Summary
President Obama tried to sell his health care overhaul in prime time, mangling some facts in the process. He also strained to make the job sound easier to pay for than experts predict.
- Obama promised once again that a health care overhaul “will be paid for.” But congressional budget experts say the bills they’ve seen so far would add hundreds of billions of dollars to the deficit over the next decade.
- He said the plan “that I put forward” would cover at least 97 percent of all Americans. Actually, the plan he campaigned on would cover far less than that, and only one of the bills now being considered in Congress would do that.
- He said the “average American family is paying thousands” as part of their premiums to cover uncompensated care for the uninsured, implying that expanded coverage will slash insurance costs. But the nonpartisan Kaiser Family Foundation puts the cost per family figure at $200.
- Obama claimed his budget “reduced federal spending over the next 10 years by $2.2 trillion” compared with where it was headed before. Not true. Even figures from his own budget experts don’t support that. The Congressional Budget Office projects a $2.7 trillion increase, not a $2.2 trillion cut.
- The president said that the United States spends $6,000 more on average than other countries on health care. Actually, U.S. per capita spending is about $2,500 more than the next highest-spending country. Obama’s figure was a White House-calculated per-family estimate.
Analysis
With the health care debate on Capitol Hill raging on, President Barack Obama held a prime-time news conference July 22 to make his pitch for a health care bill once again to the American public. Among his facts and figures, we found some false and questionable statements.
Paying For It
Obama promised that a health care overhaul “will be paid for.” Thus far, that’s been a tall order.
The House bill doesn’t pay for itself, adding a net $239 billion over 10 years to the federal deficit, according to an analysis by the Congressional Budget Office and Joint Committee on Taxation. The Senate Health, Education, Labor and Pensions Committee bill is much further away from covering its costs. The CBO estimated that legislation would bring a net deficit increase of $597 billion over 10 years. The Senate bill, CBO said, only produced net savings of $48 billion (compared to current law), while the House came up with more money, saving $219 billion and bringing in $583 billion in federal revenue over that 2010-2019 period.
As the Committee for a Responsible Federal Budget, a bipartisan group, said in a report released this month, it’s tough to save money while greatly expanding health care coverage at the same time:
CRFB: More access and broader coverage do not save money, however. Greater coverage will increase health spending. Unless major changes are successfully implemented in health care delivery and payment systems, costs will continue to rise from a larger base at a rapid pace. Moreover, potential savings are speculative, while costs are far more certain. That imbalance suggests that unless there is broad popular support for the measures that will be required to achieve savings, the nation’s health care bill could become that much more unaffordable.
Obama went on to say that “the entire cost of that has to be paid for and it has got to be deficit-neutral. And we identified two-thirds of those costs to be paid for by tax dollars that are already being spent right now.”
“Identified” is the key word – the White House may have pinpointed ways it says can save that much, but whether the president can make these happen is an open question. Obama has spoken before about saving around $650 billion (about two-thirds of a cost of $1 trillion over 10 years) by cutting spending, largely in Medicare. But proposed cuts in payments to insurers and hospitals are likely to draw strong opposition from lobbyists and lawmakers. And Obama admitted last night that legislators hadn’t adopted his proposals: “Not all of the cost-saving measures I just mentioned were contained in Congress’ draft legislation,” he said – but he remained optimistic, adding that “even though we still have a few issues to work out, what’s remarkable at this point is not how far we have left to go, it’s how far we’ve already come.”
Obama detailed a few of his Medicare savings proposals last night and went into greater detail in a speech June 15 at the American Medical Association conference. Some of the ideas are backed up by independent studies, at least in theory: Obama proposes introducing a competitive bidding process for Medicare Advantage, a program through which private insurers offer Medicare coverage and get higher payments from the government than standard Medicare reimbursements. Last night, he said it would save “over $100 billion of unwarranted subsidies that go to insurance companies”; he’s said before that it would save $177 billion over 10 years. And the CBO has estimated such a proposal could save nearly that much, $159 billion over 10 years.
Other proposals are more vague: Obama has called for adjusting Medicare payments to “reflect new advances and productivity gains in our economy,” which, he told the AMA, would “create incentives for providers to deliver care more efficiently,” saving about $109 billion over 10 years.
