When the Numbers Are Not the Numbers

Nov 22, 2013

Sometimes, the numbers are not the numbers: they may be correct, and they may be understandable, but they don’t really address the question being asked. A good example of this dissonance is Obamacare and the frequent assertion that it is absolutely budget-neutral.

Those making this assertion point out that when the Affordable Care Act was being debated, its fiscal implications were scored by the nonpartisan Congressional Budget Office. The casual listener might infer from this that even though ACA would make healthcare available to millions of people currently without health insurance and more affordable to many others, it would pay for itself and perhaps even control the growth in total healthcare spending in the U.S.

Well, yes, the CBO is nonpartisan. And they do a good and professional job. But their scoring is based on the explicit language in the law and on the assumption that the law will be enacted as stated. The ACA scoring depended on two important mechanisms:

  1. Significant additional taxes, including an additional 3.8% tax on capital gains and an additional 0.9% Medicare tax on high-income households, and a 2.3% additional tax on medical device manufacturers
  2. Stricter controls on what the government will pay for specific procedures in the Medicare program 

The first is simply another tax. It’s easy to make additional spending “budget neutral” by throwing in a tax at the same time, even though the tax bears only a nominal relationship to the reasons for the spending. And the second is price controls that may or may not work when providers look for other ways to earn the same amount of money; and in any case, year after year Congress seems to back down and defer the price controls in the face of vocal objections from doctors and hospitals.

So yes, Obamacare is budget-neutral, but not for the reasons we’d like it to be, and not necessarily in real life.

When numbers are being presented, sometimes those numbers are less important than the assumptions, or the thought process, underlying them. And audiences should demand the opportunity to get both perspectives.

“Painting with Numbers” is my effort to get people talking about financial statements and other numbers in ways that we can all understand. I welcome your interest and your feedback.

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