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Part of the argument made by critics of President Barack Obama’s health care law is that the law imposes big financial commitments in perpetuity, particularly for subsidizing health insurance for Americans who otherwise couldn’t afford it.
On CNN’s Crossfire, Sen. Saxby Chambliss, R-Ga., argued that the nation simply can’t afford this sort of ongoing entitlement.
"We're fixing to get hit with the biggest entitlement program the American taxpayers have ever seen -- $2.6 trillion over the next 10 years," Chambliss said. (For those who aren’t familiar with this particular southernism, "fixing to" means "about to.")
Is Obamacare really "the biggest entitlement program the American taxpayers have ever seen"?
Comparing spending on entitlements between 2014 and 2023
The term "entitlement" is generally used to describe a program that provides benefits to anyone who meets certain criteria, rather than spending money doled out by Congress on an annual basis. In official budget-speak, it refers to programs deemed "mandatory."
When we asked Chambliss’ office where they got the $2.6 trillion figure, a spokeswoman pointed to a calculation by the Senate Budget Committee’s Republican staff. The committee concluded that the cost of Obamacare "will amount to at least $2.6 trillion" over the 10-year period from 2014 to 2023.
This calculation has sparked some dissent. The Congressional Budget Office, the nonpartisan analytical arm of Congress, has calculated the gross cost of Obamacare’s coverage provisions at approximately $1.8 trillion over the same 10-year period. These costs include spending on increased payments for Medicaid and the Children’s Health Insurance Program, subsidies for insurance purchased on the newly created marketplaces, and tax credits for small businesses. (The CBO figure would be $1.2 trillion if you exclude Medicaid and CHIP on the theory that they’re expansions of existing entitlements, rather than new entitlements.)
In any case, to check the accuracy of Chambliss’ claim, it doesn’t matter whether you use the $1.8 trillion figure or the $2.6 trillion figure, because we found at least three entitlement programs -- Social Security, Medicare and Medicaid -- that CBO estimates will have higher costs over the same 10-year period that Chambliss was referring to.
• Social Security. According to CBO, the 10-year cost of Social Security -- both old-age benefits and disability payments -- is about $11 trillion.
• Medicare: The cost for Medicare, the health program that serves all Americans 65 and older, is estimated to be $8 trillion over the same 10-year period, accoring to CBO.
• Medicaid: The federal share of Medicaid, the joint state-federal program to provide health care for low-income Americans, is projected to be $4.3 trillion over the same 10-year period, CBO says.
Each of these three programs exceeds even the higher, $2.6 trillion estimate of Obamacare’s costs over the exact same 10-year period.
But this isn’t the way Chambliss was looking at it.
Instead, Chambliss’ office said he was referring to the initial estimated costs of those programs when they were launched.
The figures cited above for Social Security, Medicare, and Medicaid "reference today’s outrageous costs of those programs due to many years of expansion," Chambliss’ office said in a statement. "When the American people were first given these three programs, costs were much lower."
To back up this assertion, Chambliss’ office provided us with the initial cost estimates for all three programs. The estimate for Medicaid is not precisely comparable, so we’ll focus instead on Social Security and Medicare.
For Social Security, we didn’t have figures for all 10 years, but we averaged the 1940, 1945 and 1950 figures and multiplied the results by 10. When we adjusted the cost for inflation, the initial 10-year estimated cost worked out to be about $34 billion in today’s dollars. That’s well below the initial 10-year cost of Obamacare.
For Medicare, we did have estimates for Medicare Part A (hospital insurance) between 1966 and 1975, though the estimates for Part B (medical insurance) were not in a comparable form. For Part A, we added up the first 10 years’ estimates, adjusted for inflation, and came up with a total of about $215 billion in today’s dollars. That, too, is well before the first 10 years’ costs of Obamacare.
We don’t think that, for the average viewer, Chambliss’ explanation would be the most obvious understanding of what he said. We think the simplest reading of his claim is that Obamacare is "the biggest entitlement program the American taxpayers have ever seen," without limiting the comparison to initial cost estimates that are decades old.
And even if it were, it’s not clear that the comparison Chambliss is making is valid.
