On Health Reform Repeal

There has been an increasing amount of talk this week concerning calls for repeal of the health care reform legislation, as the 112th Congress convened for the first time this Wednesday. The House is scheduled to vote on a bill calling for a full repeal of the legislation this coming Wednesday.

CBO released a preliminary analysis of the costs of repealing the health reform legislation, estimating that a full repeal would add $230 billion to the deficit over the next ten years. Why is this number different than the $143 billion CBO estimated that health reform would reduce the deficit this decade? It's now a different 10-year outlook. CBO has estimated that health reform will save $143 billion over the 2011-2020 period. The ten-year outlook now looks at 2012-2021, increasing the amount of deficit reduction (or increasing the costs if repealed) after 2020 given that the savings are expected to grow over time.

Republicans have been downplaying CBO's estimates, however, pointing to an analysis from the House Budget Committee that estimates the health reform legislation will actually increase deficits by over $700 billion this decade. The House Budget Committee, including chairman Paul Ryan (R-WI), argues that the bill double counts $521 billion, does not incorporate $115 billion in estimated increases in discretionary resources, and ignores the costs of the doc fix.

We have commented on the validity of some of these issues and others budget gimmicks previously. The health reform legislation completely punted on addressing the costs of the doc fix, but that isn't quite the same as saying that repealing the bill actually costs less than how CBO scored based on something that neither the original bill nor the repeal legislation addresses. Secondly, the bill does authorize another $115 billion in discretionary spending authority, but Congress must pass appropriate funds for these items before any money is spent and to the extent funds are appropriated for items authorized in the health care bill discretionary spending will need to be reduced elsewhere to keep total discretionary spending within budget limits. In terms of double-counting, there are issues with lawmakers trying to use the savings from Medicare cuts for health subsidies while also claiming they've extended Medicare's solvency, but the fact remains that repealing those Medicare cuts will result in higher spending and higher deficits than would otherwise be the case. There is justification for excluding the costs of repealing the CLASS Act, the new long-term care insurance program which reduces the deficit in the near term as premiums are collected but increases long term deficits as benefits are paid out.

So is fully repealing the legislation the best idea for deficit reduction? Probably not. Instead of starting from scratch on health reform, which is still the number one driver of long-term spending and deficits, let's build on the cost-containment measures in the bill. This past July, we argued that one of the ways to help ensure that health reform actually reduces the deficit was for lawmakers to stick to their guns, maintaining the cost-saving measures in the bill for as long as possible. Voting for a repeal of the entire legislation right out of the gates is exactly the opposite approach.

Although the sustainability of health reform is certainly questionable over the longer-term as public and private reimbursement rates for health care continue to diverge, lawmakers should hold to cost-saving provisions as long as possible. Commenting on the sustainability, CBO notes that:

"current law now includes a number of policies that might be difficult to sustain over a long period of time. If those policies or other key aspects of the original legislation would have been subsequently modified or implemented incompletely, then the budgetary effects of repealing [the health-care law]...could be quite different."

Also troubling is the fact that the new House rules passed Wednesday (see our recent policy paper providing more analysis here) exempts the costs arising from any repeal of health reform from having to be paid for. We argue that:

'We also oppose the explicit exemption for the repeal of the health reform legislation; if CBO estimates that repeal of health care reform will increase spending or deficits, either in the short or long-term, those costs should be offset."