More About Paul N. Van de Water

Paul N. Van de Water

Paul N. Van de Water is a Senior Fellow at the Center on Budget and Policy Priorities, where he specializes in Medicare, Social Security, and health coverage issues.

Full bio and recent public appearances | Research archive at CBPP.org


Projected Health Spending Has Fallen Since 2010, Even With Health Reform’s Coverage Expansions

January 28, 2015 at 11:20 am

The Congressional Budget Office (CBO) now projects that federal health spending — including the costs of health reform’s coverage expansions — will be about $600 billion less over 2011-2020 than CBO projected in January 2010 without health reform (see figure).

In other words, projected health spending over the decade has fallen by $600 billion since 2010, despite $1 trillion in additional spending for premium tax credits and expanded Medicaid to help cover 27 million more Americans.

The decline in projected spending, which continues a pattern of downward revisions to CBO’s projections in recent years, stems from several factors.  One is health reform’s cuts in payments to Medicare providers and health plans.  Another is the recession, which has reduced the demand for health care services by slowing income growth.

But CBO and other experts have also concluded that a substantial part of the health care cost slowdown reflects structural changes in the health care system.  Professional associations, hospitals, and doctors are taking steps to curb costly and ineffective procedures and treatments.

CBO’s new report says, “Although views differ on how much of the slowdown is attributable to the recession and its aftermath and how much to other factors, the slower growth has been sufficiently broad and persistent to persuade [CBO and the Joint Committee on Taxation] to significantly lower their projections of federal health care spending.”

Health reform itself has most likely contributed to the slowdown as well.  As Kaiser Family Foundation President Drew Altman has written, “Even though its direct effects on system-wide costs may be limited so far, I believe Obamacare is having a significant indirect effect, although cause and effect and the magnitude are hard to prove. . . .  [It] is entirely likely that Obamacare has played and will continue to play a role in the slowdown in health-care cost growth and accelerating market change.”

To be sure, federal health spending — even if cost growth remains moderate — will keep rising as more baby boomers become eligible for Medicare and Medicaid.  Making the U.S. health care system more efficient thus remains a major budget challenge.  But CBO’s latest projections show that we’ve already made substantial progress.

Case for Repealing Medical Device Tax Is as Weak as Ever

January 16, 2015 at 12:41 pm

As the New York Times’ Robert Pear explained this week, health reform’s 2.3-percent excise tax on medical devices “has become a prime target for Republicans, some Democrats and a small army of lobbyists for the industry.  But a new report from the Congressional Research Service [CRS] challenges economic arguments that are being made to justify repealing the tax.”

The CRS report reaffirms what we’ve said repeatedly:  the tax, which will raise $26 billion over the next decade to help pay for health reform, has only a very limited economic impact, contrary to industry lobbyists’ dire predictions.

  • “The effect on the price of health care,” CRS says, “will most likely be negligible because of the small size of the tax and small share of health care spending attributable to medical devices.”
  • “The drop in U.S. output and jobs for medical device producers due to the tax is relatively small, probably no more than 0.2%.”
  • “[I]t is unlikely that there will be significant consequences for innovation and for small and mid-sized firms.”
  • “The tax should have no effect on production location decisions, since both domestically manufactured and imported medical devices are subject to the excise tax.”

In short, the scare talk about the medical device tax doesn’t square with reality.  Moreover, proponents of repeal need to explain how they would replace the billions in lost revenue.

House Bill Raising Health Reform Threshold to 40 Hours Would Affect More Workers

January 6, 2015 at 2:22 pm

House leaders have scheduled a vote this week to raise the threshold for health reform’s employer mandate from 30 hours of work per week to 40 hours.  House Speaker John Boehner and Senate Majority Leader Mitch McConnell call the 30-hour threshold “an arbitrary and destructive government barrier to more hours” of work and propose raising it to 40 hours.  In reality, as our newly updated paper explains, that step would lead to fewer hours of work for employees and more part-time work — the exact opposite of what their rhetoric about “restoring” the 40-hour work week implies.

Health reform requires employers with at least 50 full-time-equivalent workers to offer health coverage to employees who work 30 or more hours a week or pay a penalty.  Recent data provide scant evidence that the 30-hour requirement is causing a significant shift toward part-time work, contrary to the claims of critics.  The number of part-time workers who would rather be working full time is shrinking, as the figure shows.  And there’s every reason to believe that health reform will have only a small effect on the part-time share of total employment.

