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Bland CBO Memo, or Smoking Gun?
Posted by Michael F. Cannon
This weekend, the Congressional Budget Office released “a very strange memo” titled, “Budgetary Treatment of Proposals to Regulate Medical Loss Ratios.” You wouldn’t know it from the title, but that little memo is the smoking gun that shows how congressional Democrats have very carefully hidden more than half the cost of their health care bills.
First, a little history. Like both the House and Senate bills, the Clinton health plan would have mandated that individuals and employers purchase private insurance. In its 1994 score of the Clinton plan, Bob Reischauer’s CBO included those mandated “private” payments in the federal budget –- i.e., as federal revenues and federal expenditures.
And yet, none of the CBO scores of this year’s bills include the costs of similar individual/employer mandates as federal revenues or federal spending.
My read of the CBO’s score of the Clinton health plan is that the private-sector mandates accounted for around 60 percent of the Clinton health plan’s total cost, the remainder being (traditional) government spending. So how is it that the CBO made the full cost of the Clinton health plan apparent to the public in 1994, but may now be revealing only 40 percent of the cost of the Obama health plan?
For some time, I’ve suspected the answer is that congressional Democrats have very carefully tailored their individual and employer mandates to avoid CBO’s definition of what shall be counted in the federal budget. Democrats are still smarting over the CBO’s decision in 1994. By revealing the full cost of the Clinton plan, the CBO helped to kill the bill.
Since then, keeping the cost of their private-sector mandates out of the federal budget has been Job One for Democratic health wonks. While head of the CBO, Obama’s budget director Peter Orszag altered the CBO’s orientation to make it more open and collaborative. One of the things about which the CBO has been more open is the criteria it uses to determine whether to include mandated private-sector spending in the federal budget. The CBO even published a paper on the topic. Read this profileof Orszag by Ezra Klein, and you’ll see that those criteria were also a likely area of collaboration with lawmakers.
The Medical Loss Ratios memo is the smoking gun. It shows that indeed, Democrats have been submitting proposals to the CBO behind closed doors and tailoring their private-sector mandates to avoid having those costs appear in the federal budget. Proposals that would result in a complete cost estimate — such as the proposal by Sen. Rockefeller discussed in the Medical Loss Ratios memo — are dropped. Because we can’t let the public see how much this thing really costs.
Crafting the private-sector mandates such that they fall just a hair short of CBO’s criteria for inclusion in the federal budget does not reduce their cost, nor does it make those mandates any less binding. But it dramatically reduces the apparent cost of the legislation. It is the reason we’re all talking about an $848 billion Reid bill, rather than a $2.1 trillion Reid bill.
If someone sold you a house, or a car, or a mutual fund this way, we would put them in jail.
I can hear it now. A year after passing the bill, as all the details become apparent and the true costs become revealed, Joe Biden will be in an interview saying, “It turned out to be much worse than we expected!” It would be the first time I would agree with Joe Biden.
