Critics of the Affordable Care Act keep insisting that the law will increase the deficit. But the best evidence we have, from the most trusted authorities we have, suggests that those critics are wrong – and that the law, if anything, will reduce the deficit.
I know that many people find that difficult to believe. But, really, it’s neither complicated nor far-fetched. The law spends a lot of money, in order to make Medicaid available to more people and to provide subsidies for lower- and middle-income Americans buying private insurance. But it also finds a lot of money to pay for those new expenditures—mainly by raising some taxes, mostly on very wealthy people, and then reducing the cost of Medicare, mostly through cuts designed to eliminate corporate welfare or foster more efficient treatment.
Nobody can be 100 percent certain how it will all work. But the best guess of the Congressional Budget Office is that the law will actually reduce future deficits. That finding has never satisfied the critics, who have waged an all-out campaign to prove their point, even if that means peddling some blatant misrepresentations. It happened last month, when Republicans and their allies claimed new CBO projections showed the law would cost about twice as much as the agency had initially predicted. In fact, the new CBO projections showed no such thing, as CBO director Doug Elmendorf explained on the agency's website. Now they’re at it again, only this time their source isn’t a government report. It’s a report from Mercatus, a research center supported based at George Mason University.
The report claims that the health care law will cost $340 billion more than the CBO has estimated. The report's author is Charles Blahous, a senior research associate at Mercatus and one of two official, government-appointed trustees who watch over the Medicare fund that covers hospital expenses.
That last part is important: Blahous’ status as trustee gives the paper the veneer of official legitimacy. But it's just that: a veneer. Mercatus, a beneficiary of Koch family philanthropy, bills itself as "the world's premier university source for market-oriented ideas." Blahous is the Republican trustee (traditionally each party taps one) and a former Bush Administration official. None of which would matter if the report stood up on the merits. But, surprise, it doesn't.
To simply things a bit, Medicare has a Trust Fund from which it draws to pay hospital bills. Projections show that Trust Fund will run short on funds in the not-distant future. Under normal circumstances, Blahous says, the government would have reacted to this problem by reducing benefits and pocketing the savings. Instead, thanks to the Affordable Care Act, it's making some cuts to Medicare payments but spending those savings on helping people get health insurance. That spending, he says, will mean higher deficits.
Neither government nor most experts would make spending calculations that way—and for good reason. We assume that government will keep paying benefits for Medicare even if that means finding money from outside the Trust Fund, because, by law, people are entitled to those benefits. That’s why we call the programs "entitlements.” Conservatives should know this as well as anybody, because this is precisely why we have a long-term deficit problem—we’re on the hook for entitlement benefits that, according to projections, future government revenues will not fully support.
Jonathan Chait, who was among the first people to write about this on Tuesday, explained the significance at his New York magazine blog:
If Blahous’s assumptions are right, then we don’t really have an entitlement problem at all. Medicare can’t exceed its trust fund, so problem solved! You know how Paul Ryan has been stalking the halls of Congress with disaster-movie music in the backdrop, warning that we’re about to become Greece? He should relax! (Also, Blahous’s methodology would show that Ryan’s budget looks way worse, too.)
The kernel of truth in the report is that advocates of the law, including those in the administration, refer to improvements in the Medicare Trust Fund and lower deficits overall as if they were separate achievements. They really aren’t. They are essentially two ways of saying the same thing: Thanks to the Affordable Care Act, the government will have an easier time meeting future obligations for health care spending. Of course, that’s the exact opposite of what Blahous is trying to convince people.
Alas, not everybody who read the report seems to have noticed this problem. The paper was front-page news in the Washington Post on Tuesday. And although it prompted quick and thorough debunking, not just from Chait but also from Igor Volsky (of ThinkProgress), Paul Van de Water (of the Center on Budget and Policy Priorities, and Brian Beutler (of Talking Points Memo), versions ended up appearing on dozens, if not hundreds, of websites and news organizations around the country—typically with credulous headlines like this one, from the San Francisco Chronicle website: “Study: Health care law to add billions to budget.”
You can bet the Romney campaign and Republican National Committee are already splicing similar headlines into their advertisements. And you can bet that most people will have no idea the headlines are totally misleading.
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