More importantly, raising the threshold from 30 hours a week to 40 hours would make a shift toward part-time employment much more likely — not less so.  That’s because only a small share of workers today — 7 percent — work 30 to 34 hours a week and thus are most at risk of having their hours cut below health reform’s threshold.  In comparison, 44 percent of employees work 40 hours a week, and another several percent work 41 to 44 hours a week.  Thus, raising the threshold to 40 hours would place many more workers at risk of having their hours reduced.

In short, it’s the House Republican bill, not health reform, that threatens the traditional 40-hour work week the bill’s sponsors say they want to protect.

Trade Agreement Needs to Protect Access to Affordable Drugs

December 18, 2014 at 10:02 am

AARP, the AFL-CIO, Doctors Without Borders, the Generic Pharmaceutical Association, and Oxfam have written President Obama expressing several concerns — which we share — about the Trans-Pacific Partnership (TPP), a trade agreement that the United States and 11 other Pacific Rim countries are negotiating.  The proposed agreement requires changes to avoid reducing access to affordable drugs both in the United States and abroad, they explain.  Here are three excerpts:

  • “[T]he intellectual property (IP) provisions that the U.S. Trade Representative has proposed fail to strike a proper balance between fostering innovation and ensuring expedited access to more affordable generic drugs through increased competition in the pharmaceutical market. . . . [They] would not only require TPP parties to grant very high levels of IP protection that go beyond existing international trade commitments, but would also lock in policies, for example with respect to biologic pharmaceuticals, that would contribute to putting these very expensive drugs and vaccines out of the reach of patients.”
  • “[T]he Annex on Transparency . . . could jeopardize governments’ efforts to contain costs in publicly supported health care programs. . . . [It] puts too much emphasis on the priorities of the originator [that is, pharmaceutical] industry, and does not give equal weight to patients and public health priorities such as drug affordability, safety, efficacy, and cost-effectiveness.  Indeed, this proposed text could have a negative impact on cost containment mechanisms, such as preferred drug lists, rebates, discounts, and formularies in all countries.  For example, it could adversely impact formularies and utilization rules used in U.S. health care programs, including Medicare, Medicaid, the Veterans Health Administration, the TRICARE program, and the 340B Drug Pricing Program.”
  • “Investor State Dispute Settlement proposals in the Investment Chapter could be used to limit competition, by allowing originator pharmaceutical firms to challenge efforts to manage pharmaceutical spending in public programs, including those used by state legislatures, Congress and public agencies here in the U.S. and abroad. For example, a manufacturer could challenge a state’s Medicaid preferred drug list or utilization rules that limit access to a certain drug under specific circumstances.”

We hope that the U.S. Trade Representative will heed these concerns as the TPP negotiations continue.

New York Times Warns Against “Dynamic Scoring”

December 8, 2014 at 12:06 pm

A New York Times editorial this weekend raised several red flags about so-called “dynamic scoring” — that is, including estimates of the macroeconomic effects of policy changes in official cost estimates for tax and spending legislation.  We strongly agree.  Our recent paper making the case against dynamic scoring, and a short summary we released today, explain that:

  • Current budget estimates aren’t “static.” The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) incorporate in their cost estimates many changes in individuals’ and companies’ behavior in response to proposed changes in tax rates and other policies.
  • Dynamic estimates are highly uncertain. Different models and assumptions produce widely varying estimates of how policy changes would affect the overall economy.  Some models’ results depend on assumptions about how future Congresses will reduce deficits.  And the models all have significant gaps.
  • Dynamic estimates are prone to manipulation. Because of this uncertainty, congressional leaders will likely cherry-pick the model and assumptions that give the most favorable estimates.  That’s exactly what House Ways and Means Chairman Dave Camp did in touting the highest estimates of economic and revenue growth for his tax reform proposal — estimates more than ten times greater than JCT’s lowest ones.  (See figure.)
  • CBO did not use dynamic scoring for the 2013 Senate immigration bill. Some members of Congress claim, incorrectly, that CBO used dynamic scoring to estimate the bill’s budgetary effects.  CBO’s official cost estimate took account of the bill’s direct effect on the U.S. population and labor force.  But it did not include estimates of the bill’s more speculative and uncertain effects on the economy, such as its effects on investment and productivity.

You can follow me on Twitter at @PaulNVandeWater and my co-author Chye-Ching Huang at @dashching.