Research Briefing

DESPITE OBAMA’S PROMISE, OBAMACARE HAS FAILED TO CONSTRAIN FEDERAL SPENDING ON HEALTH CARE

Obama Said Controlling Health Care Costs Was Essential For Fiscal Discipline And The Economy. OBAMA: “[G]etting health care costs under control is essential to reducing budget deficits, restoring fiscal discipline, and putting our economy on a path towards sustainable growth and shared prosperity.” (President Barack Obama, Remarks On Reforming The Health Care System To Reduce Costs, Washington, DC, 5/11/09)

• Obama:  “This legislation will also lower costs for families and for businesses and for the federal government, reducing our deficit by over $1 trillion in the next two decades. It is paid for, it is fiscally responsible, and it will help lift a decades-long drag on our economy.” (President Barack Obama, Remarks On Signing The Patient Protection And Affordable Care Act, Washington, D.C., 3/23/10)

Increasing Health Care Costs On The National Debt Will Be Unsustainable

 “The Cost Of Government Health Care Programs Will More Than Double Over The Next Decade, The Congressional Budget Office Said Tuesday.” (Sam Baker, “CBO Expects Health Spending To Double,” The Hill’s “Health Watch,” 1/31/12)

• CBO: The Aging Population And Rising Health Care Costs “Will Increase Federal Debt To Unsupportable Levels.” “Under both CBO’s baseline and its alternative fiscal scenario, the aging of the population and rising costs for health care will push spending for Social Security, Medicare, Medicaid, and other federal health care programs considerably higher as a percentage of GDP. If that rising level of spending is coupled with revenues that are held close to the average share of GDP that they have represented for the past 40 years (rather than being allowed to increase, as under current law), the resulting deficits will increase federal debt to unsupportable levels.” (“The Budget And Economic Outlook: Fiscal Years 2012 To 2022,” Congressional Budget Office, 1/31/12)

CBO: Spending On Medicare Will Reach $1.8 Trillion In 2022. “In CBO’s baseline projections, spending for health programs more than doubles between 2012 and 2022, rising by an average of nearly 8 percent per year and reaching $1.8 trillion in 2022.” (“The Budget And Economic Outlook: Fiscal Years 2012 To 2022,” Congressional Budget Office, 1/31/12)

• Medicare Spending Will Increase By 90 Percent. “The budget office expects Medicare spending to rise 90 percent between now and 2022 – and that’s assuming Congress signs off on Medicare cuts that, in reality, lawmakers always prevent.” (Sam Baker, “CBO Expects Health Spending To Double,” The Hill’s “Health Watch,” 1/31/12)

CBO: Spending On Social Security And Other Health Care Programs Will Rise, Outstripping “Growth In Nominal GDP In 2022.” “CBO projects that the costs per enrollee for Social Security and the major health care programs also will continue to rise, albeit at different rates because of differences in the laws that govern them. Altogether, spending on those programs will increase at an average annual rate of nearly 7 percent between 2013 and 2022, a pace that will outstrip growth in nominal GDP.” (“The Budget And Economic Outlook: Fiscal Years 2012 To 2022,” Congressional Budget Office, 1/31/12)

ObamaCare’s Spending On Medicaid Will “Rapidly” Increase While Putting More Pressure On The States

CBO: With ObamaCare, Medicaid Spending Will “Shoot Up Rapidly” Totaling $605 Billion In 2022. “Spending for the program will climb again in 2013 and will shoot up rapidly in 2014, 2015, and 2016 as a result of provisions in the Affordable Care Act. By 2022, under current law, federal outlays for Medicaid are expected to total $605 billion, more than twice the 2012 amount; spending will equal about 2.5 percent of GDP, compared with 1.7 percent this year.” (“The Budget And Economic Outlook: Fiscal Years 2012 To 2022,” Congressional Budget Office, 1/31/12)

