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During a town hall meeting, U.S. Rep. Russ Carnahan, a Democrat from Missouri, tried to reassure constituents that his party's health care reform bill would cost less than expected.
"The Congressional Budget Office most recently came out and analyzed the current plan and said that it was not only deficit-neutral, which has been one of the important factors for the president and congressional leaders, but also that over 10 years it would create a $6 billion surplus," Carnahan told an audience on July 20, 2009, at Forest Park Community College in St. Louis.
The audience laughed in response. (To see for yourself, fast forward this video to the 7-minute mark.)
It's a claim that's been repeated by many Democrats since the Congressional Budget Office, a nonpartisan group that does all the number crunching for Congress, released its cost estimate for the health care bill on July 17.
In its report, the CBO estimated the bill will cost about $1.04 trillion over 10 years. That sum would be partially offset by $219.3 billion in Medicare savings and by $583 billion in tax increases over the same amount of time.
Still, the bill would create a $239 billion deficit, according to CBO.
We were perplexed: How could Carnahan proclaim a $6 billion surplus if the budget office was projecting a deficit?
The confusion comes down to an accounting question about how to treat $245 billion in the House bill that would cover the cost of adjusting Medicare reimbursement rates so doctors don't face the potential of a 21 percent cut in fees.
In 1997, Congress agreed that, should Medicare reimbursement rates grow faster than the economy, they would be cut. But instead of following its own rules, Congress has put off those cuts year after year with a Medicare "fix." CBO considers that sum as part of the cost of the bill.
But many Democrats don't. Two days after Carnahan's town hall meeting, the House approved a bill that would require all new spending be paid for by new taxes or spending cuts to other government programs, a practice widely known as pay-as-you-go. That bill exempts the Medicare pay fix from these rules, which effectively reduces the cost of the health care reform bill by that same $245 billion. The pay-as-you-go bill is pending in the Senate.
But in the meantime, CBO will continue to include it as part of the legislation's price tag until the pay-as-you-go rules are put into law.
Back to Carnahan's math: If you accept his assumption that pay-as-you-go ultimately passes both houses of Congress and is signed into law, the health care bill will only cost $797 billion over 10 years. The $219.3 in spending cuts and the $583 billion in tax revenue total $802 billion, so that leaves $5.3 billion extra. (That's not quite $6 billion, but it's in the ballpark. We can assume this is the result of rounding.)
Whether Republicans or Democrats are in charge, this kind of budget trickery is nothing new to Washington, said Brian Riedl, a budget expert at the conservative Heritage Foundation.
"It's the best way to do business in Washington," he said. "You inflate the baseline [of a bill] to make it seem like you're spending less."
So as for Carnahan's statement, he is definitely misstating CBO's findings. The budget office did not say there would be a $6 billion surplus, it said there would be a $239 billion deficit. Only when Carnahan added some optimistic assumptions did the math work the way he claimed. We find his claim False.
House Education and Labor Committee, CBO score confirms deficit neutrality of health care reform bill , July 20, 2009
Politico, CBO deals another blow to House health plan , July 18, 2009
Wall Street Journal, Why Medicare cuts for doctors will be back , July 10, 2009
Congressional Budget Office, Letter to Rep. Charles Rangel , July 17, 2009
Office of Rep. Henry Waxman, CBO scores confirm deficit neutrality of health reform bill , July 20, 2009
Interviews with Dean Baker, Center for Economic and Policy Research; Jim Horney, Center on Budget and Policy Priorities; Brian Riedl, Heritage Foundation
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