The Wonk Room

Why The House Bill Is Deficit Neutral

Heritage’s The Foundry is calling my claim that House’s Tri Committee health care bill is deficit neutral “flat out untrue,” quoting directly from the the CBO’s analysis of the bill. “Here is the CBO letter (pdf) that Volsky was referring to. Click on it. Search for the term “deficit neutral” … or even just “neutral”. You’ll notice that those terms do not appear anywhere in the document. This is what the CBO letter actually says“:

According to CBO’s and JCT’s assessment, enacting H.R. 3200 would result in a net increase in the federal budget deficit of $239 billion over the 2010-2019 period.”According to CBO’s and JCT’s assessment, enacting H.R. 3200 would result in a net increase in the federal budget deficit of $239 billion over the 2010-2019 period.”

But as the CBO letter explains, that $239 billion is not the cost of a specific reform. Rather, it is the cost of fixing the so-called Sustainable Growth Rate (SGR). Congress created the formula in 1997 to check rising health care costs. According to the formula, “the amount Medicare pays doctors for an average Medicare patient can’t grow faster than the economy as a whole.” In 2002, once medical inflation outpaced economic growth, physicians experienced a cut in reimbursement rates, and Congress has patched the cut every cut since (by eliminating the pay cut).

“The net cost of the changes in physicians’ payment rates would total $245 billion,” the CBO concludes in its letter. In other words, the House’s SGR fix and its $239 billion price tag has little to do with health care reform; the policy is not adjusting unsustainable growth in health care spending or some other system imbalance. It is fixing a complex formula that Congress created to control health care spending but has largely over-ridden in an effort to please a powerful political constituency. So I was right, health care reform is budget neutral; patching Congress’ patches is not.