had to go up.

There are two ways to control government health care costs- either reform the entire system and help everyone including private businesses and those privately insured (which health care reform seeks to do), or cut/cut/cut from government programs and worsen millions of Americans’ health care…or even make them become uninsured by denying them coverage. Once the American people realizes that these are the two inevitable options that we will have to choose from, they are going to realize the decisions is easy. Go for the less painful cuts from reforming the whole system, versus making tens of millions of more Americans- the most disadvantaged ones!- go into a series of second-tier system that provide inferior benefits and care quality. This is the choice, and that is how Congress and the President can and must frame this debate and sell health care reform’s many changes to the American people. You are correct that a lot of these proposals do have costs upfront, and do inflict some pain on certain stakeholders (though I’d argue this is only true initially and ignores that the reforms are actually in the aggregate painless when you consider everyone involved). If the health care sector doesn’t change on its own, we will end up choosing between these two paths- an easy choice, so I strongly believe Congress can sell and muster the political will to make these test-projects full scale.

Patrick_Landers said...

Congress will go for tackling health care costs system-wide, and that path has 3 branches of specific ways of doing it. I’ve explained my thinking on this before. 1) We continue with a hybrid system- which health care reform is designed to do. 2) We do a full-privatization system- however, there are not historical or international comparisons we can make that show us what this might look or whether it would be successful. All other nations, even ones that people try to characterize as privatized, are in fact extremely regulated and involve government in a major role (multi-payer variations for instance). Similarly, I think history matters and I question whether it’s feasible, politically or economically, to move from our hybrid system to a heavily more private model. Then there’s option 3) A single-payer or nationalized system- which btw, is done by most of our developed peers and is proven to be more successful than our current system. Painless system-wide reform is more politically palatable to the American public once they are informed about realities (which they will be if Republicans try to take the nation down the other path of cutting health care benefits for millions). Health care reform like “ObamaCare” is our they hybrid improved model- it includes so many ideas. If it fails, then I’d suspect political pressures would emerge to move towards a socialistic system. Is that what Republicans want? No. That’s why Republicans should be embracing the Obamacare test projects like Democrats are. Implementing them wide-scale is feasible, because people can see the alternative.

This is why I am confident PPACA will be a significant plus with its many pilot projects, and why I believe Congress will enact them. In the face of malicious Republican attacks about death panels and “Medicare cuts,” and the public angst Republicans raised by harnessing the economic downturn and misinforming people, enough Democrats stood firm to health care reform. They did this because they believed in it. They showed their political will to make tough decisions in the short-run in the hope of achieving long-term gains. I am confident, and so hopeful, that they will do again in the future and work to actively expand upon the first steps Obama took in PPACA. We need to go a lot further more aggressively down the path once we have a decent sense of what to do- and part of the process of learning what we need to will be based on PPACA’s test projects over the next few years.

I am confident in the PPACA’s potential, partially unscored by CBO, and I am confident that Congress will implement some of these reforms. Thus, I think CBO underestimated PPACA’s potential, which reduces the risk from any slippage in CBO’s estimates on PPACA’s deficit reduction in other ways, and I hope and believe offer a really good chance to make a significant impact on our deficits.

Patrick_Landers said...

So that’s my rebuttal to one of the points raised by Professor Eismeier. I hope it was mildly persuasive or thought-provoking, and I’d love to talk about the points I raised even more in the future. That leaves three points left. I want to look at and talk about each of them, and in particular the CLASS Act. But that will have to wait for another day, since it’s bedtime.

Quick rebuttal to Megan: PPACA largely establishes many test projects, and then gives the Secretary of HHS (and other officials) broad power to expand upon them. PPACA’s cost savings don’t depend on Congress doing more in the future- they depend on Congress not doing things to actively worsen the situation. PPACA doesn’t preclude Congress from doing more in the future, and so there is a chance that any additional Congressional actions over the next few years can be a net positive. Btw, I’d define Republican’s defunding attempts as a big negative on PPACA’s potential.

Also, look at how difficult it was to pass PPACA, which included so many formerly Republican ideas (heck, it’s RomneyCare 2.0 but with MORE cost-control potential!) and avoided certain liberal ideas which comparatively look like they are very successful.

I’ll respond to Megan and Professor Eismeier more fully soon.

TJE said...

Sorry Patrick, I just don't share your optimism that "painless" cost controls will emerge if we just throw enough spaghetti at the wall.

I look forward to your thoughts about CLASS

Megan said...

Totally misunderstood what we were talking about! Point conceded. God I hate healthcare.

Also, in defense of my indefensible crime of defending Bush, I think I was really just looking to see how heated I could make people.

TJE said...


TJE said...


TJE said...


Patrick_Landers said...

Megan: Consider your effort to get people riled up a success (though I knew you were just being inflammatory in the good sense of the word). I also appreciate saying outrageous things, or inserting little barbs, just to irritate people.

TJE: On the CLASS Act, I’m still heavily in the research mode on this question so I will only have a partial, tiny (relatively-speaking) response today. The CLASS Act claim rests on some very significant and complicated policy arguments and facts, so it will take some time for me to determine my response, which could potentially be that I agree with conservatives, or more likely from my research so far- that I would really question the robustness of the concerns about the CLASS Act and their validity as an argument against health care reform’s deficit reduction. I probably won’t start getting fully into this topic in Sunday since I have time obligations until then.