A somewhat better way to do it is to measure the cost as a percentage of gross domestic product, economists told us. So we took the one-year average for each program’s initial 10-year period, then divided this by the midpoint year’s GDP. (We did not adjust for inflation.)
We found that during its first 10 years, Social Security, on average, accounted for 0.1 percent of the 1945-level GDP. The equivalent figure for Medicare, using the 1970 GDP, was 0.3 percent. And for Obamacare, using the Senate Budget Committee Republicans’ number and the CBO’s GDP projection for 2019, it worked out to 1.1 percent of GDP. The percentage is lower if you use the CBO estimate (0.8 percent of GDP) or if you use the CBO figure minus Medicaid (0.5 percent of GDP).
In other words, using the GDP-adjusted calculation and conceding Chambliss’ terms, the senator from Georgia has a point.
That said, there are still problems with Chambliss’ methodology. While Medicare and Obamacare are both health insurance programs, the cost of medical care has skyrocketed since the mid 1960s. So counting the 10-year costs for any medical program starting in 2014 will inevitably produce a much higher cost than the first 10 years of a medical program that started in 1966. This biases the comparison.
Also, Chambliss’ comparison doesn’t factor in population growth. The universe of possible Social Security beneficiaries in 1940 -- those 65 or older -- was just 12 million. By comparison, by 2022, CBO expects 22 million people to obtain insurance on the Obamacare exchanges and an additional 17 million people to obtain insurance through the law’s expansion of Medicaid and the Children’s Health Insurance Program. Combined, that’s a universe of beneficiaries three times larger than those who might have qualified for Social Security in 1940.
So Chambliss’ comparison is not apples to apples.
Chambliss said that with Obamacare, "we're fixing to get hit with the biggest entitlement program the American taxpayers have ever seen."
Measured by the most obvious standard -- whether there’s ever been a bigger entitlement program -- Obamacare is hardly the biggest. Over the next 10 years, Obamacare ranks no higher than fourth, trailing Social Security, Medicare and Medicaid. If you use a less obvious standard -- restricting it to the initial projected costs for the first 10 years of any entitlement program -- Obamacare does rank as the biggest as a percentage of GDP, though that’s shaped by differences in population growth and medical inflation that make comparisons questionable. We rate his statement Mostly False.
Saxby Chambliss, comments on CNN’s Crossfire, Sept. 25, 2013
Senate Budget Committee Republican staff, "SBC Analysis Of President Obama’s Health Law," June 28, 2012
Congressional Budget Office, "CBO’s Estimate of the Net Budgetary Impact of the Affordable Care Act’s Health Insurance Coverage Provisions Has Not Changed Much Over Time," May 14, 2013
Congressional Budget Office, "Medicaid Spending and Enrollment Detail for CBO's May 2013 Baseline," May 2013
Congressional Budget Office, "Old-Age and Survivors Insurance May 2013 baseline," May 2013
Congressional Budget Office, "Updated Budget Projections: Fiscal Years 2013 to 2023," May 2013
Congressional Budget Office, cost estimate for H.R. 2668, Sept. 6, 2013
Congressional Budget Office, "The 2013 Long-Term Budget Outlook," Sept. 17, 2013
Congressional Research Service, "Health Care Fact Sheet: Original Medicare Cost Estimates," Sept. 22, 1993
Bureau of Labor Statistics, inflation calculator, accessed Sept. 27, 2013
U.S. Census Bureau, "Historical Statistics of the United States: Colonial Times to 1970," accessed Sept. 27, 2013
U.S. Census Bureau, "Population by Sex and Selected Age Groups: 2000 and 2010," accessed Sept. 27, 2013
Bureau of Economic Analysis, main search page for GDP, accessed Sept. 27, 2013
Congressional Budget Office, "CBO and JCT’s Estimates of the Effects of the Affordable Care Act on the Number of People Obtaining Employment-Based Health Insurance," March 2012
Email interview with Henry Aaron, senior fellow at the Brookings Institution, Sept. 27, 2013
E-mail interview with Eugene Steuerle, fellow with the Urban Institute, Sept. 27, 2013
Email interview with Lauren Claffey, spokeswoman for Saxby Chambliss, Sept. 27, 2013
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