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CBO already revising its Demcare math

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By Michelle Malkin  •  December 20, 2009 03:53 PM

Oops.

How many more bad estimates did the CBO make in its rush to get its Demcare scoring out yesterday?

The Hill:

The Congressional Budget Office (CBO) corrected its estimate of the Senate health bill’s costs on Sunday, saying it would reduce deficits slightly less than they’d predicted.

In a letter to Senate Majority Leader Harry Reid (D-Nev.), CBO Director Douglas Elmendorf said that the nonpartisan budget office had overestimated the extent to which the legislation’s new Independent Payment Advisory Board would bring down the deficit.

While the CBO’s estimates of the board’s and overall bill’s impact in its first 10 years of the legislation are correct, Elmendorf wrote, the program’s effects on deficit reduction during the second decade of the program were overestimated.

“CBO expects that the legislation, if enacted, would reduce federal budget deficits over the decade after 2019 relative to those projected under current law—with a total effect during that decade that is in a broad range between one-quarter percent and one-half percent of GDP,” Elmendorf said. “In comparison, the extrapolations in the initial estimate implied a reduction in deficits in the 2020–2029 period that would be in a broad range around one-half percent of GDP.”

The full CBO correction is here and it underscores how dismal the government’s record is in projecting the true costs of massive entitlement programs:

All told, CBO expects that the legislation, if enacted, would reduce federal budget deficits over the decade after 2019 relative to those projected under current law—with a total effect during that decade that is in a broad range between one-quarter percent and one-half percent of GDP. In comparison, the extrapolations in the initial estimate implied a reduction in deficits in the 2020–2029 period that would be in a broad range around one-half percent of GDP. The imprecision of these calculations reflects the even greater degree of uncertainty that attends to them, compared with CBO’s 10-year budget estimates. The expected reduction in deficits would represent a small share of the total deficits that would be likely to arise in that decade under current policies.

Based on this extrapolation, CBO expects that Medicare spending under the legislation would increase at an average annual rate of roughly 6 percent during the next two decades—well below the roughly 8 percent annual growth rate of the past two decades (excluding the effect of establishing the Medicare prescription drug benefit). Adjusting for inflation, Medicare spending per beneficiary under the legislation would increase at an average annual rate of roughly 2 percent during the next two decades—well below the roughly 4 percent annual growth rate of the past two decades. It is unclear whether such a reduction in the growth rate could be achieved, and if so, whether it would be accomplished through greater efficiencies in the delivery of health care or would reduce access to care or diminish the quality of care.

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