First, CLASS concerns don’t affect ObamaCare’s savings in the first (and largely speaking the second) decade(s)- any type of program like this is always front-loaded in that you collect revenues now to pay for future benefits. People aren’t really questioning CBO’s estimated revenue on the CLASS program- they think the costs will prove so much higher that the DHHS won’t be able to control the spending side. However, the first two decades are primarily revenue-increasing years for the program with less-major spending years- so any problems with the program are unlikely to have a significant impact in the first two decades. Certainly not enough to offset “ObamaCare’s” other CBO-estimated deficit reduction in the first two-decades (including that $1.3 trillion in the second decade claim that started this whole blog debate). Basically I’m pointing out that even if we decide that the CLASS Act argument is completely valid, that isn’t enough in itself to offset “ObamaCare’s” other savings for the first two decades. A lot of other things would still have to go wrong and nothing could do better about health care reform in the first two-decades for CBO-estimated deficit reduction to be off. (An example of a claim that people can make that, if true-?, would really have a large impact in the first two decades would be the exchanges/subsidies/firms dumping employees argument- I’ll obviously need to address this in the future. But CLASS’s problems are definitely of a longer-term nature. )

Patrick_Landers said...

For now, I’ll note that many (across the ideological spectrum) are concerned that the CLASS program is problematic and may add to the deficits over the long-run, offsetting any of “ObamaCare’s” savings (or adding to its fiscal cost if you think it has no savings).

This argument is absolutely valid in several respects- there is a lot of uncertainty and risk to this program, probably a lot more than was realized when it was written. By the time it was passed, people knew it was going to be problematic. The first defense people make against this claim that CLASS Act is going to be a disaster is the one that Peter made and is completely true- the DHHS Secretary is given significant power (and responsibility) in PPACA to ensure the program’s solvency. So then we have to study whether the Secretary can address those potential problems and risks. There are two parts to this- either the Secretary and Congress will fail, or the more-common (and potentially more convincing if the numbers hold up) argument (made by the Heritage Foundation article) is the Secretary won’t be able to find the right formula or make the program sustainable due to policy and economic complexities. Mostly conservatives have moved past the political argument aspect on the CLASS Act because they recognize that the Secretary has enough power and authority to do it if she/he can find the right policy mix. Also, of all the areas for Congress to likely override what the Secretary does, this one is a smaller concern I think- you’d be more likely to see movement on the bigger questions of Medicare cuts (or as I prefer to call them- savings), the individual mandate, provisions affecting businesses, requirement for states, exchanges, any IPAB (Independent Payment Advisory Board) recommendations, etc. I just think that the CLASS isn’t likely to be the biggest political problem if there is going to be political problems, and I think conservatives generally agree with that assessment because they stress the uncertainty of getting the policy. In case you don’t find my dismissal of the political concerns convincing, I’d suggest reading my rebuttal (see below) of the claim about pilot projects that Congress won’t implement them because they inflict pain. I think I demonstrate convincingly that Congress is going to implement pain, so it’s really a question of how much and where that pain is directed. I argue that health reform (and in this case, the CLASS Act), has just as good a chance as being selected as an area where Congress inflicts pain, and in fact I think there’s good reasons why Congress might be more inclined to inflict the pain this way.

So that’s what I have for now on the CLASS Act. Coming Attraction: To rebut the CLASS claim, I need to analyze the policy concerns about the CLASS Act’s potential instability and possibility of actually adding to the deficits in the long-run. If I rebut that policy concern, I’d argue that I will have successfully rebutted the entire CLASS claim for the argument “ObamaCare” actually increases the debt.

Patrick_Landers said...

There are many claims besides the CLASS Act that have been made in the articles that I still have to answer- and I will. It’s going to take days though.

For now, I first want to review the general thrust of the Republican/Heritage Foundation/National Review/Sarah Palin/WSJ/Fox News/Tea Party/Charles Krauthammer critique. They point out (correctly) that you could subtract from PPACA’s CBO-estimated deficit savings of $210 from 2012-2021 the $30 billion for implementation not included in the bill, the $19 billion from the student-loan provision, and the CLASS Act’s $86 billion to get a core health reform deficit reduction figure for the first decade: this would leave us with $75 billion in deficit reduction. So far, the bill still reduces deficits in the first decade. They then want us to assume that no provisions of PPACA have increased cost savings, while multiple elements of the bill actually do much worse than the CBO estimated. (Note that CBO director Elmendorf has said he’s very comfortable with CBO’s estimates and he doesn’t think they were gamed by Congress). Shockingly, if you assume that a bill only has things go wrong with it, it costs more. We should apply this approach to everything! It makes so much intuitive sense to just apply this blanket rule willy-nilly to everything.

First of all, these critics tend to ignore addressing why many provisions might result in greater cost savings. However, anyone studying this issue with an open-mind must carefully and equally consider all the provisions of health care reform that have greater uncertainty- including ones that would cause the bill to underestimate OR overestimate the bill’s deficit reduction. If there’s valid reasons that things might go worse than expected (Which they argue), then there might be valid reasons why things could turn out better than expected. Yet they generally try to ignore this. I hope to in the next few weeks on the blog to look at all of these issues and uncertainties that both sides are arguing about.

So while these critics ignore potential greater savings, they base their assumption that things will go worse on two claims. The more sophisticated argument they make is actually explaining why there might be problems with certain ObamaCare provisions, such as the CLASS Act. Obviously defenders of health care reform need to respond to those concerns.

However, critics also rely on the blanket claim that “it is highly likely that the CBO is off, given the remarkable consistency by which that agency underestimates the growth of new government programs.” (I was saddened when the Forbes article made this [false] assertion and didn’t even try to provide any support for it- he just stated it as fact. I guess you might think it’s a fact if you simply trust whatever FreedomWorks says http://www.freedomworks.org/press-releases/freedomworks-investigates-accuracy-of-cbo-scores-f .) However, the CBO has frequently in the past underestimated the savings from various health provisions. As I’ve stated before- there is no consistent bias to CBO estimates- there is just a lot of uncertainty which goes both ways. You can’t just rely on the blanket uncertainty claim to attack “ObamaCare,”- there is no predictable bias to CBO scores, so we need to carefully examine the underlying provisions and see what happens in the balance when you compare those provisions that might cost more versus those that might save more.

