off the charts
POLICY INSIGHT
BEYOND THE NUMBERS

On Health Reform and the Deficit, There They Go Again

Politico quotes incoming House Budget Committee Chairman Paul Ryan today as stating that the health reform law “is full of gimmicks that more than erase the false claim of deficit reduction” made by the Congressional Budget Office, which has estimated that the law will reduce the deficit by $143 billion over 2010-2019 and by some $1.3 trillion over the following decade. But the “gimmicks” he cites are nothing of the sort, as my colleague Jim Horney and I explained in a report we issued when these and similar misleading charges began surfacing nearly a year ago. According to Politico, Rep. Ryan claimed that the Affordable Care Act uses revenues from Social Security and premiums from a new long-term care insurance to offset the cost of health reform. In reality, health reform reduces the deficit even without counting these revenues. As our report explained:
CBO and the Joint Committee on Taxation have concluded that the health reform legislation will reduce employer spending on health insurance, in part because the new excise tax on high-cost insurance plans will lead employers to shift some employee compensation from health insurance to cash wages. Workers will pay Social Security payroll contributions and income taxes on the additional wages. The legislation also establishes a new, voluntary program of long-term care insurance, called the CLASS Act. Benefit payments from CLASS will be fully financed by premiums that beneficiaries pay and interest earnings. In its early years, as the program starts up, premium collections will substantially exceed benefit payments. Congressional leaders crafted the health reform bill so that it would be fully paid for without relying on these additional Social Security payroll contributions or the CLASS Act premiums. The CBO estimate clearly shows that if one excludes the net revenues of $29 billion from Social Security contributions and $70 billion from CLASS Act premiums, health reform still reduces the deficit by $44 billion over the first ten years.
In the second ten years and thereafter, CLASS and Social Security together contribute only a small share of the projected reduction in deficits.