• CBO: Enrollment In Medicaid Will Increase Under ObamaCare, Increasing The Federal Share Of Those Expenses. “Enrollment is expected to rise rapidly over the decade as more people become eligible for Medicaid under provisions of the Affordable Care Act and as the number of elderly people rises. By 2022, about 95 million people will be enrolled in Medicaid at some point in the year, CBO estimates. For many of those new enrollees, the federal share of their costs will be significantly larger than the share for individuals enrolled in Medicaid today.” (“The Budget And Economic Outlook: Fiscal Years 2012 To 2022,” Congressional Budget Office, 1/31/12)

States Have Had To Increase Medicaid Spending By 29 Percent This Fiscal Year. “The federal government had provided extra Medicaid help to states as part of the stimulus program. But that help has ended, prompting states to increase their Medicaid spending by an average of 29 percent this fiscal year, according to the Kaiser Family Foundation.” (Michael A. Flethcer, “States face bleak economic forecast, report says,” The Washington Post, 11/29/2011)

States’ Medicaid Spending Is Expected To Increase Once ObamaCare Provision Takes Effect In 2013. “Officials say the fiscal pressure that Medicaid puts on states is expected to increase when the federal health-care overhaul takes effect in 2014.” (Michael A. Flethcer, “States face bleak economic forecast, report says,” The Washington Post, 11/29/2011)

• Although ObamaCare Will Fund The Extra Costs Of The Newly Eligible For Medicare, States Will Eventually Shoulder More Costs. “Officials say the fiscal pressure that Medicaid puts on states is expected to increase when the federal health-care overhaul takes effect in 2014. Although the federal government is required to pick up the costs for people newly eligible for the program, many who are now eligible but not enrolled are expected to be drawn in, and states must shoulder part of those costs.” (Michael A. Flethcer, “States face bleak economic forecast, report says,” The Washington Post, 11/29/2011)

ObamaCare’s Mandates Will Cost Billions

CBO: ObamaCare Mandates Will Increase Mandatory Health Care Spending “From $26 Billion This Year To $161 Billion In 2022.” “Provisions in the Affordable Care Act will significantly increase the scope and scale of such benefits in the coming decade. In CBO’s baseline projections, federal spending for mandatory health care programs other than Medicare and Medicaid rises from $26 billion this year to $161 billion in 2022.” (“The Budget And Economic Outlook: Fiscal Years 2012 To 2022,” Congressional Budget Office, 1/31/12)

OBAMA’S CLASS ACT “PONZI SCHEME” DISMISSED IN THE HOUSE

Last Wednesday, The U.S. House Voted To Repeal The Community Living Assistance Services And Supports Program (CLASS). “The House on Wednesday evening voted to repeal a section of the 2010 health reform law establishing a voluntary, long-term healthcare program that the Obama administration has since said is not financially viable.” (Pete Kasperowicz, “House Votes To Repeal Health Care Law’s ‘CLASS Act’ Program,” The Hill’s “Floor Action Blog,” 2/1/12)

• Twenty Eight Democrats Backed CLASS Repeal. “Members voted 267-159 in favor of the bill, H.R. 1173, which repeals the Community Living Assistance Services and Supports (CLASS) program. While 28 Democrats joined Republicans in support of the bill, House passage sends the bill to a Democratic Senate that is expected to ignore the bill completely.” (Pete Kasperowicz, “House Votes To Repeal Health Care Law’s ‘CLASS Act’ Program,” The Hill’s “Floor Action Blog,” 2/1/12)

Senator Kent Conrad (D-ND): “‘A Ponzi Scheme Of The First Order, The Kind Of Thing That Bernie Madoff Would Have Been Proud Of,’ And He Vowed To Block Its Inclusion In The Senate Bill.” ( Lori Montgomery, “Proposed Long-Term Insurance Program Raises Questions,” The Washington Post, 10/27/09)

Sen. Max Baucus (D-MT): “I Am No Fan Of The CLASS Act Myself.” “To be honest, I frankly would like to hear you talk about the CLASS Act because frankly I am no fan of the CLASS Act myself, so you can proceed.” (Sen. Baucus, Floor Remarks, 12/2/09)

