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Opinion: Columnists

Philip Klein: Obamacare's deficit reduction continues to unravel

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Speaking on Christmas Eve in 2009, just after the Senate first passed his national health care legislation, President Obama declared, "Because it is paid for and curbs the waste and inefficiency in our health care system, this bill will help reduce our deficit by as much as $1.3 trillion in the coming decades, making it the largest deficit-reduction plan in over a decade."

It's true that the Congressional Budget Office predicted that, if fully enacted, the health care package would modestly reduce the deficit overall. CBO bean counters projected that a combination of tax hikes and cuts to the growth of Medicare spending would more than offset the law's new spending on expanded insurance coverage.

But CBO officials also consistently included this important caveat in their reports during the health care debate: "These longer-term calculations assume that the provisions are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation."

As a classic example, in 1997, Congress voted to slow the growth rate of Medicare payments to physicians. But whenever the time has come to implement the cuts, Congress -- under intense lobbying from doctors' groups such as the American Medical Association -- has ultimately caved and prevented the cuts from actually going into effect.

If the health care law's Medicare cuts do not get implemented, instead of reducing the deficit, the law would actually add $6.2 trillion to the nation's long-term deficits, according to a recent analysis by the Government Accountability Office.

Despite years of insisting that the skeptics were wrong, the Obama administration this week provided a major signal that history is likely to repeat itself. Officials at the Centers for Medicare and Medicaid Services announced they would delay cuts to the Medicare Advantage program scheduled to go into effect in 2014.

About one in four Medicare beneficiaries, or roughly 13 million people, participate in Medicare Advantage, which offers seniors the ability to choose among privately administered plans with additional benefits. Throughout the health care debate, Democrats argued that the federal government was paying far too much money to subsidize participating private insurers.

When Obama spoke of reducing "waste and inefficiency in our health care system," a big part of that initiative was reducing such overpayments. According to a CBO analysis from last year, $156 billion of the more than $700 billion in Medicare cuts under Obamacare were supposed to come through such changes to the Medicare Advantage payment scheme.

In February, when CMS proposed new rate cuts within the program, insurance industry lobbyists rushed into action. Soon, 160 members of Congress from both parties sent letters asking the administration to back off. Now, instead of reducing payments to health insurers who provide seniors insurance through Medicare Advantage by 2.3 percent in 2014, the federal government will increase payments by 3.3 percent.

America's Health Insurance Plans -- the nation's largest insurance lobbyist -- understandably hailed the reversal. So did Wall Street investors, who sent health insurance stocks soaring this week. But the news also bodes poorly for the financing of Obamacare.

All of Obamacare's proposed cuts and industry-specific tax hikes are going to draw similar lobbying efforts from other power players -- such as hospitals, doctors and pharmaceutical companies -- that stand to lose if certain provisions go fully into effect. Just last month, the Senate voted 79-to-20 on a nonbinding measure to repeal the law's tax on medical device-makers after ferocious lobbying from the industry.

Unfortunately for taxpayers, these special interests will not be lobbying to undo the trillions in new spending created by the law. The end result is that Obamacare is likely to be the budget buster its critics always feared.

Philip Klein (pklein@washingtonexaminer.com) is a senior editorial writer for The Washington Examiner. Follow him on Twitter at @philipaklein.

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