DPC REPORTS

FACT SHEET | March 7, 2011

Republican Myths about Costs of the Affordable Care Act

In their efforts to repeal and defund the Affordable Care Act, Republicans continue to make false claims about the impact of the law on federal and state budgets, the economy, and the health care system. They ignore nonpartisan analysis from the Congressional Budget Office (CBO) and other independent experts and instead concoct arguments based on flawed assumptions for their own political purposes. This is the first in a series of DPCC Fact Sheets meant to dispel Republican myths regarding the Affordable Care Act.

Myth: Health reform will cost $2.6 trillion over a ten year period

Reality: The nonpartisan analysis from CBO estimates that the Affordable Care Act will cost $930 billion and reduce the deficit by $210 billion over a ten year period.[CBO, 2/18/2011]

Republicans contend that CBO utilized a number of “gimmicks” to underestimate the cost of the law, overestimate the savings, and therefore misrepresent its impact on the budget. Senate Republicans have gone as far to claim that the law will cost close to three times the CBO estimate, $2.6 trillion over a ten year period, and add $701 billion to the deficit. [GOP Report, 2/7/2011] Republicans are misrepresenting facts and their claims are unfounded. This DPCC Fact Sheet aims to address their most commonly cited arguments regarding the cost of the law.

Republicans incorrectly claim that CBO double-counts savings to Medicare. Republicans contend that CBO counts savings to Medicare both for extending the solvency of the Hospital Insurance (HI) trust fund and reducing the impact of new programs on the deficit. As a result of their interpretation, Republicans claim that $398 billion in CBO projected savings are erroneous. [GOP Report, 2/7/2011]

The Affordable Care Act slows the growth in Medicare spending while simultaneously extending the solvency of the HI trust fund for an additional 12 years. [Berwick, 8/5/2010]
In the past, CBO projected Medicare savings to both extend the solvency of Medicare and reduce the deficit for the Balanced Budget Act of 1997 and the Deficit Reduction Act of 2005. The Republican controlled Congresses did not object to CBO scoring at that time or suggest that CBO was double-counting savings to Medicare [Center on Budget and Policy Priorities, 3/25/2010]

The Center on Budget and Policy Priorities reiterated this point before the House Committee on the Budget: “There’s no double-counting involved in recognizing that Medicare savings improve the status of both the federal budget and the Medicare trust funds. In the same way, when a baseball player hits a homer, it both adds one run to his team’s score and also improves his batting average. Neither situation involves double-counting.” [Center on Budget and Policy Priorities, 1/26/2011]

Republicans add the cost of permanently fixing the sustainable growth rate (SGR), commonly known as the “Doc Fix,” to the overall cost of the Affordable Care Act.As a result, Republicans add $208 billion to the cost of the law. [GOP Report, 2/7/2011]

Over the past eight years, Republicans and Democrats have repeatedly enacted a number of temporary fixes for SGR. These temporary fixes have historically been bipartisan efforts to ensure that seniors and military families have continued access to healthcare services.
In 2003, President Bush signed the Medicare Prescription Drug, Improvement, and Modernization Act into law following passage by a Republican Congress. Although the law included a temporary SGR fix, Republicans did not include the cost of the fix as part of the new law. [CBO, 7/21/2004]
On December 10, 2010, the Senate passed a one-year SGR fix costing $14.9 billion by unanimous consent. [CBO, 12/7/2010] The House passed the same bill by a vote of 409 to 2 and the President signed it into law on December 15, 2010.
Without any precedent, Republicans add the cost of permanently fixing SGR to the cost of the Affordable Care Act. This cost would be incurred with or without health reform. If the Affordable Care Act had not been enacted, Democrats and Republicans still intended to fix SGR.
Since 2007, when Democrats took control of Congress, every temporary SGR fix has been paid for with mandatory savings or revenue increases. Republicans are wrong to assume that the SGR costs should be added to the Affordable Care Act without assuming commensurate savings.
During an interview with Ezra Klein, Rep. Paul Ryan reiterated his commitment to fix SGR, “Oh yeah! I think we should fix the thing. Don’t get me wrong.” [Ezra Klein, 3/5/2010] Rep. Ryan voted for the one-year SGR fix with 188 of his Republican colleagues less than ten months later. In fact, Rep. Ryan voted for temporary SGR fixes five times. [Ezra Klein, 3/5/2010]

Republicans exaggerate the costs of implementing and administering the Affordable Care Act.Republicans contend that an additional $115 billion over ten years will be required in discretionary spending to fully implement and administer the Affordable Care Act. [GOP Report, 2/7/2011]

Republicans are selective in their interpretation of a CBO analysisregarding the discretionary funds required to implement Affordable Care Act. Although the CBO analysis states that the law will require an additional $100 billion in discretionary funding over ten years, the analysis includes $85 billion are for “activities that were already being carried out underprior law or that were previously authorized and that PPACA authorized forfuture years.” [CBO, 2/18/2011] Therefore, the law will require an additional $1.5 billion each year in discretionary funds, not $10.5 billion as the Republicans contend.

Republicans make misleading claims about the Community Living Assistance Services and Support (CLASS) program.CBO projects that the CLASS program will reduce the deficit by $86 billion between 2012-2021. [CBO, 2/18/2011] These savings are a result of generating more revenue from premiums than spending on benefits. Republicans contend that the program is not fiscally responsible because, over time, the surpluses initially generated by these additional revenues will be used to pay benefits. They also claim that the program is not actuarially sound. Both claims reflect misunderstandings about the program.

The law is explicit in stating the CLASS program must be able to pay for benefits over the long-term only using the premiums it takes in. Secretary Sebelius reiterated, “No taxpayer dollars will be used to pay for CLASS benefits. This is non-negotiable, and it has been the starting point for every conversation we’ve had about this program.” [Kaiser Family Foundation, 2/7/2011]
During debate on the legislation, CBO assumed premiums would be set to ensure the CLASS program is actuarially sound. To provide additional guarantees of its soundness, Secretary Sebelius and her team are currently considering a number of regulatory modifications—including adjusting the work and income eligibility requirements—to ensure that the program will be on solid financial footing.
While today they complain about a program that will require not a single taxpayer dollar, many Republicans, in 2003, led an effort to expand health coverage while increasing the deficit: CBO scored the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 as adding $395 billion to the deficit during a ten year period.

This DPCC Fact Sheet addresses some of the flawed arguments made by Republicans to incorrectly increase the cost of the Affordable Care Act to $2.6 billion. Please find additional resources related to these and other arguments below.

Center on Budget and Policy Priorities: http://www.cbpp.org/cms/index.cfm?fa=view&id=3134

Factcheck.org: http://factcheck.org/2011/01/a-budget-busting-law/

Ezra Klein: http://voices.washingtonpost.com/ezra-klein/2010/03/the_true_cost_of_the_health-ca.html

DPC