The Story Behind More Bad Headlines About the Cost of Health Reform

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On Tuesday, we got word that the ten-year cost of the new health reform law may be more than the $938 billion that was reported when the bill became law. In a letter released yesterday afternoon, the Congressional Budget Office said $115 billion more in discretionary spending could be spent to fully implement the law. This is not pocket change.

It’d be easy for critics of health reform to stop right here and shout from the rooftops that proponents hid the true cost of the bill and that proposed savings and reductions in the deficit will never materialize. But, as you might expect, there’s more to this story than what fits in a cable TV clip – or a headline, for that matter. Here’s why:

As the White House is eager to point out, this additional discretionary spending will only happen if Congress authorizes it. The $938 billion in mandatory spending called for in the law, on the other hand, will happen unless Congress acts to change the law. The law includes expenditures. The new CBO letter concerns authorizations for appropriations. Huh? Ken Baer, spokesman for the White House Office of Management and Budget, puts it this way, “The difference between an authorization and an expenditure is the difference between saying you can do something and saying you will do something.”

So the new law says the government will spend $938 billion over ten years on provisions in the Patient Protection and Affordable Care Act. The law also says Congress can spend $115 billion more, but it doesn’t have to. In other words, future discretionary spending called for in some new programs, along with expenses incurred by federal agencies charged with overseeing implementation – like the IRS and Department of Health and Human Services – is up to Congress.

This is not atypical. This is run-of-the-mill business as usual Congress. Funding to keep the government running – and the lights on at the IRS – is often doled out this way, via the budget. There is $34 billion in authorized spending for community health centers in the new CBO health reform estimate. These centers are almost always paid for with discretionary spending. In fact, says Paul Van de Water, of the Center on Budget and Policy Priorities, “Most of things [in the CBO letter] are things traditionally financed through appropriations.”

The downside for the White House is this: For the new law to be fully implemented as intended, it will need more money. The priorities outlined in the CBO’s letter on discretionary spending and health reform won’t “cause the whole edifice to come crashing down” if they’re not funded, says Van de Water. But, as Baer points out, “Some of these discretionary items are important to helping implement health reform.” So the really, really important stuff is included in the $938 billion; but some other regular important stuff would need discretionary spending.

The downside for those who want more funding for community health centers, post-partum depression, nurse managed health clinics, pediatric and public health dentistry and even a “state demonstration program on alternatives to medical tort litigation” – the bone Obama threw to Republicans who wanted major tort reform – and a substantial list of other programs are dependent on the whim of Congress.

Baer says even if all the items authorized for appropriations are funded – which is unlikely – it won’t hurt the government’s bottom line. He points out that the current budget has a freeze on discretionary spending, meaning if more money was appropriated for health reform, less money would have to be spent in other parts of the budget. But this freeze is an annual freeze, meaning it could end at some point. Baer says Obama has pledged to offset any additional health reform spending with cuts elsewhere in the budget, but Obama won’t be president forever.

It’s safe to assume that items relegated to the discretionary spending category would have been fully funded by the law if its backers could have found a reasonable way to pay for them. But they couldn’t and Congress funds a lot through discretionary funding anyway, so pushing off some items into this category, while not ideal from a common sense perspective, is not unique to health reform.

“It’s deeply embedded in the way Congress does business and has been around forever,” says Van de Water. Still, for transparency’s sake, it’s good information to know, it should be clearly disclosed and there should have been more reporting on discretionary spending during the debate.

It should also be noted that CBO said in March that the reform law authorized about $50 billion in discretionary spending. This new letter is simply an update with some corrections, including $9 billion in authorized spending for the National Health Services Corps, which was, according to CBO, “inadvertently left off the March 13 table.” Ooops.