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PolitiFact: The Truth About Obamacare as Entitlement

Oct14

obama_doctorWith the government of the United States still officially shut down and the nation on the verge of defaulting on its obligations because the Republican Party is holding the economy hostage, the issue at the core of the Tea Party’s complaint – the Affordable Care Act – is wildly misrepresented and misunderstood.

One of the biggest lies being told is that “Obamacare is the biggest entitlement the American taxpayers have ever seen.” This, according to PolitiFact.com, is incorrect. We can’t really improve on their analysis,  so endorse and offer it to our readers as is.

Louis Jacobson
PolitiFact.com

Part of the argument made by critics of President Barack Obama’s health care law is that the law imposes big financial commitments in perpetuity, particularly for subsidizing health insurance for Americans who otherwise couldn’t afford it.

On CNN’s Crossfire, Sen. Saxby Chambliss, R-Ga., argued that the nation simply can’t afford this sort of ongoing entitlement.

“We’re fixing to get hit with the biggest entitlement program the American taxpayers have ever seen — $2.6 trillion over the next 10 years,” Chambliss said. (For those who aren’t familiar with this particular southernism, “fixing to” means“about to.”)

Is Obamacare really “the biggest entitlement program the American taxpayers have ever seen”?

chamblisComparing spending on entitlements between 2014 and 2023

The term “entitlement” is generally used to describe a program that provides benefits to anyone who meets certain criteria, rather than spending money doled out by Congress on an annual basis. In official budget-speak, it refers to programs deemed “mandatory.”

When we asked Chambliss’ office where they got the $2.6 trillion figure, a spokeswoman pointed to a calculation by the Senate Budget Committee’s Republican staff. The committee concluded that the cost of Obamacare “will amount to at least $2.6 trillion” over the 10-year period from 2014 to 2023.

This calculation has sparked some dissent. The Congressional Budget Office, the nonpartisan analytical arm of Congress, has calculated the gross cost of Obamacare’s coverage provisions at approximately $1.8 trillion over the same 10-year period. These costs include spending on increased payments for Medicaid and the Children’s Health Insurance Program, subsidies for insurance purchased on the newly created marketplaces, and tax credits for small businesses. (The CBO figure would be $1.2 trillion if you exclude Medicaid and CHIP on the theory that they’re expansions of existing entitlements, rather than new entitlements.)

In any case, to check the accuracy of Chambliss’ claim, it doesn’t matter whether you use the $1.8 trillion figure or the $2.6 trillion figure, because we found at least three entitlement programs — Social Security, Medicare and Medicaid — that CBO estimates will have higher costs over the same 10-year period that Chambliss was referring to.

• Social Security. According to CBO, the 10-year cost of Social Security – both old-age benefits and disability payments — is about $11 trillion.

• Medicare: The cost for Medicare, the health program that serves all Americans 65 and older, is estimated to be $8 trillion over the same 10-year period, accoring to CBO.

• Medicaid: The federal share of Medicaid, the joint state-federal program to provide health care for low-income Americans, is projected to be $4.3 trillion over the same 10-year period, CBO says.

Each of these three programs exceeds even the higher, $2.6 trillion estimate of Obamacare’s costs over the exact same 10-year period.

But this isn’t the way Chambliss was looking at it.

Exploding-HeadChambliss’ rationale

Instead, Chambliss’ office said he was referring to the initial estimated costs of those programs when they were launched.

The figures cited above for Social Security, Medicare, and Medicaid “reference today’s outrageous costs of those programs due to many years of expansion,” Chambliss’ office said in a statement. “When the American people were first given these three programs, costs were much lower.”

To back up this assertion, Chambliss’ office provided us with the initial cost estimates for all three programs. The estimate for Medicaid is not precisely comparable, so we’ll focus instead on Social Security and Medicare.

For Social Security, we didn’t have figures for all 10 years, but we averaged the 1940, 1945 and 1950 figures and multiplied the results by 10. When we adjusted the cost for inflation, the initial 10-year estimated cost worked out to be about $34 billion in today’s dollars. That’s well below the initial 10-year cost of Obamacare.

For Medicare, we did have estimates for Medicare Part A (hospital insurance) between 1966 and 1975, though the estimates for Part B (medical insurance) were not in a comparable form. For Part A, we added up the first 10 years’ estimates, adjusted for inflation, and came up with a total of about $215 billion in today’s dollars. That, too, is well before the first 10 years’ costs of Obamacare.

Analysis

We don’t think that, for the average viewer, Chambliss’ explanation would be the most obvious understanding of what he said. We think the simplest reading of his claim is that Obamacare is “the biggest entitlement program the American taxpayers have ever seen,” without limiting the comparison to initial cost estimates that are decades old.

