Committee for a Responsible Federal Budget

Those 'Health Care Gimmicks' Are Still Out There

Sep 9, 2009 | Health Care

Today, the Peter G. Peterson Foundation released a Lewin Group analysis of the current House health care reform bill (America’s Affordable Health Choices Act of 2009). Unlike CBO, Lewin's analysis looks at a 20-year period. And while they find the bill to be nearly deficit neutral in the first decade, they expect it to increase the deficit by over $1 trillion between 2019 and 2029. They also find economy-wide health care spending would increase by $2 trillion over the next two decades, while the number of uninsured would drop by nearly 30 million people. 

Change in Total Federal Spending5301,8772,407
Change in Total Federal Revenue4918681,359
Change Impact on Federal Deficit391,0101,048

We find the projected costs of the bill, beyond the ten year budget window, to be quite trouble. As the report explains: “over time, the sources of financing do not keep pace with the expected growth in new costs.”
In Beware of Budget Gimmicks in Health Care Reform, we warned about running deficit beyond the 10-year window. As we wrote at the time:
A bill can be structured to appear deficit-neutral in the first ten years while leading to large budget deficits thereafter...[A] ‘final year test’ would deter the use of phase-in gimmicks since the phase-in of any costs would have to be accompanied by an increase in the size of offsets...The final year test is not sufficient, however, to prevent new health care spending from exceeding offsets beyond the ten-year period...Even if costs are aligned with offsets in the tenth year, they could easily diverge beyond this period.
Lewin's analysis should serve as a warning of the dangers of relying and ten-year budget neutrality alone. Policy makers must ensure that health reform is sustainable -- and in fact reduces deficits -- well beyond the traditional 10-year budget window.