Congress’ Former Fiscal Expert Attacks Health Overhaul Effort

AD TITLE: “Rethink Health Care Reform”

SPONSOR: Employment Policies Institute

SUMMARY: Appearing in ads backed by a business-oriented group, June O’Neill, a former head of the Congressional Budget Office, says a health care overhaul will add to the already large national debt and hurt the elderly. Parts of her argument have merit, but the CBO doesn’t share her alarmist view of the overhaul’s fiscal dangers. And her own analysis suggests that some of the Medicare cuts she warns about are unlikely to occur.

BACKGROUND: This ad comes from the Employment Policies Institute, a nonprofit group run by Richard Berman, a lobbyist and corporate public relations official. His firm, Berman and Company, says on its Web site that it has helped the restaurant industry “vigorously counter the campaigns of modern-day prohibitionists” such as Mothers Against Drunk Driving. He has also run advertising campaigns against trial lawyers, animal rights advocates and other activists that criticize the food industry for contributing to the nation’s obesity problem.

EPI has financed studies asserting that increases to the minimum wage lead to job losses. It has also underwritten research by O’Neill arguing that lack of health insurance does not increase the chance of death.

EPI says it is devoting $12 million to its “Rethink Reform” campaign against the health care effort. An EPI spokeswoman declines to name the donors funding the health care commercial, which is airing nationally on CNN, Fox News, and CNBC cable channels. The ad also will be running on cable and broadcast TV in eight states: Arkansas, Connecticut, Indiana, Louisiana, Maine, Nebraska, North Dakota and Virginia.

The group has taken out full-page print advertisements in The New York Times and USA Today that compare health reform to a proctology exam. Beneath a caption saying, “You may feel some discomfort,” the print ad shows a disconcerted patient lying on an examining table as a masked doctor slips on a latex glove. EPI says it will launch new television ads in the coming weeks. The campaign will run for eight to 10 weeks.

AUDIO AND VISUALS: An announcer declares: “A message from June O’Neill concerning health care reform.” O’Neill is shown sitting in a study as she speaks directly to the viewer, with soft music playing in the background.

O’Neill says: “Our country is facing an enormous debt crisis. Many of the plans to reform health care will make this crisis worse. As an economist and former director of the Congressional Budget Office, I’m deeply concerned about these health care reforms.

“They will add hundreds of billions of dollars to the already $12 trillion national debt. We are paying $500 million a day in interest alone. This growing debt is unsustainable. It will have huge negative effects on jobs, taxes and our economy.

“Unfortunately, some politicians are using accounting gimmicks to hide the cost of these changes. And seniors on Medicare will pay the price. Changes are necessary. But I fear these health reforms are definitely not the answer.” The screen fades to white and these words appear: “rethinkreform.com. Let’s rethink health reform.”

POLITICS: This ad tries to link health reform to President Barack Obama’s job approval rating for his handling of the federal budget deficit, which at 42 percent is lower than his public approval in any other area explored in an ABC News/Washington Post poll. The ad also attempts to raise concerns among the elderly, which is one of the favored lines of attack for opponents of the overhaul effort.

ACCURACY: O’Neill’s claims that the health care bill will add to the nation’s debt ignore the projections by her former employer, the CBO. The CBO estimates that the measure passed by the House last month would actually reduce the federal budget deficit by $138 billion over the 10-year period ending in 2019, while the Senate bill would narrow it by $130 billion.

In an interview and a four-page paper expanding on her critique, O’Neill, now a professor at Baruch College’s business school, argues the CBO analysis is incomplete and isn’t capable of forecasting the full effects of the bills. “They don’t really know,” she says.

O’Neill complains that the first decade of the overhaul doesn’t reflect its long-term trends because government-subsidized insurance-and the costs it entails-wouldn’t begin until halfway through the period. But here again, O’Neill is at odds with the CBO projection, which anticipates the bills, once phased in, will decrease the deficit. According to CBO, in 2019, the last year for which it offers a projection, the deficit would narrow by $12 billion if the House bill were enacted and $8 billion if the Senate bill went into effect. Longer term, the CBO says that under the Senate bill, the government probably wouldn’t spend more on health care than it already does, but notes that estimating that far ahead is very difficult.

O’Neill is on fair ground to raise concerns about “accounting gimmicks,” though the phrase may be more cynical than warranted. Most notably, both bills contain a new government program that would allow people to buy long-term elderly care insurance. Since more money would enter this program than be spent in its first decade, the premiums end up comprising 74 percent of the 10-year deficit reduction numbers in the House bill and 55 percent of the deficit reduction in the Senate bill. Still, even discounting for the program, both bills would lower the deficit in 2019-albeit by a much smaller amount-and CBO says the long-term care’s program overall impact on the deficit will be “fairly small.”

O’Neill says Congress lacks the political stomach to follow through on the cost cutting measures it has included in the bills, including scheduled cuts to Medicare providers and reductions in payments to Medicare Advantage plans. “The history of the Medicare budget process provides the classic example of tough measures enacted, but never executed,” she writes.

O’Neill has a plausible case here, one which CBO acknowledges. Senators from a few states have already won partial exemptions from proposed Medicare Advantage cuts for some of their constituents, at least for the next few years. The House voted last Thursday to avert a scheduled cut in Medicare physician payment rates-something Congress has done repeatedly.

That increase, if approved by the Senate, would not only wipe out the projected savings from health care overhaul but end up increasing the deficit by $89 billion over the next decade. But averting the cuts to physician’s pay would probably happen regardless of the health overhaul effort.

CBO estimates the Senate health bill would actually reduce Medicare growth to 6 percent a year, which is 2 percentage points less than it has averaged over the last two decades. There’s disagreement about whether these cuts-about $500 billion over a decade-would hurt care for beneficiaries, as O’Neill asserts, or whether providers would operate more efficiently. Richard Foster, the chief actuary of the Centers for Medicare & Medicaid Services, wrote that the Medicare cuts in the House’s bill could lead some providers to drop out of the program, “possibly jeopardizing access to care for beneficiaries.”

But other independent heath care experts don’t believe the Medicare reductions would have a substantial effect. “The Medicare cuts proposed to pay for health care reform are not more severe than Medicare cuts we’ve seen on many occasions in the past, which were done to address the budget deficits,” says Paul Ginsburg, president of the Center for Studying Health System Change, a Washington research group. “These cuts are not unusually threatening to access or quality of care.”

There are legitimate concerns from experts of varying ideological backgrounds that the health overhaul legislation wouldn’t do enough to control medical costs, ultimately adding to the country’s financial problems. But that would also happen if Congress does nothing.