As CBS News anchor Katie Couric recently asked Obama, “[A]ren’t a lot of these cost savings, Mr. President, theoretical?. … [T]here are no guarantees these projected savings will really happen.”
The president dodged the question: “Well, here’s what we know. Here is a guarantee: If we do nothing, then health care inflation is going to keep on going up at 8 percent, 9 percent, 10 percent a year. … If we take these actions, we are confident that we can actually see some serious reductions in health care inflation.”
Beyond paying for a health care bill, however, Obama has said an overhaul of the system will actually save money – or at least save money compared with what health care spending would have been without changes to the system. In his press conference, Obama said “the bill I sign must also slow the growth of health care costs in the long run.“ What Congress has proposed so far doesn’t do that, either.
CBO’s analysis of the House bill does recognize specific savings that the legislation will reap from changes to Medicare, but also highlights some increases the bill would make in Medicare spending as well. Overall, that bill and the Senate’s don’t control the rising costs of federal health programs, according to CBO Director Douglas Elmendorf, who told the Senate Budget Committee last week that the bills didn’t have “the sort of fundamental changes” that would change the cost curve. On the contrary, he said: “The curve is being raised.”
Near-Universal Coverage?
The president exaggerated the number of persons who would be covered by his health care plan.
Obama: So the plan that has been – that I put forward and that what we’re seeing in Congress would cover – the estimates are – at least 97 percent to 98 percent of Americans.
That’s true of the House health care bill, but it’s far from the truth about Obama’s plan proposed when he was running for president.
The CBO estimated that the bill working its way through the House would result in 97 percent of Americans (excluding illegal immigrants) having insurance by 2015. The figure would be only 94 percent of all those in the U.S., including those here illegally. However, Obama was careful to apply his 97 percent figure to “Americans,” so he’s right as far as the House bill is concerned. But that’s the only proposal now being considered that would achieve such wide coverage.
The Senate HELP Committee bill wouldn’t go as far. The CBO projected that legislation would cover 90 percent of Americans by 2015 (excluding illegal immigrants), and 88 percent of all those in the U.S. including those who aren’t here legally. The Senate bill leaves twice as many people uninsured by 2019 (34 million) as the House bill (17 million).
The plan Obama campaigned on last year would have covered fewer than the House bill, according to analyses from two groups. The Lewin Group and the Tax Policy Center estimated last year that Obama’s plan would leave 26.9 million and 25.2 million uninsured, respectively, in 2018.
Uncompensated Care
Obama repeated a claim about uncompensated care that we’ve already said was unjustified:
Obama: And, in fact, there’s going to be a whole lot of savings that we obtain from that because, for example, the average American family is paying thousands of dollars in hidden costs in their insurance premiums to pay for what’s called uncompensated care – people who show up at the emergency room because they don’t have a primary care physician.
We wrote about this back in June, when Obama said that “the average family pays a thousand dollars in extra premiums to pay for people going to the emergency room who don’t have health insurance.” This came from a report by the health care advocacy group Families USA, which estimated that people with private family insurance paid an extra $1,017 in premiums to cover the cost of uncompensated care to the uninsured; individuals paid $368 extra. But the nonpartisan Kaiser Family Foundation took issue with that estimate, saying that they were “highly skeptical” that the rising cost of insurance premiums had much to do with cost-shifting, because much of the uncompensated costs would not be passed on to premium payers. KFF’s estimate of actual cost shifting amounted to more like $200 per family annually.
In his press conference, Obama added even more to families’ premiums, saying they paid “thousands” more to cover uncompensated care. That’s not what the Families USA study found, and even that group’s $1,000 estimate has been disputed.
A $5 Trillion Whopper?
The president claimed he has cut federal spending by more than $2 trillion.
Obama: I am very worried about federal spending. And the steps that we’ve taken so far have reduced federal spending over the next 10 years by $2.2 trillion.
The nonpartisan Congressional Budget Office doesn’t agree that Obama’s budget has “reduced federal spending” at all. Quite the opposite. His budget calls for vastly increased spending, according to CBO.
