Study on healthcare law, deficit puts Obama administration on the defensive

The Obama administration is playing defense after a Republican Medicare trustee released a report that says the president's healthcare law will add $340 billion to the deficit. 

In a White House blog post late Monday night, the president's deputy assistant for health policy derided the report as "another brand of 'new math' " and highlighted the political ties of its author, Charles Blahous, who was a champion of privatizing Social Security during the George W. Bush administration.

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"In another attempt to refight the battles of the past, one former Bush administration official is wrongly claiming that some of the savings in the Affordable Care Act are 'double-counted' and that the law actually increases the deficit," Jeanne Lambrew wrote. 

"This claim is false. … This new math fits the old pattern of mischaracterizations about the Affordable Care Act when official estimates show the healthcare law reduces the deficit."

In his report, Blahous revisits the Republican claim that the administration "double counted" Medicare savings when scoring the budgetary impact of the law. He argues that practice hides the real cost of the measure, even though it conforms with government accounting rules and has been used by both parties in the past.

“The enactment of the [Affordable Care Act] has seriously worsened a federal fiscal outlook that was already untenable over the long term,” Blahous wrote in a blog post about his study.

“Many of the cost-savings measures under the ACA were already required in some form under previous law, and thus their combination with a substantial expansion of federal health entitlements unambiguously worsens the nation’s fiscal predicament,” Blahous wrote.

The administration says the healthcare law reduces the deficit and extends the life of the Medicare trust fund. 

The crux of the issue is whether the same Medicare savings can be used to pay for the health law's subsidies and other benefits while simultaneously strengthening Medicare's long-term fiscal outlook. According to the Medicare Office of the Actuary, the healthcare law extends Medicare's hospital insurance trust fund from 2017 to 2029.

Critics such as Blahous say the act of counting the same pot of money as reducing the deficit and extending the life of Medicare is double-counting.

The administration does not accept the “double-counting” charge and says the deficit reduction from the law and the solvency of the trust fund are two separate things.

The report come as Obama's signature domestic achievement remains unpopular with about half the public and faces a test at the Supreme Court, which is expected to rule this summer on whether the law is constitutional. 

Questions about the health law's solvency could further weaken its appeal and validate Republican warnings that even the law's popular provisions — such as the subsidies it will provide for people to buy insurance — are fiscally unsustainable.

Officially, the nonpartisan Congressional Budget Office estimated when the law passed in 2010 that it would cut the deficit by $143 billion over the first 10 years, with even more savings in the future. The impact on the deficit comes through new revenues, such as fees on drug companies and health plans, but also from the law's $575 billion in Medicare savings from lower reimbursement rates to doctors, hospitals and insurers.

Medicare's chief actuary, a leading skeptic of Congress's ability to stick to the law's Medicare cuts, has argued that on paper the law reduces the deficit, but said the Medicare savings should not be used to extend the life of the program, as the Department of Health and Human Services has done.

"In practice," Rick Foster wrote in an April 2010 memo, "the improved [Medicare] financing cannot be simultaneously used to finance other federal outlays (such as the coverage expansions) and to extend the trust fund, despite the appearance of this result from the respective accounting conventions."

— This story was last updated at 10:36 a.m.

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