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Angie Drobnic Holan
By Angie Drobnic Holan November 6, 2009

House health care bill pays for itself over the long run, CBO says

Do you think the conservative editorial board of the Wall Street Journal likes the health care bill written by Democrats in the House of Representatives?

Well, the headline on a recent editorial about it was "The Worst Bill Ever."

The editorial disliked new regulations for the health care system and additional taxes to pay for health insurance expansions.

The bill also "disguises hundreds of billions of dollars in additional costs with budget gimmicks," the editorial said. "It 'pays for' about six years of program with a decade of revenue, with the heaviest costs concentrated in the second five years. The House also pretends Medicare payments to doctors will be cut by 21.5% next year and deeper after that, 'saving' about $250 billion."

We've looked into the problem of Medicare payments previously and whether that should be considered part of health care reform. We found evidence to support both sides. So we rated Sen. John Cornyn's statement about it -- "The first installment of health care reform ... will raise the deficit by $250 billion " -- as Half True.

Here, we wanted to look at the claim that the bill pays for "about six years of program with a decade of revenue, with the heaviest costs concentrated in the second five years."

To check on the bill's financial condition, we turned to the Congressional Budget Office, or CBO, the nonpartisan budget agency that creates calculations for how much bills in Congress will cost the government. Political leaders and others regularly turn to the CBO as the definitive source for budget projections.

The CBO looked at the bill's new spending, new savings and new taxes. CBO analysts added those numbers together to get the bill's impact on the deficit for a given year, and over 10 years. Generally speaking, the CBO does not provide numbers after the first 10 years, because it believes those numbers are subject to too much uncertainty.

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Looking at the House health care bill, it takes awhile for all the pieces of it to take effect, with different measures going into effect in different years. The requirement for individuals to buy insurance, for example, doesn't begin until 2013. People are subject to a tax penalty for not having insurance, and they'll see that penalty on the return they file in 2014.

The new taxes on high-income individuals, however, go into effect earlier, in 2011. The CBO projects that these tax revenues will rise gradually over the first nine years.

Meanwhile, cost savings don't start kicking in until 2012. The cost savings grow slowly but then get bigger in the last three years of the plan. (You can follow along with these numbers by looking at Page 3 of this CBO report .)

The Journal editorial is right that the CBO shows the biggest costs come in the second five years of the program, from 2015 to 2019. But the cost savings are the biggest in the final years as well. Overall, the plan is in the black through 2014, dips briefly into the red in 2015 and 2016, and then pays for itself again in 2017, 2018 and 2019. Over 10 years, the bill reduces the deficit by $104 billion.

The CBO did not create numerical projections for the years 2020 to 2029, but the report notes that for those years, the bill would probably result in "slight reductions in federal budget deficits. Those estimates are all subject to substantial uncertainty."

To be clear, those who oppose the Democratic bill think the CBO's estimates will likely be undermined by future events. "The tax hikes will bring in less revenues than is estimated, and the spending provisions will likely be expanded over time," said Brian Riedl of the conservative Heritage Institution. "Even if the CBO assumes it's revenue neutral, the smart money would bet on lower tax revenues, fewer spending cuts and higher program costs." (Riedl added that he wasn't questioning the work of the CBO, he just thought it would be overtaken by political realities.)

On the other hand, Edwin Park of the left-leaning Center on Budget and Policy Priorities said that it's significant that the CBO found the bill lowered the deficit over the first 10 years and also in the subsequent 10 years after that. That shows that the bill pays for itself over the long term and is fiscally sound.

"The CBO has been crystal clear that it reduces the deficit in the out years," he said.

The Journal editorial says the House bill "'pays for' about six years of program with a decade of revenue, with the heaviest costs concentrated in the second five years." It's true that the taxes kick in first, before many of the bill's biggest expenses get started. But the editorial doesn't mention that the CBO projects the largest cost savings for the bill's final four years, and that the bill appears to be self-sustaining starting around 2017. So we rate the statement Half True.

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House health care bill pays for itself over the long run, CBO says

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