The Congressional Budget Office released its assessment of the House fixes to the Senate health care reform bill Thursday. Over the next 10 years, the package would cost $940 billion and reduce the federal deficit by $130 billion. Over the second decade, it would reduce the deficit by $1.2 trillion.
It's not that those numbers are wrong. It's that they rely on assumptions that don't always square with reality. Any time the CBO scores a piece of legislation, it measures the bill's cost based on current law—in other words, it assumes that the status quo is going to hold, even if everyone knows it won't. Members of Congress can therefore tweak a bill to make it look more favorable in the short-term than it really is in the long run.
Here are some of the most common tricks to make your bill look good and how the health care bill does or doesn't use them:
Tax now, pay later. You might call this the oldest trick in the book. It dates back at least to 1935, when Congress passed Social Security. In 1937, the tax kicked in, but benefits didn't get paid out until 1940, thus guaranteeing that the program would be solvent. Of course, the delay made sense policywise, since Social Security needed a pot of money before it could start paying out benefits. But since then, Congress has used the strategy of speeding up revenue and delaying costs to make all kinds of legislation look more affordable than it really is. Some say that because most of the health-insurance reforms wouldn't kick in until 2014—nearly four years after the first taxes begin—it's not sustainable. According to the CBO report, however, long-term sustainability isn't a problem.
Delay the pain. One of the best policy ideas in the health care bill, according to most economists, is the tax on so-called "Cadillac" health care plans. It's also one of the most controversial, particularly among unions. Perhaps that's why the tax doesn't kick in until 2018, when Barack Obama is no longer president and the 111th Congress is a distant memory. The problem is, there's no guarantee it will ever kick in. Congress could simply overturn it in 2018. And opponents now have eight years to rally against it. One of the best revenue streams for health care reform is thus not only delayed but also uncertain. "To some it does seem, if not ludicrous, very iffy," says Isabel Sawhill of the Brookings Institution.
Count on fixes. In 1997, Congress planned to lower the amount of money doctors are paid by Medicare as part of the Balanced Budget Act. Instead, they've passed an annual "doc fix" to make sure that doctors' reimbursements don't go down. Some Democrats want to make that fix permanent. But until that happens, the CBO is forced to assume that current law—i.e., lower reimbursement rates—will continue and therefore assumes the country is saving more money than it really is. The Alternative Minimum Tax is similar: Originally, the tax was intended to expand every year to include more families, thus bringing in more revenue. But Congress instead passes an annual "patch" to protect those families, thereby blocking the revenue stream.
Pretend that costs will "sunset." The Bush tax cuts passed in 2001 were originally intended to "sunset" in 2010, at which point tax rates would revert to previous levels. But now that it's 2010, no one wants to be accused of raising taxes. Obama has therefore promised to extend the cuts for everyone except families making more than $250,000. Yet budget projections have always assumed that the tax cuts would end after 2010, making future deficits seem less egregious.
The health care legislation contains few if any truly misleading accounting gimmicks. Everything is above-board—at least for those who care to look. And because Obama asked for a 20-year projection rather than the usual 10-year window, critics have a harder time claiming the bill would only work for a decade. But the bill has still been tweaked to maximize its CBO score. The question now is whether reality will cooperate.