Friday, January 7, 2011

Why CBO Projects A Substantially Higher Cost For Healthcare Repeal Than Original Deficit Reductions

Donald Marron posted on his blog an explanation as to why repeal of healthcare cost $230 billion when CBO's original projections said the law reduced the deficit by $143 billion.

Donald Marron, a former CBO acting director and a former member of the President's Council of Economic Advisers, knows more than most people and most bloggers about the inner workings of CBO cost projections.

He wrote in his blog post, "Why Does It Cost $230 Billion to Repeal Health Reform?":
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.
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.
Read Don Marron's complete blog post here.

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