CLASS Was A Bad “Accounting Gimmick” And Was A “Fiscal Disaster”

CLASS Was To Account For 40 Percent Of The Savings In ObamaCare. “By scrapping the CLASS Act, HHS is losing about 40 percent of the savings healthcare reform was supposed to generate. The Congressional Budget Office’s most recent estimates projected $210 billion in total deficit reduction from the healthcare law, $86 billion of which would have come from CLASS.” (Sam Baker, “Obama’s HHS Ends Controversial Program In Health Reform Law,” The Hill’s “Health Watch,” 10/14/11)

CLASS “Was Amongst The Worst Accounting Gimmicks Used To Make It Seem As If National Health Care Would Reduce The Deficit.” “Known by the acronym CLASS, the government-backstopped insurance for nursing homes, home health aides and the like was among the worst accounting gimmicks used to make it seem as if national health care would reduce the deficit.” (Joseph Rago, “GOP Vets An ObamaCare Program,” The Wall Street Journal, 9/19/11)

• CBO: CLASS Act Will “Eventually Lead To Net Outlays When Benefits Exceed Premiums.” “As noted earlier, the CLASS program included in the bill would generate net receipts for the government in the initial years when total premiums would exceed total benefit payments, but it would eventually lead to net outlays when benefits exceed premiums. ... In the decade following 2029, the CLASS program would begin to increase budget deficits.” (Douglas Elmendorf, CBO Director, Letter To Rep. Rangel, P.13, 10/29/09)

Obama Had Given Approval To Using Budget Gimmickry And “Fiddling With The Way It Presented Savings” From ObamaCare. “In the December 20th memo, they resorted to gimmickry. In his first budget, Obama had prided himself on ‘honest budgeting,’ declining to employ the fanciful assumptions that the previous Administration had used to hide the costs of government. On disaster relief, for example, he had estimated that the government would need twenty billion dollars a year, a figure based on the statistical likelihood of major disasters requiring federal aid. Now Obama’s aides reminded him that Congress had ignored his ‘‘honest budgeting’ approach,’ and perhaps they should, too. They proposed ‘$5 billion per year for disaster costs.’ Obama drew another check mark. The White House could also save billions by fiddling with the way it presented savings from Obama’s health-care-reform bill. Check.” (Ryan Lizza, “The Obama Memos,” The New Yorker, 1/30/12)

• “A Trove Of Internal Emails” Showed That The Obama Administration Knew That Their Long-Term Care Program Really Was “A Fiscal Disaster.”  “The Solyndra solar subsidy flare-up is getting all the media attention, but arguably as great a White House scandal concerns one of ObamaCare's multiple new entitlements. A trove of internal emails uncovered by congressional investigators shows that administration officials knew that a new program for long-term care really was the fiscal disaster that critics claimed at the time.” (Joseph Rago, “GOP Vets an ObamaCare Program,” The Wall Street Journal, 9/19/11)

Despite Halting CLASS, The Obama Administration Opposed Repeal

Last Fall, The Obama Administration Pulled The Plug On The Community Living Assistance Services And Supports (CLASS) Program.  “The Obama administration says it is unable to go forward with a major program in the president's signature health care overhaul law — a new long-term care insurance plan. Officials said Friday the long-term care program has critical design flaws that can't be fixed to make it financially self-sustaining.” (Ricardo Alonso-Zaldivar, “Obama Pulls Plug On Part Of Health Overhaul Law,” The Associated Press, 10/14/11)

• HHS Secretary Kathleen Sebelius: “I Do Not See A Viable Path Forward For CLASS Implementation At This Time.” (Alex Wayne & Drew Armstrong, “Obama Ends Kennedy-Backed Long-Term Care Program As Too Costly To Sustain,” Bloomberg, 10/15/11)
  