And even if it were, it’s not clear that the comparison Chambliss is making is valid.

A somewhat better way to do it is to measure the cost as a percentage of gross domestic product, economists told us. So we took the one-year average for each program’s initial 10-year period, then divided this by the midpoint year’s GDP. (We did not adjust for inflation.)

We found that during its first 10 years, Social Security, on average, accounted for 0.1 percentof the 1945-level GDP. The equivalent figure for Medicare, using the 1970 GDP, was 0.3 percent. And for Obamacare, using the Senate Budget Committee Republicans’ number and the CBO’s GDP projection for 2019, it worked out to 1.1 percent of GDP. The percentage is lower if you use the CBO estimate (0.8 percent of GDP) or if you use the CBO figure minus Medicaid (0.5 percent of GDP).

In other words, using the GDP-adjusted calculation and conceding Chambliss’ terms, the senator from Georgia has a point.

That said, there are still problems with Chambliss’ methodology. While Medicare and Obamacare are both health insurance programs, the cost of medical care has skyrocketed since the mid 1960s. So counting the 10-year costs for any medical program starting in 2014 will inevitably produce a much higher cost than the first 10 years of a medical program that started in 1966. This biases the comparison.

Also, Chambliss’ comparison doesn’t factor in population growth. The universe of possible Social Security beneficiaries in 1940 — those 65 or older — was just 12 million. By comparison, by 2022, CBO expects 22 million people to obtain insurance on the Obamacare exchanges and an additional 17 million people to obtain insurance through the law’s expansion of Medicaid and the Children’s Health Insurance Program. Combined, that’s a universe of beneficiaries three times larger than those who might have qualified for Social Security in 1940.

So Chambliss’ comparison is not apples to apples.

pinocchiomegOur ruling

Chambliss said that with Obamacare, “we’re fixing to get hit with the biggest entitlement program the American taxpayers have ever seen.”

Measured by the most obvious standard — whether there’s ever been a bigger entitlement program — Obamacare is hardly the biggest. Over the next 10 years, Obamacare ranks no higher than fourth, trailing Social Security, Medicare and Medicaid. If you use a less obvious standard — restricting it to the initial projected costs for the first 10 years of any entitlement program — Obamacare does rank as the biggest as a percentage of GDP, though that’s shaped by differences in population growth and medical inflation that make comparisons questionable. We rate his statement Mostly False.


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There are 3 comments for this post

  1. avatar scrutonizer says:

    The Pinochio nose on Chambliss should be doubled. There’s no way ‘The biggest entitlement program Americans have ever seen’ could be interpreted as a statement about original estimates of cost. So he was mistaken in the first instance about relative cost, and lying in the second explaining what he really meant.

    Furthermore, much of the cost of Obamacare is already being borne by Americans in the form of the world’s highest healthcare costs per capita. Obamacare, by treating patients more efficiently, is likely to decease overall healthcare costs, while simultaneously improving overall national health. This is something all Americans would celebrate, if they weren’t so deeply embedded in their partisan mental bunkers.

  2. avatar Noozeyeguy says:

    Missing from the analysis of 1940-50 SSI benefits as a percentage of GDP: The payout pool was much smaller as a percentage of the population, and didn’t live as long. The SSA’s own methodology (http://www.ssa.gov/history/lifeexpect.html) shows that the recipient pool in 1940 was 9 million, with an average post-retirement life expectancy of 13 years or so. By 2000, the pool had quadrupled to almost 35 million, and they lived three to five years longer, on average. So an equivalent cost vs. GDP for Social Security would be on the par of 0.6 – 0.7% of GDP. Again, short of the 0.8 – 1.1% levels cited for the ACA, but it’s not really an apples-to-apples comparison since SSI is a cash benefit paid directly to recipients and the costs for Obamacare are driven by third-party economics (the healthcare industry).

  3. avatar jabberwolf says:

    1-”For Social Security, we didn’t have figures for all 10 years, but we averaged the 1940, 1945 and 1950 figures and multiplied the results by 10. When we adjusted the cost for inflation, the initial 10-year estimated cost worked out to be about $34 billion in today’s dollars. That’s well below the initial 10-year cost of Obamacare.” Um picking numbers from anywhere are you? You do realize that SS was a money maker FROM people because the life expectancy was much less that it is today.

    2- The ROI from Medicaid taken from check seems to be a better ROI cost from the larger increases to HC costs ( not less) that lead to a less ROI from expenditures from Obamacare . As someone pointed out – one is a direct benefit in form of money to people and medical costs. Obamcare is direct benefits to 3rd party insurance companies and medical organizations. Basically obamacare isn’t a return in $ to people that put in the money.

    This fact check article = nothing but nose !!

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