Patrick_Landers said...

Moving on, three other claims have been shot down to the satisfaction of everyone on this blog (I presume, since they haven’t been mentioned since Peter and I rebutted them- the “10 and 6,” the double-counting, and the doc-fix). Note that the Forbes article conceded or never mentioned those points, and I think that really was the best article on this subject. I want to give Avik Roy (the author) credit- he laid out a relatively well-cited review of the conservative claims on reform and generally avoided some of the most ridiculous arguments, like “double-counting. I guess that’s the difference between articles for Forbes versus those for publications like the WSJ or the National Review ;-)

There is still one claim that has been significantly addressed so far that is still being disputed- Peter’s, mine, and others’ overconfidence in the pilot projects aspect of “ObamaCare.” It’s really a two-part question: whether the pilot projects will result in many savings and whether Congress will implement them widespread since they (might) cause pain. Both parts are still contested.

On the first aspect (pilot projects work?), I used the analogy of throwing stuff at a wall in an attempt to simplify and make more understandable the argument about how health care reform is going to result in improved outcomes and cost savings for the federal government and the private sector. Namely, that PPACA does a lot of things based on strong theory, and in many cases based on compelling from more efficient geographic areas and select providers across our country, and rigorously tests them to make sure they work before we bring them up-to-scale. Clearly it was not understood that way or accepted, so obviously I’ll need to be devote a large amount of time in the next few weeks reviewing and posting in detail about numerous provisions of the Affordable Care Act that look very promising. I still believe that I will be able to prove this point given time- but for now I concede that I haven’t completely refuted this objection.

Patrick_Landers said...

On the second aspect, some have claimed that Congress will never implement the test projects or many of the reforms the CBO scored as cost-saving. Or more accurately, Congress will not allow the DHHS Secretary to implement them because they would step in and order the Secretary not to do things. This is a general indictment of political will. My response:

I strongly disagree with this argument. Who is generally making these arguments? The exact same people who are screaming loudest about deficit-reduction (and are actually truly focused on cutting the size of government). These same people think the economy can lose significant amounts of aggregated demand (from government domestic discretionary non-security spending on things like Head Start) and not be impacted, and that the American people won’t feel that pain or the pain of cuts in K-12 education. They think and want these non-security programs to be cut on average by 15.4% in the next six months (according to H.R. 1- the Republican CR).

Even if we think Congress compromises and can pass something similar to Bowles-Simpson, that’s $3 trillion in spending cuts and$1 trillion in tax increases over the next decade. Many Republicans don’t want any tax revenue increases, so they’d actually want at least $4 trillion in spending cuts over the next decade if they JUST wanted us to go to Bowles-Simpson target for the next decade. Talk about Congress inflicting pain!

The National Academy of Sciences and the National Academy of Public Administration actually looked at a fiscal path of deficit reduction similar, though not as extreme, as what many Republicans are discussing- and it shows just how much pain they want (and presumably think) Congress can enact. (They did this in the best and most comprehensive study on our nation’s fiscal future, drawing upon experts - not including their data, it’s a little over 200 pages for those of you interested in reading it) They looked at a low-spending path that got us down to spending as 21% of GDP through just spending cuts necessary to stabilize the debt-GDP target at 60 percent if the total tax burden was maintained at its historical level between 18 and 19 percent of GDP. Note this is actually well-above (less severe) than what many Republicans are calling for- I’ve watched enough committee hearings to know that Republicans in Congress don’t want spending or taxes above 18% of GDP. So keep in mind that these same conservatives who argue that Congress won’t enact the pain of health care reform, argue that Congress can enact a path included deep cuts in Social Security, Medicare, and Medicaid, as well as reductions of about 20 percent in aggregate funding for all other federal programs including defense, education, infrastructure, veterans’ health care, veterans’ disability payments, medical research, and the like. To get to the levels conservatives want, we’d also have to continuously raise the Social Security retirement age and cut benefits. For instance, A newly retired worker in 2050 with average lifetime earnings would see their benefits by 27%. They would also have to cut Medicare and Medicaid expenditures 20 percent by 2025 and over 40 percent by 2050. I hope I’ve pointed out how these critiques by many are hypocritical, since these same people are claiming they can inflict far greater pain. If they can do their pain of cutting spending, then Congress and the DHSS can easily enact the “pain” of health reform.

Patrick_Landers said...

Now, some might say- well those Republicans are crazy and we know we can’t politically inflict that much pain. However, even Bowles-Simpson inflicts significantly more pain than health reform. So if health reform’s provisions are in aggregate assumed to be too painful politically, than Bowles-Simpson is also too painful. That isn’t a good thing about our political, because pain is coming- it is necessary and inevtiable. Leaders from both parties have failed for decades (some- Bush Jr./Reagan, more than others-Bush Sr./Clinton). Our nation’s fiscal trajectory leaves us with no other choice- so if Congress is going to inflict painful choices, why wouldn’t they favor and actually be more likely to enact reforms in health care that have the potential (and supportive evidence) to be actually painless (or at least less painful) in that they don’t reduce benefits or outcomes. Similarly, our health care system is so massively screwed up that we spend at least 50% more per person than our competitors and we still don’t get better outcomes. The private health care sector is also unsustainable and making our private businesses less competitive. Short-term pain will come- either that or our country will fail and face a debt crisis/massive economic shock. Political conditions are changing, and things that might have been dead-on-arrival in Congresses of the past won’t be in the future.

