Health Care Reform Is Deficit Reduction. Remember That?

When health care reform was signed into law, President Barack Obama correctly described it as "biggest deficit reduction plan since the 1990s." [1] In fact, the Congressional Budget Office projected it would save more than $1 trillion during the next two decades.

This didn't end the deficit hysteria. It should have.

It is a profound shame that congresspeople who voted for the law did not echo the President and consistently tout that they just put America on the path to long-term deficit reduction. Instead, they either tried to change the subject or play up the provisions that polled well such as ending discrimination against people with pre-existing conditions.

But that allowed perceptions to remain that the health care bill amounted to $1 trillion in reckless spending [2], when the literal opposite was true.

And so we face a deficit commission proposal that pretends the path to deficit reduction isn't health care reform.

As Kevin Drum recently observed, the huge increases in the long-term budget deficit forecast is almost completely due to the cost of health care. In turn, he said: "any serious long-term deficit plan will spend about 1% of its time on the discretionary budget, 1% on Social Security, and 98% on healthcare. [3] Any proposal that doesn't maintain approximately that ratio shouldn't be considered serious."

And the Simpson-Bowles plan? "[It], goes into loving detail about cuts to the discretionary budget and Social Security but turns suddenly vague and cramped when it gets to Medicare. That's not serious." [3]

In that respect, I agree with the deeply conservative incoming House Budget Committee chair Paul Ryan [4]. When announcing his opposition to the Simpson-Bowles plan, he said, "You cannot fix this problem without taking on health care."

Of course, that's where Ryan's wisdom ends.

He charges the new health care law with making the deficit worse. Problem is there are no credible estimates backing up that assertion. (Conservatives lean on an oversimplification of the estimates of national health expenditures made by the Medicare actuary [5], when in fact his report finds a slowing of spending up to 2019, and doesn't even analyze the following decade when CBO expects the big savings to materialize.)

Furthermore, many argue -- such as Peter Orszag [6] and Paul Krugman [7] -- that the CBO estimates are too conservatve, and the experimental cost-controls in the new health reform law are likely to perform better than expected.

As Krugman wrote back in March: [7]

There are many cost-saving efforts in the proposed reform, but nobody knows how well any one of these efforts will work. And as a result, official estimates don’t give the plan much credit for any of them. What the actuary and the budget office do is a bit like looking at an oil company’s prospecting efforts, concluding that any individual test hole it drills will probably come up dry, and predicting as a consequence that the company won’t find any oil at all — when the odds are, in fact, that some of the test holes will pan out, and produce big payoffs.

To conservatives like Ryan, who think gutting Medicare and providing less health care is a superior way to cut the deficit: Sorry. You lost the legislative battle. The Affordable Care Act is law.

It is our most serious attempt at long-range deficit reduction, involving the only area where our long-term deficit can be reduced.

Do we know exactly how well it's going to work? Of course not!

They are reforms. We need to try them out. We need to see what works and what doesn't in practice, and make adjustments as we go.

That is the only way to reform. Anything.

Is it likely more reforms will be needed later on? Of course!

In fact, one of the positive aspects of passing the Affordable Care Act this year was that it ensured we would continue fighting about how best to implement health care reform on an ongoing basis. Whereas defeat would have likely meant ducking the issue for another decade or more while our health and fiscal problems festered.

But Rep. Ryan rips the Simpson-Bowles deficit reduction plan for not proposing to junk our only plausible path to deficit reduction. That's being a sore loser, not being a constructive lawmaker.

Whereas the Citizens' Commission accepts the reality of the law and goes on to propose additional cost saving measures [8], such as a public health insurance option and direct government negotiations for prescription drug prices, that build on the cost-control reforms already in place.

The bottom line is: we are already firmly on the path to health care reform, which means we are already firmly on the path to deficit reduction.

We need to keep working at it. We don't need take our eye off the ball.

UPDATE: The New Republic's Jonathan Chait notes Rep. Ryan's stubborn refusal to accept the Affordable Care Act as reason why "You Can't Negotiate With Paul Ryan": [9]

Ryan, like many conservatives, prefers to reside in an alternate universe in which the Affordable Care Act is not a budget saver but a massive drain on the federal budget (like, say, the prescription drug entitlement he supported.) ... You can negotiate with somebody who has different preferences than you do. But negotiating with somebody who inhabits a different reality is very difficult.