President Obama's landmark health care initiative, long touted as a means to control costs, will actually add more than $340 billion to the nation's budget woes in the next decade, according to a new study by a Republican member of the board overseeing Medicare financing.
The study was released Tuesday by Charles P. Blahous III, a conservative policy analyst and Hoover Institution research fellow whom Obama appointed in 2010 as one of two public trustees for Medicare and Social Security. His analysis challenges the conventional wisdom that the health care law, which calls for an expensive expansion of coverage for the uninsured beginning in 2014, will nonetheless reduce deficits by raising taxes and cutting payments to Medicare providers.
The 2010 law does generate both savings and revenue. But much of that money will flow into the Medicare hospitalization trust fund, and it must be used to pay years of additional benefits to those who are already insured. That means those savings would not be available to pay for expanding coverage for the uninsured.
"Does the health care act worsen the deficit? The answer, I think, is clearly that it does," Blahous, a senior research fellow at George Mason University's Mercatus Center, said in an interview. "If one asserts that this law extends the solvency of Medicare, then one is affirming that this law adds to the deficit. Because the expansion of the Medicare trust fund and the creation of the new subsidies together create more spending than existed under prior law."
Obama administration officials dismissed the study, arguing that it departs from bipartisan budget rules used to measure every major deficit-reduction effort for the last four decades -- including the blueprint offered last month by House Budget Committee Chairman Paul D. Ryan, R-Wis.
"Opponents of reform are using 'new math' while they attempt to refight the political battles of the past," a White House budget official said. "The fact of the matter is, the Congressional Budget Office and independent experts concluded that the health-reform law will reduce the deficit. That was true the day the bill was signed into law, and it's true today."
In arriving at his deficit figure, Blahous updates the numbers through 2021 and subtracts savings that would have come from another provision: the CLASS Act, a long-term-care program that was supposed to have generated as much as $86 billion in new revenue through 2021. The Obama administration acknowledged last year that the CLASS Act is unworkable and suspended efforts to implement it.
"This isn't just a persnickety point about the intricacies of budget law," Blahous said. "If Medicare were going insolvent in 2016, you'd better believe right now there would be more pressure on lawmakers to do something about it. It's essential that there be a full public understanding of the most economically significant federal law in years."