Also, it’s not Congress that is going to have to do this- ACA gives the Secretary of HHS the authority to implement successful pilot projects without congressional approval. So this argument that Congress won’t have the political will to enact these reforms (or Medicare cuts- a common example) is misleading. They’d have to actively intervene, which is harder to do.

Also, Congress actually has a good record of implementing Medicare cuts (which are the largest part of health reform savings). Every significant deficit-reduction package in the last 20 years has included Medicare savings, most of which have been implemented as planned. Virtually all of the Medicare cuts enacted in 1990 and 1993, which accounted for a significant portion of the savings in those large deficit-reduction packages, were implemented. And nearly four-fifths of the savings enacted in 1997 other than the “doc-fix” were implemented as well. First of all, the doc-fix has actually only been intermittently implemented- the SGR formula (what the doc-fix addresses) hasn’t always been blocked by Congress. The SGR formula is very different from the other Medicare reforms that Congress has actually implemented in the past, which is important because health care reform is similar to these past-implemented cost-savings. Note how Republicans have it both ways with this point. They say the Medicare cuts are never going to happen so the bill isn’t deficit-reducing, and they scream that Obama and the Democrats are going to cut people’s Medicare in order to mobilize fear and opposition to the bill. I don’t know why Republicans always have to try to make mutually contradictory arguments.

Patrick_Landers said...

Hopefully with my arguments I’ve successfully rebutted the claim that Congress won’t have the political will to implement “ObamaCare” savings and any “pain.” They will, because pain is coming no matter what so health reforms can certainly be part of policy prescription.

I still want to and need to demonstrate that ACA will result in “painless” improvements, or even just painful ones that will reduce spending and help our deficit. However, once I’ve established this point, which I believe I can, I will have completely rebutted the claim that we are being overconfident about “ObamaCare’s” pilot projects, which really consists of two parts- that no pilot projects/reform ideas will work (as part of the original CBO score or in addition), and even if they did, Congress will never implement them.

Rebuttals so far:

Claims completely rebutted (and accepted by all-involved?): 1) “10-and-6”; 2) Double-counting, 3) the “doc-fix”

Claims largely rebutted (and hopefully accepted by all-involved, but they are so recent that I haven’t gotten a definite feel for what people are thinking): 1) the blanket claim that we can just ignore potential savings and only consider how the bill might potentially turn out worse than projected, 2) the blanket claim that since there is uncertainty about CBO’s projections (like any), we can’t trust them and should just assume “ObamaCare” is going to come out costing more

Claims partly Rebutted/partly unaddressed: 1) We are being too optimistic about pilot projects, consisting of 1a) Pilot projects won’t work, and 1b) Even if they do, Congress won’t implement them. I’d argue I’ve rebutted claim 1b tonight, but maybe people disagree. 1a still needs work.

Started, but no major rebutting yet: 1) The CLASS Act

Mentioned, but not started: 1) HHS has already approved over a thousand waivers- a first signal of how “ObamaCare” underestimated certain factors and is going to fail. 2) Certain other CBO assumptions like how many people will use the exchanges are particularly uncertain and may prove to be wrong. Critics argue that the CBO underestimated how many people use them and get subsidies as private employers drop millions from employee-provided health insurance.
There are also several claims that have been made that have not been specifically mentioned on this blog debate (I think). These are low-priority for now, but I may address them time permitting. Hopefully this review hasn’t missed anything. Please let me know if you have additional concerns, disagree with my review of what's happened in this debate and whether claims have been succesfully rebutted, or if there are additional claims you'd like to see addressed. There's a decent chance I won't be making major additions to the blog until Sunday, but I may get lucky or at least post quick responses to anything that get's brought up in the meantime.

TJE said...

Patrick, as long as we are in record comment territory:

1. If you really want to defend the plausibility of the ten year "deficit reduction claim," you need to respond to specifics in Forbes piece.

2. For me, the "doc fix" problem is less a criticism of Obamacare than it is a cautionary tale about "painless" ways of reducing growth of Medicare.

3. Not persuaded by your argument about double counting.

4. To achieve significant decrease in uninsured Americans, obamacare creates massive subsidies for millions of Americans. The fiscal health of system depends on: 1. healthy young Americans subsidizing older, sicker Americans 2. employers who currently provide health insurance continuing to do so 3. vague promises about painless cost savings brought about by efficiencies. Are you confident that estimates of how many people will just say no (I won't pay for insurance. I'll pay the piddling "penalty" that is now a "tax"and wait until I get sick to buy insurance) are not too low, perhaps way too low? Are you confident that estimates of number of employers who will pay penalty and dump employees into subsidized system are not too low, perhaps way too low? Is there anything in the history of entitlement programs that makes you confident in vague promises of future cost controls?

I might be persuaded by an argument about how obamacare is an imperfect partial solution to a difficult problem whose benefits outweigh the risks. I am impressed by your courage in taking on the role of "Lincoln lawyer" for obamacare. But isn't one of the rules for a good defense attorney o acknowledge that his client is not perfect?

TJE said...

A criticism of one of the main justifications for obamacare-- that the currently insured are paying a big price for the currently uninsured:


Patrick_Landers said...


So I have 4+ (ake 5+ pages of a Word document) comments worth of finalized material in response to the most recent comments and the CLASS Act, but I’ve realized I just don’t have enough time necessary to keep up responding on these points so I’m going to stop here. Pretty soon this blog post will disappear from the main page, which is probably a good sign that the argument should be closed and only reopened if it’s brought up in the future. So if future posts are brought up related to health care I might take a second stab at this debate, but for now I figured I’d try to very quickly make my meta-argument about health reform. It’s not really designed to convince anyone- just quickly show where I’m coming from and why I think health care reform is a good thing that should not be repealed, but instead rapidly added to.

