Double Counting Medicare Savings

University of Minnesota professor Roger Feldman, with whom I’ve co-authored several papers, has written an opinion piece for the Minneapolis/St. Paul Star Tribune. He takes the Obama Administration to task for rhetorically double counting health reform’s Medicare cuts, once to shore up Medicare and once again to pay for expansion of health insurance. However, he notes CBO made no such error.

The CBO did not make a mistake in its arithmetic. By law, it must estimate the effect of proposed legislation on the federal deficit, and … [not on] other federal programs [that] must be cut.

The president, however, does not have to follow the same rules as the CBO. He could have told us that Medicare spending cuts can be used to fix Medicare or to pay for health insurance expansion, but not both. Instead, he chose to maintain the fiction that Medicare savings can be counted twice.

… Congress should address Medicare reform and health insurance reform separately in future legislation. … However, the CBO should not change its method of scoring proposed legislation. The CBO is not responsible for maintaining the fiscal soundness of Medicare. But another federal agency, the Office of Management and Budget, should publish a budget that shows the future liabilities for all entitlement programs and these should be included in the president’s annual budget.

Until we meet this challenge, we will continue to use bad arithmetic and budgetary tricks to hide the cost of health care reform.

I would also prefer to see policy debates conducted in a climate of candor. Unfortunately one can’t count on everyone to behave that way. And neither side has an incentive to be fully open and honest. The proper penalty is to point it out, as Roger has. None of this changes the fundamental truth that the budget deficit problem is a health care spending problem. I don’t think anyone who follows the debate is under the illusion that that problem will be fixed with this reform alone. Obama may have tried to make the hole appear shallower than it is. But even half a deep hole is a deep hole.

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