Today, we sat down with Jim Horney, Director of Federal Fiscal Policy at the Center, to discuss myths about health reform and its impact on the federal budget deficit.
Jim, let’s start off at the broadest level. Some opponents of the new health reform law claim that it will increase the federal deficit. Are they correct?
No, they are not correct. The nonpartisan, highly-regarded Congressional Budget Office, or CBO, estimates that the health reform law will reduce deficits by $143 billion over the next 10 years.
Some critics say that despite the CBO estimate, the law will increase rather than reduce deficits because it uses “gimmicks” to finance heath reform. Today we’re focused on one particular claim: that the law hides the true cost of health reform by starting to collect its new revenues in the early years and delaying spending until later years. Put another way, critics say it uses 10 years of revenues to pay for just 6 years of benefits.
This claim is flatly wrong. Critics selectively cite just a few provisions and fail to consider the legislation as a whole. They focus only on spending that doesn’t start right away, but there are also revenue increases that don’t start for a number of years.
But the clearest evidence that this is a false claim is CBO’s estimate. It shows that the health reform law will reduce the deficit not just in its first ten years but also in its second ten years and in decades that follow.
What does that tell us?
If the costs were delayed then the law would save money in the short run but then lose money down the road. But that’s not the case here.
CBO estimates that from 2020 to 2029, the health reform law will reduce the deficit by about a half a percent of gross domestic product or GDP. That’s equivalent to about $1.3 trillion in deficit reduction over that decade.
Listen to the podcast of this conversation, the first in a series on health reform myths and realities (or find it on iTunes).