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A New Round of Old Questions on Health Insurance Reform

Posted by Peter Orszag on May 12, 2010 at 06:08 PM EDT
A Congressional Budget Office (CBO) letter released yesterday has sparked a new round of old questions about the cost of the recently enacted health insurance reform law, the Affordable Care Act.  The letter simply updates CBO’s calculation of the size of discretionary authorizations included in the legislation. 
 
CBO’s tally, which is not included in its estimate of the cost of the law, has led some to erroneously conclude that the law includes more spending and less deficit reduction than CBO has previously reported.
 
As I have said before and independent analysts have echoed, this is incorrect: 
  • Authorizations are just that — they are not spending. That is, they are expressions of what Congress would like to spend money on, not what it will spend money on. This is important since Congress frequently does not fully fund authorizations and many are never funded.  As CBO itself says in the letter, authorizations "are subject to future appropriation actions, which could result in greater or smaller costs than the sums authorized by the legislation."
     
  • The President has made a firm commitment to freezing non-security discretionary funding for the next three years — a commitment he has said would be enforced by his veto pen.  As a result, any actual new funding would have to fit within this freeze and so would have to be offset by budget cuts elsewhere.
     
  • It is also worth noting that a number of these authorizations — including the largest authorization reported in the CBO letter — are simply new authorizations of spending that already exists.  In other words, funding such authorizations does not result in new spending.
The bottom line remains the same: the Affordable Care Act is the largest deficit reduction package enacted in over a decade according to CBO. It will reduce deficits by more than $100 billion in the current decade and more than $1 trillion in the decade after that — and that will not change.

Update: CBO this afternoon released a clarification of their letter from yesterday making clear that their findings had been misinterpreted. CBO concludes that much of the discretionary spending authorized in the bill already exists. Therefore, even if such authorizations were fully funded, they would not add a dime to the federal budget.
 
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