Basically, the more and more I think about health care reform- I think of it as having three parts. It involves the liberal desire for approaching universal coverage (which many economists of all stripes think is essential due to the economics of health care and moral hazard) provided through what was the mainstream conservative health policy framework (individual mandates, state exchanges, phasing out health insurance being provided through employers, etc.) combined with attempts to incorporate most of the cost-control ideas proposed by policy experts in the past few decades. That is truly what it is- people may dismiss the claim that ObamaCare includes many conservative ideas as a lie, but it actually is true. So much of it really is the ideas that New Democrats/Smart conservatives/Centrist economists had all agreed to with some semblance of consensus. ObamaCare is not a liberal/Progressive boondoggle. I’m not a personal fan of the public option (which I think leads inevitably to the next step of a) single-payer system- I believe in the power of harnessing the free market system, keeping in mind that health care is a very particular good which requires some modification of the classic-free market model. The free-market model rests on a number assumptions which the health care good very explicitly violates- so any free-market model (which ObamaCare is) requires significant modification to even have a chance of working. Back to the point, I think we need a free market-heavy solution, which I think health reform really tries to do while keeping in mind how health care is an unusual good.

Patrick_Landers said...

Liberals (not me, the ones in Congress who pushed this) gave up SOOOOOOO much to pass health care reform- I really want everyone to realize that not having a public option was an INCREDIBLY HUGE AND PAINFUL sacrifice many health reform advocates made because they believed so STRONGLY in the goals of achieving universal coverage and tackling the rising costs of health care system wide before they destroyed any chance of the poor, elderly, working, and middle-classes ever acquiring quality health care. Conservatives are so focused on the size of government in health care that they ignore that the American health care system is a huge drag on American businesses, and on the hard-working everyday Americans who make all the right decisions (in conservative lingo, the “deserving.”). Now maybe sophisticated conservatives would respond that government intervention is why the health care system is in shambles (a fact which actually lots of Republicans in the health care debate denied), but that’s not an accurate argument- which I’d love to explore more in-depth at some point on this blog. I agree that part of the problem is attributable to our-mixed system of government involvement, but large parts of it are related to the unique nature of the good “health care” and how the American private health care system developed (largely before government intervened significantly). If we look around the world, we can clearly see that all of our international peers, all with systems in their own way that have a far greater role for government in health care, all have far more successful systems- clearly a robust government role does better than our hybrid American system. But there’s a value decision America has made, I think for the right policy decisions (harnessing free market power with controlled government interventions that shape the market). It’s something fundamental to our nation’s framework, and I don’t want to or believe in changing that. There’s no way an unmodified free market system can deal with health care, and there’s no way (for the foreseeable future) that America could politically accept a state-solution.

Patrick_Landers said...

So that leaves us with some kind of mixed system. Something which nearly all economists (and many conservative thinkers) had agreed to in the past, which is that in order to manage health care, you had to create a system in which everyone was always in the boat forced to make decisions with some awareness and repercussion from their impact. There couldn’t be free loaders. It’s very hard for people to pay for health care costs because most people at any given time have very little costs or medical needs- but then some people have such astronomical amounts (largely as a function of age) that there is now way even if they perfectly saved and perfectly worked their whole lives that they could ever pay for their costs. Since health care needs are in large part unpredictable and random occurrences, it makes it very hard for even extremely responsible people to deal with the system. However, we feel a moral obligation to treat people since we often know what to do- most people think we should try to save their lives, to treat their conditions, and control their pain. But people could never pay for all the health care costs they’d incur when health care is addressed in a market system where people pay for goods and services and make marginal deals. Health care is an issue which relates well to Rawls’ Veil of Ignorance concept- I’m basically providing here just a quick and crappy discussion of why we have any form of insurance. The point of this discussion was to explain why we need health insurance and why people can’t just pay for health care directly (which I know everyone knows, I just thought it was important to review as an example of why health care is a tricky good). So yes, “the fiscal health of the system depends on: 1. healthy young Americans subsidizing older, sicker Americans.” Any economist with an ounce of intelligence will tell you that’s ESSENTIAL if you want everyone to have health insurance/aka be able to afford health care. If you don’t think everyone should have a shot at getting health care (maybe you’d say charity would take care of them, but once again the problems with how health needs are distributed make this impossible), then you could have some critique against “getting everyone in the boat.” In order to get “everyone into the boat”- there’s the statist option of single-payer or there’s the free market system based on (nearly) everyone having to have health insurance and having young, healthy people subsidize the costs of sick, old people. Of course, it’s important to remember that almost everyone ends up old and sick. Pretty much the only other option is too die young.

There is no serious alternative to the ObamaCare model- it was what people on both sides of the aisle had been coalescing around for years. All the Republican/conservative alternatives that have been proposed in the last two years would have a marginal impact for a few years (expanding insurance coverage by a few million), but do nothing to change the underlying flaws with our current system. This means the system’s unsustainable track wouldn’t be altered, and pretty quickly the system would continue hemorrhaging old, sick, and poor people.

Patrick_Landers said...

Health reform attempts to address the current system’s flaws and try to craft a sustainable system for both private and public interests. It gets everyone into the boat. It uses state exchanges to promote the creation of more free market incentives and emphasis on trade-offs and marginal decision-making. I think ObamaCare’s assault on employer-provided health insurance is great, and actually a good long-term decision. If you’d like, I can review every argument Stuart Butler from the Heritage Foundation (like many other conservative health policy experts) was making for years about how our employer-sponsored health insurance system was a huge factor in why our system sucked. People on the far left also agreed, though there solution was a state, single-payer system. It was center-left and center-right people, liberals and business interests, who had supported the employer-sponsored system for so long because they thought it was the best way to get at least SOME people health insurance and safety from health risks. However, people on the center-left eventually realized that people like Stuart Butler were right- the employer-sponsored system was a massive problem underlying the health care sector and largely explaining why the system was unsustainable.

