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A Project of The Annenberg Public Policy Center

Gimmicks in the Health Care Bill?

Democrats in Congress have been pleased with the Congressional Budget Office’s findings that both the House and Senate health care bills would reduce the deficit over 10 years. But is that assessment due to some accounting trickery in the bills?

The conservative Employment Policies Institute is airing an ad on cable news networks featuring June O’Neill, former director of the CBO in the mid- to late ’90s, who says that "some politicians are using accounting gimmicks to hide the cost" of the House bill. A nonpartisan budget watchdog group agrees with her.

O’Neill’s main complaint, provided to us by the Employment Policies Institute, is that revenue measures, such as a surcharge on the wealthy, kick in right away (in 2011), but major cost components, like subsidies to help people buy coverage, aren’t implemented until 2013. That means that the 2010-2019 period, during which CBO found the bill would decrease the deficit by a net $109 billion, includes a few more years of revenue-making measures than spending.

The nonpartisan Committee for a Responsible Federal Budget calls this a "timing gimmick," writing in a report on the bills that the House "front-loads offsets, before the new spending begins."

When we talked with CRFB President Maya MacGuineas, she cut the House bill a little bit of slack on this point. "The timing, obviously what it does … it masks the true differences in the cost. It would be a deficit over 10 years" if the bill had phased in the revenue and cost measures at the exact same time, MacGuineas says. However, it is legitimate to point out that something this large "can’t possibly get put into effect full force" immediately, she says.

A more "egregious" gimmick, in MacGuineas’ view, is the one in recently finalized Senate legislation, which pushed the start of subsidies back to 2014 to lower the 10-year price tag. Previous versions of the legislation implemented subsidies in 2013. The CBO said the first 10 years of that bill would reduce the deficit by a net $130 billion.

Still, the CBO estimated that both bills would result in slight deficit reductions in the subsequent 10 years, too. MacGuineas says that’s because some of the savings mechanisms "ramp up more gradually and generate savings in the second decade that you wouldn’t actually see in the first decade."

And there are other "gimmicks" at play. The clearest example: House Democrats took out a provision to cancel a scheduled cut in Medicare payments to physicians and put it in a separate bill. That’s a $210 billion measure over 10 years that passed the House Nov. 19. MacGuineas calls the budgeting maneuver "absolutely absurd," and at least one lawmaker admitted the separation was done to lower the health care bill’s apparent cost. "The reason it was separated, I would have to admit, was purely political," Democratic Rep. Pete Stark of California said. "We had to abide by the president’s request that we not exceed certain costs."

The so-called "doctor fix" alone would have negated the CBO’s projected net deficit reduction, instead adding about $100 billion to the deficit over 10 years, if it had remained in the health care bill. 

CRFB also took issue with the CLASS Act, a long-term insurance program for living assistance services, which is part of both chambers’ bills. It’s set up to bring in revenue through premiums over five years before participants become vested and start qualifying for benefits. "Using that money as an offset is a complete gimmick," MacGuineas says, adding that the program would probably be underfunded in the future.

The O’Neill ad goes on to claim that "many seniors on Medicare will pay the price" for these "accounting gimmicks." We asked the Employment Policies Institute how that would happen and got conflicting information. The group criticizes the House bill for proposed savings that it believes won’t materialize (part of the "gimmicks"), but also says seniors would suffer if such savings actually did occur.

In documentation from EPI, O’Neill argues that Medicare cuts are unlikely to be implemented. "The history of the Medicare budget process provides the classic example of tough measures enacted, but never executed," she writes. That would drive up the net cost of the House bill, but not cutting Medicare certainly wouldn’t mean seniors would "pay the price." A spokesman for EPI told us the line in the ad was a reference to the Medicare doctor fix being taken out of the bill. So, if the reduction in payments to doctors wasn’t canceled, Medicare would be adversely affected. But that contradicts O’Neill’s assessment that such tough cuts are traditionally canceled.

EPI also referred us to a report, which was released after the ad began airing, by the chief actuary of the Centers for Medicare and Medicaid Services. The report did find that certain proposed cuts in the bill could lead to some health care providers “end[ing] their participation in the program (possibly jeopardizing access to care for beneficiaries)” as the providers found it difficult to make a profit. But the report also questioned, as O’Neill did, whether the bill’s cuts to Medicare could hold up over time. Scaling them back, of course, “would likely result in significantly smaller actual savings than shown here for these provisions.”