• HHS Admits That CLASS Was “Unsustainable” And That The Administration Would Not Enact The CLASS Program. “The U.S. won’t start a long-term care plan created by the 2010 health overhaul, the largest piece of the law so far to be stopped by Congress, the courts or President Barack Obama’s administration. The Health and Human Services Department said it would indefinitely suspend the program, known as the Class Act, calling it financially unsustainable. In doing so, officials said that deficit savings from the health law would be cut by $86 billion over a decade, from $210 billion. ‘I do not see a viable path forward for Class implementation at this time,’ HHS Secretary Kathleen Sebelius said yesterday in a letter to congressional leaders.” (Alex Wayne & Drew Armstrong, “Obama Ends Kennedy-Backed Long-Term Care Program As Too Costly To Sustain,” Bloomberg, 10/15/11)

Obama Opposed The Repeal Of CLASS.  “President Obama is against repealing the health law's long-term-care CLASS Act and might veto Republican efforts to do so, an administration official tells The Hill, despite the government's announcement Friday that the program was dead in the water. ‘We do not support repeal,’ the official said Monday. ‘Repealing the CLASS Act isn't necessary or productive. What we should be doing is working together to address the long-term care challenges we face in this country.’” (Julian Pecquet, “Obama Opposes Repeal of Healthcare Program Suspended Last Week,” The Hill’s “Health Watch,” 10/17/2011)

• Although Repealing CLASS Would Not “Affect The Deficit.” “The Congressional Budget Office confirmed Monday that formally repealing the dormant CLASS program in health care reform law would not affect the deficit.” (Sam Baker, “CBO: Repealing CLASS Health Care Law Won’t Affect Budget Deficit,” The Hill’s “Health Watch,” 10/31/11)

OBAMACARE CREATED AN AGENCY TO STUDY COST CUTTING INITIATIVES THAT HAVE ALREADY FAILED

ObamaCare Created A New National Center To Study Ways To Cut The Costs Of Health Care.  “The Obama administration touts it as a key solution to the nation’s runaway health-care spending: a new national center set up by the 2010 health-care law to test and implement groundbreaking ways to cut costs while improving patient care.” (N.C. Aizenman, “Center For Medicare And Medicaid Innovation Aims To Cut Health-Care Costs,” The Washington Post, 1/26/12)

• But Health Care Experts Question The New Center And Its Programs, Pointing To Similar Initiatives In The Past Forty Years That Have Mostly Failed. “Some health-care experts question how many of these experiments will result in significant savings. They point to a study released by the Congressional Budget Office last week that found that savings were produced in only one of 10 major Medicare demonstration projects tried by administrations since 1967 — all of them similar to initiatives the innovation center has begun.” (N.C. Aizenman, “Center For Medicare And Medicaid Innovation Aims To Cut Health-Care Costs,” The Washington Post, 1/26/12)

Those Cost Cutting Initiatives Have Failed To Lower Health Care Costs

CBO: “In Nearly Every Program, Spending Was Unchanged Or Increased.” “In nearly every program, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program, when the fees paid to the participating organizations were considered.” (“Lessons From Medicare’s Demonstration Projects On Disease Management, Care Coordination, And Value-Based Payment,” CBO Director’s Blog, 1/18/12)

CBO: “Programs Did Not Achieve Enough Savings To Offset Their Fees.” “Programs in which care managers had substantial direct interaction with physicians and significant in-person interaction with patients were more likely to reduce Medicare spending than other programs. But, on average, even those programs did not achieve enough savings to offset their fees.” (“Lessons From Medicare’s Demonstration Projects On Disease Management, Care Coordination, And Value-Based Payment,” CBO Director’s Blog, 1/18/12)

CBO: “On Average, The 34 Programs Had Little Or No Effect On Hospital Admissions.” (“Lessons From Medicare’s Demonstration Projects On Disease Management, Care Coordination, And Value-Based Payment,” CBO Director’s Blog, 1/18/12)