Basically, I don’t see an alternative framework for managing the health care system other than the one ObamaCare embraces (caveat: besides a single-payer, an extremely-regulated and subsidized multi-payer system, or a nationalized system- I doubt conservatives prefer those options). The “cost control” ideas really represent a variety of ideas designed to improve the market functioning of health care by changing incentives of providers, insurers, and patients to make better health care decisions that take into account outcomes and financial cost. What we really need is a far more aggressive implementation of these cost control ideas to make the system rapidly improve. Repealing or defunding ObamaCare I think is a disastrous idea- what we really need to do is realize that ObamaCare was the first bite at the apple which created a framework very easy to build-on. We need to move fast and hard on health care- it’s currently devastating our government, our economy’s competitiveness, and our nation’s people. I agree that health reform has lots of very troubling areas- it’s a very hard balancing act that it’s trying to pull off. I don’t see that as an argument against ObamaCare- I see that as an argument for intensifying it. The sooner and more fully we’ve tested the idea of trying to create a sustainable hybrid system, the sooner we know whether it’s even possible. If it succeeds- great! If it fails- we know what the next step is. Move to one of the only models we know works- single-payer, incredibly regulated multi-payer system (where basically the government operates through private entities it carefully controls), or a nationalized system. I’ve argued in the past, I think even on this blog, that I think conservatives should be the ones most strongly pushing for serious reform to the entire system (though they are welcome to come up with an alternative to the ObamaCare model). If we don’t address the system, more and more people are going to hate it and more and more political animus against it is going to develop- which creates a big pool of political support statist, really leftist thinkers and political actors can draw upon to achieve the state-controlled model that they think that works.

Patrick_Landers said...

Ok, so that’s where I’ve been coming from. Clearly I’m arguing for going further, and that might lead to the counter-argument, previously made in other contexts, that entitlement programs’ histories are replete with problems. I agree- entitlement programs as originally implemented are rarely problematic to such a drastic scale- the problem is that they get added to so much over the following decades- generally adding more and more benefits for middle-class constituents. So that would be a historical argument about being concerned about ObamaCare…with just one problem. The next few decades are going to be so different from the past (I know, what a truism). Basically our country has two choices- collapse or make difficult decisions where the country actually pays for its false sugar-high of the last few decades based on politicians not making people realize the tradeoffs between taxes and spending, on investment and consumption, etc. If you don’t think the country is going to collapse, then you think the country is going to change. A huge part of that will be the government’s role changing- lots of things are going to get cut, and we are going to have to have a more open and honest debate about what kind of and what size of government people want. I don’t think the debate’s likely to go towards expanding the government’s role- it’s going to be about what are the first things we sacrifice. ObamaCare would not be added to in its generosity- the political potential is to make the cost-control ideas much stronger. Politicians are going to find it’s easier to do indirect cuts (by altering the health care system) then it is to cut Medicare or Social Security benefits for real middle-income people.

Patrick_Landers said...


1. I am happy to oblige further in responding to the Forbes article. I previously said that it was correct when it stated you can remove several provisions of overall reconciliation bill and add in additional implementation costs in order to get a “true” deficit-saving figure for just the “health reform” aspect. I agreed with that, and pointed out that if you do just that- take out the non-related aspects, you still get “ObamaCare” reducing the deficit in the first decade. To show that it adds to the deficit, in any time-frame, critics need to show that “ObamaCare” will do worse in enough respects to outbalance any ways in which it might do better. That’s how the Forbes article got to its result that “ObamaCare” adds to the deficit. In order to get “ObamaCare” to add to the deficit, the Forbes article had to assume that nothing goes better and several things actually go worse than either the CBO or the less optimistic Medicare Actuary’s report predict. For instance, it had to assume that CBO projections underestimate the growth of health costs by one percent (AGE POINT! Sloppy writing there- the author misspoke by ignoring the distinction between one percent and one percentage point.) .

The Forbes article also had to assume a discount rate for “the possibility that the subsidized exchanges could cost an additional $1.35 trillion from 2012-2021,” a figure based off the calculations of researchers from the American Action Forum and the Ethics and Public Policy Center. First, CBO would only use that kind of variation in discount rate to explore the robustness of their results (which they always discuss in the reports to Congress). Second, I have to point out that these aren’t even the first tier of right-wing think tanks (Heritage, Cato, or better yet, the AEI). No, these are from notoriously more hard-line groups with much crappier quality histories (a point which relates well to this week’s discussion of think tanks- which I’m super excited for. I’ve always been obsessed with them writ large).

(Sidebar: The Medicare actuary and trustees’ report is the one that Republicans are always harping on and on about, even though if they read his report they’d realize he comes to conclusions that only slightly diverge from the CBO’s. The actuary finds that the system-wide benefits and deficit reduction from health reform are still there in the first decade and increase substantially over time, his estimates are just slightly lower than the CBO’s 2) There is considerable uncertainty about the estimates- the actuary just thinks there’s more reason to be concerned/ that there is more uncertainty than the CBO does).

Patrick_Landers said...

We need to look at the specifics on both sides of the equation, which I am in the process of doing. I’m sorry if I can’t keep up quickly enough with the work published by multiple publications and think tanks. Don’t take that too sassily. I’m not really criticizing your use of articles, I’m just pointing out that it creates a lot of material which is just logistically harder for me to respond to so quickly. The authors you cite spend their full-time jobs working on this stuff- even just researching to find counter-articles and posting them would take a while. So that’s my excuse for not having fully covered all the very important issues these articles have raised.

