“Double-Counting” Canard Quacks Again

April 10, 2012 at 2:32 pm

Former Bush Administration official Charles Blahous has garnered some media attention by gussying up old, discredited arguments about the budgetary effects of health reform.  But his paper adds nothing new to the debate.

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

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

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

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

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

For example, the Balanced Budget Act of 1997 and the Deficit Reduction Act of 2005 — both of which Republican Congresses approved — included Medicare savings that were counted as reducing the deficit and improving Medicare’s financial outlook.  The Senate Republican Policy Committee rightly claimed credit for this result, and no one made charges of double-counting.

And, just last month, House Budget Committee Chairman Paul Ryan (R-WI) touted how his budget plan would both “shore up Medicare” and reduce projected deficits.  No one discounted his Medicare savings because of supposed double-counting.

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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 | Blog Archive | Research archive at CBPP.org

12 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. milo janus #

    What is so hard to understand here? The Medicare savings are a cut in the RATE of spending. If you cut back your RATE of spending to the tune $500 Billion over ten years, that means that at the end of the ten years there’s $500 billion more left than what you would have had you not cut back on the spending. What you do with the $500 billion that you saved is irrelevant as far as the HI trust fund is concerned. There is no double-counting this money within Medicare.

    Think of it this way: If you’re driving your car in 3rd gear at 50 mph for ten years, your tank is going to run out of gas much more often than if you drove it at a more efficient rate, like 5th gear. And in 5th gear, it will cost you less because you’re driving at a more efficient rate. What you do with the money you saved on gas is irrelevant.

  2. mnemos #

    This doesn’t actually address the Blauhaus argument at all. According to Blauhaus, the CBO assumes in its baseline for comparison a drastic reduction in Medicare spending after 2016 – which is expected since the fund would be depleted. That’s OK. It also assumes that cuts in Medicare spending will stall the depletion of the fund until 2024 – that’s OK. So let’s look at 2017 – if we have the earlier cuts in Medicare spending, the fund will not be depleted – so will the drastic cuts assumed in the baseline occur? The drastic cuts are only assumed because the fund is depleted, so it only makes sense to say if the fund is not depleted, the cuts won’t happen. There are at least two ways to deal with this: assume the drastic cuts don’t occur until the fund is depleted (2024), or enact something to force the cuts to occur without the fund being depleted. According to Blauhaus, the CBO was required to assume that the cuts magically occur in 2016 without depleting the fund or requiring them by law – which is being described as “double counting”. To refute his argument, you need to show that the drastic cuts from 2016 are not assumed in the CBO report.

    • Paul Van de Water #

      The baseline (as defined in law) assumes that Medicare Hospital Insurance benefits will be paid in full even when the trust fund is depleted. It does not assume any drastic cuts.

  3. Bob #

    The priorities of Obamacare:

    1. Provide guaranteed trillions to insurance corporations.
    2. Provide guaranteed trillions to pharmaceutical and medical device corporations.
    3. Provide guaranteed jobs to millions of political dependents.
    4. Provide trophies for Obama to brag about.
    5. Get ready to relieve corporations of medical expense.
    6. Get ready for caste-based medical care.

  4. Fuzzy #

    Mr. Van de Water is conveniently ignoring the fact that the supposed Medicare savings is no savings at all since that money will never be put into the Medicare HI trust fund, but will be instead spent to fund other portions of Obomacare. The so-called eight year extension of solvency for Medicare is just a case of eight additional years of IOUs put into the HI account. Those IOUs will need to be paid by the next generation IN ADDITION to what they pay into Medicare.

    When are these government bozos, like Van de Water, going to figure out that the taxpayers already have seen through their phony trust funds and the countless lies they continue to spout while pretending these trust funds actually consist of something other than IOUs?

    It’s quite a ponzi scheme you are backing, Mr. Van de Water. You advocate putting a worthless IOU into the Medicare trust fund while spending the money that you falsely claim is being put into the fund, and then whine when anyone points out the fraud you are so conveniently enabling.

  5. jeff meyer #

    If, as you allege, talking about the same savings two different ways is good then why not save more and talk about it three different ways. Or do it again in different languages and multiply the savings by the square or cube?

  6. Tom Genin #

    But when a batter scores three runs a game, which is part of the teams 6 runs a game, if the other team knocks him out of the lineup, they can’t say they stopped 6 runs a game (3 from his personal stats and 3 from the team stat) which is what the Obama Administration is doing.

    They’re double counting savings from both accounts and then using that double counted dollar number as an assett when comparing liabilities from the health care bill, which savings are therefore 50% wrong.

    The author is right though, math isn’t new, but to some is does to be either a challenge, or a tool to be so disingenuous that it borders on fraud.

  7. ezra Abrams #

    Van de Water, Krugman, deLong, Chait, E Klein…5 very bright articulate guys, and not one of em can explain in words intelligble to a 5th grader exactly what it is that was so bad.
    Thats my opinion
    I’m not be injurious, etc; I’m stating what I say as a fact: a monumental failure on the part of hte progressive web to articulate something.

    • 10

      – Yes, it’s a challenge to dispel the confusion that opponents of health reform have created over the budgetary accounting.

      Here’s the bottom line:
      Medicare is a part of the federal budget. Therefore, reducing projected deficits in Medicare also helps reduce projected deficits in the overall budget. It’s as simple as that.

      • Kyle E #

        Mr. Van de Water-

        I think you have just made the critics point; yes you can say that it is going to reduce the deficit, but you can’t also say that you are going to use the money saved to extend Medicare. Are you or are you not spending that money on ACA? or Are you taking the savings and (saving) the money for another day to spend on Medicare? The other problem with this idea is, I believe every time someone in Washington says we are going to cut this or that out of Medicare they don’t, so thus the savings never appear. Remember how the Doc fix was supposed to be in the bill, but when it was the budget didn’t balance. So how did they solve this billion dollar problem, they took it out and put it in another bill.

        Also your argument that they did this in previous congresses doesn’t make it right. In fact, probably the best reason to believei it is wrong.

        Finally the fact that you started with a “a former Bush Administration” instead of a Obama appointee, shows your hand pretty early. (yes I know he was an Obama appointed GOP member of the committee)

        I apologize for and spelling errors, I didn’t have time to check.

        • 12

          Some criticisms of health reform rest on a mistaken belief that, in recent years, Congress has repeatedly enacted provisions to achieve savings in Medicare and then generally blocked these provisions before they could take effect. Thus, critics say, no one should take seriously the provisions of health reform that would produce Medicare savings. In fact, my colleague Jim Horney and I analyzed major legislation affecting Medicare that Congress has enacted over the last two decades and have shown that Congress has permitted the vast majority of Medicare savings to take effect.

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