Donald Marron

Last spring, the Congressional Budget Office estimated that the new health legislation would reduce the deficit by $143 billion over ten years. Yesterday, CBO estimated that repealing that legislation would increase the deficit by $230 billion over ten years.

What gives? Why would it cost $87 billion more to repeal the law than was saved by enacting it?

The main reason is that the 10-year budget window moved. The health debate started in 2009, so CBO used a 10-year window that ran from 2010 to 2019. It’s now 2011, so the repeal law will be judged against a 10-year window that runs from 2012 to 2021. The $230 billion figure reflects that longer window. Through 2019, the cost would be $145 billion.

The second reason is that the legislation President Obama signed last spring wasn’t the final word on health reform. In December, Congress was struggling to find a way to pay for the infamous Medicare “doc fix”, which now runs through the end of 2011. To do so, Congress decided to cut $15 billion from the subsidies created by the health legislation. Because those cuts reduced future subsidies, it is now $15 billion more expensive to repeal the overall health reform.

The third reason is that the original health legislation wasn’t just about health policy. It also included fundamental reforms to the way the government subsidizes college loans. The repeal bill wouldn’t undo those changes, which resulted in budget savings of $19 billion over 2010 to 2019.

Finally, the original health reform included about $7 billion in net budget costs during 2010 and 2011. It’s unlikely (to say the least) that the health repeal bill would be enacted in time to avoid those costs.

Bottom line: CBO estimated that the original legislation would reduce deficits by $143 billion over 2010-2019. CBO now estimates that repeal would increase deficits by $145 billion over the same period; the slight difference reflects the education provisions in the original legislation, the 2010 and 2011 costs that can’t be avoided, and the December 2010 changes to the law. The jump from $145 billion to $230 billion then reflects the addition of two years to the budget window.

P.S. The $230 billion figure is preliminary and subject to change once CBO has an opportunity to update its calculations to reflect the latest information about the economy, health care markets, etc.

P.P.S. Aficionados of the health debate will recall that many differences of interpretation surround CBO’s cost estimates for health reform. You can see some of my discussion here.