Also, I do not go into these articles with a mind frame assuming they are going to be wrong. I am aware of how much of a balancing act health care reform is trying to provide between cost-control and expansion of health insurance. I know how volatile these cost projections are. I have actually spent weeks- literally hundreds of man-hours- for a Hamilton class attempting to craft a deficit-neutral health care bill- a balancing act where the numbers and assumptions changed daily, and included constructing estimates of the cost of income-varying subsidies in the exchanges projected 10-years into the future. Once again, I’m not trying to be sassy- just pointing out that I am fully aware and accept that critics are likely to stumble upon uncertainties and risks to “ObamaCare.” So I disagree that I have not acknowledged my “client” is imperfect.

I have started addressing the CLASS Act concern, which I have agreed is a large source of concern by many, even those who support health care reform. It is absolutely a source of uncertainty and concern with the CBO estimates. It will absolutely need to look different (at least in revenue and spending rates) than originally conceived for it to work. However, unlike some other recent programs, such as the Medicare drug benefit, CLASS is fully paid for by beneficiary premiums, not deficit-financed. The law specifically requires the Secretary of Health and Human Services to design the program’s benefits and set the premiums to assure that the program takes in as much money as it pays out for each generation of workers. CBO’s score already acknowledges the uncertainty argument, but it also reflects this requirement of action on behalf of the Secretary. The Secretary will do this- the only way this won’t happen is if the structure of the program proves unsolvable. That is the point I am currently looking into- whether a practical policy solution can be found for the CLASS ACT. And absolutely, it’s going to be tough. However, I’m not convinced yet that it’s impossible. Lots of very smart people are working very hard on coming up solutions- no one has a greater incentive to make this work than the Administration. There are also a lot of people trying to make it work at a variety of think tanks around Washington.

Patrick_Landers said...

Hopefully my discussion of the CLASS Act shows how flexible I am in accepting “ObamaCare’s” flaws, and how open-minded I am about actually researching these things to not just blindly accept either side’s rhetoric. As an example, while I think the record clearly demonstrates that PPACA includes, in one form or another, nearly every major cost-control idea developed by experts across the ideological spectrum in the past few decades- I fully acknowledge that many are not implemented in full-strength. Things aren’t done full-scale yet, while other provisions aren’t implemented fast enough or strongly enough to achieve the maximum amount of cost savings. This is what I think Congress needs to be doing- moving aggressively on strengthening individual aspects of health care reform, not the Republican strategy of repeal and replace with… TBD (they instruct certain committees to report back tbd legislation at some indefinite point in the future- sounds like they’re serious about the replacing part to me).

In some ways, health reform Democrats now have increased flexibility, because they don’t need to be concerned about splintering their entire coalition of Democrats and providers/insurers/patients by going after certain people’s interests- they take on each interest group (and I include privately-insured patients in that, AARP, or Medicare beneficiaries as well) and inflict the short-term pain that will improve the entire system’s long-term financial health- improving not only our government’s fiscal state, but also our private sector’s competitiveness.

Similarly, the deficit-reduction concerns offer opportunities to motivate political movement on many cost-control issues. A prime example- the tax deduction for employer-sponsored health insurance. Experts across the ideological spectrum agree that it inflates costs by preventing a large segment of the market to be aware of the full cost of their health-insurance. In health reform, President Obama and many serious experts wanted to quickly and fully repeal that tax subsidy. Unfortunately, Labor Democrats resisted. Without labor, the bill could not have passed (since the amount of movement to the right necessary to attract any Republican support would have changed health reform into a minor marginal tinkering of the system which wouldn’t even try to address our long-term health care problems). In order to maintain the coalition, Democrats compromised and implemented the “Cadillac” tax. Now in the conversation over deficit reduction, the only efforts that have a chance of succeeding (Bowles-Simpson, Rivlin-Domenici, the “Gang of 6”) also include quickly limiting or all-out eliminating this distortive tax subsidy that inflates costs system-wide. This is good news, and I hope it comes into being. This kind of movement is a great example of how Congress can build upon PPACA using the political opportunity of deficit-reduction concerns.

Patrick_Landers said...

Let’s just hope Republicans don’t allow THEIR FANTASY IDEA of the “perfect” to become the enemy of the public good. Already Republicans are resisting some of the concessions and Obama and Democrats have suggested, like increasing flexibility by allowing states to start implementing alternative coverage schemes starting in 2014, rather than the original start date of 2017. Republicans though have dismissed this idea. Why? Republicans have realized that if they do anything to improve health reform, it makes it harder to stir people up over the issue. Charming!

2. The “doc-fix” was instituted after a few years where health care costs had accelerated at a much lower rate- the doc-fix was intended to only achieve relatively minor savings. The problem is the rate of cost growth system-wide picked up, and so getting the cost savings the SGR formula demanded would have been very difficult (though they did get some of it through the years). I’ll take this opportunity to emphasize again the problem with Medicare and Medicaid is not their government-derived inefficiencies or massive expansion of benefits- it’s a byproduct of the system-wide increase in health care costs. If you want to blame the problem on government, you’d have to argue that the government’s intervention in health care is entirely to explain for the American system’s unusually high-rate of cost growth (and higher starting point- in recent decades our peer countries have also seen high growth rates, they just had such a lower cost base than us that their’s hasn’t been unmanageable). However, that isn’t an accurate argument- a more statist, government-heavy solution from all international examples is much easier to be successful than our hybrid system. Also, I’m happy to explain the intricacies of our private system to explain why our high cost growth rates aren’t attributable to just government.

Patrick_Landers said...