Last month CBO estimated that total federal spending, without the changes Obama proposed in his budget, would be just under $39 trillion over the next 10 years. It also estimated that if Congress adopted the president’s budget, spending would increase to more than $41.7 trillion over the same period. As a percentage of the economy, CBO figured that federal spending would rise from 22.1 percent of gross domestic product (GDP) under current law, to 23.7 percent under Obama’s budget proposals.
CBO specifically estimated the “total effect on outlays” of Obama’s budget as an increase of $2.7 trillion compared with what’s called for in current law. So by CBO’s figuring, spending would go up $2.7 trillion, not down $2.2 trillion. That would make Obama’s claim a nearly $5 trillion whopper.
Even the administration’s own projections don’t suport Obama’s extravagant claim of a $2.2 trillion spending cut. His Office of Management and Budget projected that Obama’s budget would produce $42.2 trillion in total outlays over the next 10 years. That’s only $431 billion more than CBO’s later estimate. However, Obama’s OMB comes up with a much higher prediction of where spending would be without the president’s budget. OMB figures “baseline” spending of $43.4 trillion. Compared with that, OMB figures that Obama’s budget would represent a reduction of more than $1.2 trillion. But that’s still nearly $1 trillion short of the figure Obama claimed.
Obama may have confused his deficit figures with his spending figures. Earlier he said that the projected deficit is “$2.2 trillion less than it would have been if we had the same policies in place when we came in.” But even that is disputed. It’s true that OMB projected a $7.1 trillion, 10-year deficit under Obama’s budget, and a $9.3 trillion deficit if current policies continued unchanged. That would amount to a $2.2 trillion improvement. But congressional budget experts don’t agree with that. CBO projects a $9.1 trillion deficit under Obama’s budget, and a $4.4 trillion deficit under current law. In other words, CBO figures Obama’s budget would make the deficit $4.5 trillion worse, not $2.2 trillion better.
U.S. vs. The Rest of the World
Obama exaggerated the discrepancy between U.S. and foreign health care costs:
Obama: And we know that we’re spending on average, we here in the United States are spending about $6,000 more than other advanced countries where they’re just as healthy.
In fact, the U.S. spends nearly $7,000 per person total, or nearly $2,500 more than the next highest-spending country, according to the most recent completed data from the Organisation for Economic Co-Operation and Development.
We contacted the Office of Management and Budget, where an official told us that Obama’s figure represents costs per family, not per person. Obama didn’t specify that, and the authoritative OECD figures on which he relied don’t offer a per-family cost. The OMB official said the administration multiplied the per-capita spending by 3.3 to get a family figure (roughly the average number of persons living in family households). This yields closer to an $8,000 difference than $6,000, however, so we’re still unsure of how Obama got his figure. In any case, using a per-family figure without identifying it as such is misleading, since millions of Americans live alone, and per-capita spending is the standard used for making such comparisons.
– by Lori Robertson, Brooks Jackson and Jess Henig
Sources
Committee for a Responsible Federal Budget. “Health Care and The Federal Budget.” Jul 2009.
Montgomery, Lori, and Shailagh Murray. “Budget Analyst Assails Cost of Congress’s Health-Care Proposals.” The Washington Post. 23 Jul 2009.
Congressional Budget Office. Letter to Rep. Charles B. Rangel. 17 Jul 2009.
Congressional Budget Office. Letter to Sen. Edward M. Kennedy. 2 Jul 2009.
Congressional Budget Office. Letter to Rep. Mike Crapo. 18 May 2009.
Congressional Budget Office. “Comparison of Projected Revenues, Outlays, and Deficits in CBO’s Baseline and CBO’s Estimate of the President’s Budget.” Jun 2009.
Office of Management and Budget. “Updated Summary Tables; Budget of the U.S. Government, Fiscal Year 2010.” May 2009.
Organisation for Economic Co-operation and Development. Health Data 2009 database. accessed 23 Jul 2009.
Hadley, Jack et al. “Covering the Uninsured in 2008: A Detailed Examination of Current Costs and Sources of Payment, and Incremental Costs of Expanding Coverage.” Kaiser Commission on Medicaid and the Uninsured. Aug. 2008.
Families USA. “Hidden Health Tax: Americans Pay a Premium.” May 2009.