OTR Interviews

How 'ObamaCare' is a prescription for even greater national debt

Author of study claiming president's national health care law adds $340 billion to deficit explains findings


This is a rush transcript from "On the Record," April 10, 2012. This copy may not be in its final form and may be updated.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I will not sign a plan that adds one dime to our deficits either now or in the future.


GRETA VAN SUSTEREN, FOX NEWS HOST: Well, that was President Obama in 2009. But a new study which the White House calls faulty and partisan shows the president's health care law which was supposed to cut costs is actually exploding the deficit to the tune of up to $527 billion.

Now, the study's author, Charles Blahous, joins us. Nice to see you.


VAN SUSTEREN: OK, so why do you say that this adds to the budget -- adds to our deficit and the president says the opposite? Where's the difference?

BLAHOUS: Well, first of all, why it adds to the deficit is simply because the new costs in the legislation add up to a lot more than the cost savings. So there are a lot of new spending commitments in the legislation -- subsidized health care coverage for 30 million people, an extension of Medicare solvency for another eight years. All those things cost money and there's not enough cost saving in the law to pay for all of that.

The reason that many people don't understand this is because they refer to common scorekeeping conventions of the federal government which obscure these effects. They basically ignore some of the extra financing commitments made under the law and create the, I'm afraid, misimpression that it actually reduces the deficit.

VAN SUSTEREN: All right, now, who's doing the scoring that's making these original estimates on it? It's not the actually White House. Is it the Congressional Budget Office? I mean, who came up with the original number?

BLAHOUS: Well, the Congressional Budget Office produces the number. And they undertake an analysis that is based upon scorekeeping conventions that go back to 1985.

VAN SUSTEREN: When you say "scorekeeping conventions," what do you mean?

BLAHOUS: It basically...

VAN SUSTEREN: You mean -- you mean double counting that was sort of the way we -- the way do sort of unusual things here in the government in terms of cost accounting?

BLAHOUS: Yes. I mean, yes, that's right. I try to stay away from the double counting term in my paper because it sounds so pejorative and accusatory. But the fact is that it does allow for some de facto double counting.

Basically, what the Congressional Budget Office is directed to do is to assume in all events that Medicare will pay full benefits, even if its trust fund runs out. Now, under the law, that's not the case. Under the law, once the Medicare trust fund runs out, it can't pay full benefits.

But basically, what they have to assume in all of their baselines comparison is that the Medicare program is going to pay full benefits forever and ever.

VAN SUSTEREN: Well, that's a cost. That's a giant cost.

BLAHOUS: That's a giant...

VAN SUSTEREN: It's not a savings. That's a -- that's a giant cost.

BLAHOUS: That's a giant cost, and it's in their baseline of comparison. So if you do anything less than that, it looks like you're saving a lot of money.

VAN SUSTEREN: That's how you consider savings, if you don't spend as much as you could possibly spend? In a -- in a -- in a pure situation, like an -- almost in a petrie dish?

BLAHOUS: Right, for which there is no legal authority to do. And CBO, to their credit, in their budget documents, always discloses this. They always say these assumptions assume that the Medicare program will pay full benefits forever and ever, even though it had no legal authority to do so.

So they're very transparent in always disclosing this is not comparison with actual law. But when you compare it with this baseline that they use, it looks like the legislation had lowered the deficits.

VAN SUSTEREN: All right, now, Jay Carney on Air Force One today said that you're partisan and that your study is faulty. First of all, you have some Republican credentials.

BLAHOUS: I do. I am -- I was -- certainly, I'm a self-identified Republican trustee. There's one Democratic Medicare trustee, there's one Republican, and I'm the Republican. I also served in the Bush White House for eight years.

VAN SUSTEREN: All right, now, what is -- what is the problem here, though? I mean, why -- you know, nobody wants to get deeper into debt. Is it that -- is -- are you suggesting that the White House is using ways to figure out these numbers that are simply, for lack of a better term, intellectually dishonest, they're using these conventions, or are you saying they're trying to hide it or you're saying that they don't get it? What -- what is the -- what is the problem here that we're finding ourselves in?

BLAHOUS: What I try very hard not to do in the paper is to ascribe a motive to anyone. There's a lot of people who misunderstand the CBO scoring conventions. There's a lot of people who exerted an effort in crafting the legislation to pass muster under the CBO scoring conventions.

My paper is really just focused on explaining the literal change in the law. It struck me when I began to compose the paper that there's a lot of discussion as to what the CBO found, but no one had ever done a study of what was the actual effect of changing the law. And that seemed to me to be a big, glaring gap in public understanding of what the health care reform law does.

VAN SUSTEREN: Do you think Congress understands the cost of this? I mean, how you even arrive at the cost or how -- I mean, when you hear these scoring numbers and when you hear them bat them around, do you think Congress has any sort of idea of how they're arrived at?

BLAHOUS: I think there is a conceptual idea, but I think there was a need to fill in the numbers. Like, when I went in and met with people and said, Here's what's happening under the law, here's why it adds to federal deficits, conceptually, people, I think, many people were already there. They understood that.

They understood you couldn't put one set of savings and apply it to extending Medicare and also take the same set of savings and apply to creating a new health entitlement. They got that conceptually.

What I don't think there was a full understanding of was the magnitude of this, that this law would actually add, say, $340 billion in a best case scenario to federal deficits over the next 10 years.

VAN SUSTEREN: Well, you know, this is going to happen -- I mean, if your paper is correct, this is going to happen to us unless the law is held unconstitutional. I mean, this is inevitable unless we find some pot of gold some place, right?

BLAHOUS: Right. Right. I mean, if the entirety of the law is upheld, it's going to be an enormous cost to the federal government.

VAN SUSTEREN: And there's just no place where we can get this money except to go farther into debt.

BLAHOUS: We -- right. It will add to the deficit.

VAN SUSTEREN: Are you the only one saying this, or is this sort of, like, the -- I mean, do most people sort of -- I mean, within the economic field, they agree with you? Or does everyone just sort of, like, not want to confront this and just rather go with the old conventions on how things are scored?

BLAHOUS: I don't think I'm the only person pointing out the problem. I think a lot of people -- at the time the law was debated, there was a big debate. You know, is there double counting, is there not double counting? There were accusations. There were defenses. So I'm certainly not the first person to point out sort of the technical problem with the scorekeeping conventions.

I think I'm the first person to put a number to it. So I think I am first in that respect. But certainly, if you look at the writings of CBO in the past, if you look at the writings of the CMS Medicare actuary in the past, they acknowledge this issue.

VAN SUSTEREN: Have we ever been right on any of these numbers, and the scoring? I mean, it's, like -- you know, every year, every single bill that ever gets passed, we hear the numbers on it, CBO scores. Has any number ever been remotely in the ballpark?

BLAHOUS: We can never know. We don't have a crystal ball. And that's-

VAN SUSTEREN: But are we even getting close? Are we even good at guessing?

BLAHOUS: I think for some things we're good at guessing. For something, we've very bad. If you look at, say, the Social Security trustees' reports going back for the last 20, 30 years, they were remarkably accurate. And that's because there, most of the factors are known -- demographic factors. Those things are fairly easy to predict.

The things that are hard to predict are things like economic swings and cycles, the sorts of things the CBO has to deal with. And that's where we see really wild fluctuations in the projections.

VAN SUSTEREN: Well, we'll watch to see what happens. And of course, we'll know in June whether or not the law even is standing anymore. Anyway, Chuck, thank you.

BLAHOUS: Thank you.

VAN SUSTEREN: Nice to see you.