3. Double-counting. There are two aspects to this argument in my mind. There’s the basic version of it which is how can health care reform improve the deficit situation and improve the fiscal health of the trust fund. That’s double-counting! (Hopefully I’m not screwing this alternative explanation up…) but That’s really an accounting property- the trust fund is part of our government’s fiscal situation, so any improvement to the trust fund (by increasing its revenue inflows or reducing its spending, the second of which ObamaCare does) is going to also improve the deficit situation. It’s really the most logical form of accounting the federal government has used for decades, for very good reasons. There are alternative accounting methods which I think would allow you to do this- not do this kind of “double-counting”- which I don’t think of as a gimmick, just a logical sequence of properties (I think about there being alternative options– I know there are alternative methods, I’m just not sure how twisted they’d have to be to not do this “double-counting”). Also, as I think I’ve said before but I’ll say in a different way this time- this “double-counting” property will be essential for politicians cutting spending in the next few years. Most of the savings that will be achieved will be done through entitlement reform. If you didn’t “double-count” (aka the normal accounting process), then politicians would have to cut trillions in the entitlement programs, cutting the real benefits that people feel- but the politicians wouldn’t be able to count this. Politicians would be voting for the biggest cuts in government programs in our nation’s history- but they wouldn’t be able to say how much of an impact it was having on our government’s fiscal state. “Double-counting” is a good thing- it makes it harder to worsen the fiscal state of the entitlement programs because worsening the trust fund also worsens the deficit picture. “double-counting” also makes it easier politically to cut these entitlement programs. I think people need to think really hard before they decide to just attack “double-counting.” I’m not sure we want to go down that path. And I know this argument sounds like I’m agreeing with you that it was a gimmick- but I’m not. I don’t think of it as a gimmick, but clearly you might, and if you felt so strongly about how the government does accounting, you could probably feel that way. I was just trying to point out that double-counting does important things I think most conservatives like.

The second part of the double counting argument might be if you question whether the medicare savings are achievable. I actually think that’s separate from the double-counting question, really an accounting concern. The medicare savings are an attack on whether ObamaCare’s cost savings are achievable, not about the CBO scored them specifically. And as I’ve stated before, the history of Medicare savings in the last few decades is pretty good with the large exception of the doc-fix/SGR formula, which I’ve noted is very different from what ObamaCare does- which is really more in line with successful past Medicare savings.

Patrick_Landers said...

4. I disagree that “promises about painless cost savings” are “vague”- specific examples include Accountable Care Organizations, the Independent Payment Advisory Board’s recommendations being implemented, the Cadillac tax, payment reforms- moving away from the fee-for-service system to ones that transfer the risks and incentives to control costs and improve outcomes onto the provider, the exchanges which create greater market competition, reducing administrative costs by standardizing the interactions between providers and payers (every payer and provider uses a different paperwork and payment processes- which is incredibly inefficient, since so many people and man-hours are spent on this thing which would be improved if there was just a standard form), establishing a CMS center for innovation to test and evaluate payment structures and methods to foster patient-centered care, improve quality, and reduce the costs of care in Medicare and Medicaid- The HHS Secretary can implement these reforms nationwide if they are found to reduce health care expenditures without reducing the quality of care, electronic health/medical records expansion, heavily investing in research in comparative effectiveness (aka what people do when they compare pepsi and coke- it’s just always been hard to do this in health care because insurers don’t care because they largely pass costs along, providers don’t care because they get paid, and patients don’t care because they generally don’t have time to consider their options and they pay their health costs indirectly), promoting primary care by increasing payments to this avenue of care provisions (which is cost-effective compared to specialty care), Reducing avoidable hospital readmissions through payment incentives that punish providers with poor records, etc. None of these are silver-bullets- they are largely “not-sexy” changes which work with one another through interaction effects to make a huge impact on the system. One big area of possibility is the payment bundling- that’s an area where they do a lot of test projects to figure out what’s best, because we know the fee-for-service system isn’t working and we know that providers (Kaiser, Geisinger, Intermountain, Mayo Clinic, etc.) do variations which work better- we just need to figure out to spread their payment structures to health care providers that aren’t so integrated. Here’s an article that Peter referred to earlier that discusses health reform experimentation versus the past success of agricultural innovation http://www.newyorker.com/reporting/2009/12/14/091214fa_fact_gawande?currentPage=all in case anyone’s interested.
ON the comparative effectiveness, The major rationale for this “comparative-effectiveness” is that we might find out that something works better than something else. That’s all. I imagine most people would like to know that. I don’t know why someone wouldn’t. I admit, if we find out that something works better (through the “comparative-effectiveness” work), AND it also turns out it’s cheaper, I’d encourage its use. I think that when something is more effective AND costs less, it’s a no brainer that it’s a superior option.

Patrick_Landers said...

I totally think there’s a great deal of uncertainty to the estimates on these things- which is an argument in my mind because I think reform is essential , for continuously addressing this problem and doing more and more with each bite at the apple. The current ObamaCare is imperfect, but it is our best hope and can be made better quite easily- there’s so much political opportunity if conservatives hadn’t made the political atmosphere so toxic.

Lastly on the most recent WSJ article link posted, I am well aware of the literature on cost-shifting as being relatively minor from the costs of the uninsured going to the rest of all people, just as cost shifting from Medicare and Medicaid to the private sector is very small. However, the cost-shifting argument was not a big argument for the mandate. The mandate is about getting every into the boat, taking personal responsibility for themselves and their future selves, and preventing the incentive to free-load- which is conservatives like people at the Heritage Foundation developed the concept!!!!

Okay- and that’s everything from me. Sorry for how random and off in a thousand directions at the speed of molasses everything I said was. Sorry for my grammatical mistakes. Sorry for my word count. Sorry for any excessive sassiness. (all my sorry’s are sincere- basically my way of closing off this argument). Anyways, it was fun talking about health care.

TJE said...

But what if many more people and firms than predicted don't get in the boat-- choosing small penalty/tax.