With Obamacare, "we're fixing to get hit with the biggest entitlement program the American taxpayers have ever seen." -- Sen. Saxby Chambliss on Sept. 25, 2013, in a discussion on CNN's "Crossfire"
Part of the argument made by critics of President Barack Obama’s health care law is that the law imposes big financial commitments in perpetuity, particularly for subsidizing health insurance for Americans who otherwise couldn’t afford it.
On CNN’s “Crossfire,” Sen. Saxby Chambliss, R-Ga., argued that the nation simply can’t afford this sort of ongoing entitlement.
“We’re fixing to get hit with the biggest entitlement program the American taxpayers have ever seen — $2.6 trillion over the next 10 years,” Chambliss said.
Is Obamacare really “the biggest entitlement program the American taxpayers have ever seen”?
Comparing spending on entitlements
The term “entitlement” is generally used to describe a program that provides benefits to anyone who meets certain criteria. In official budget-speak, it refers to programs deemed “mandatory.”
When we asked Chambliss’ office where they got the $2.6 trillion figure, a spokeswoman pointed to a calculation by the Senate Budget Committee’s Republican staff. The committee concluded that the cost of Obamacare “will amount to at least $2.6 trillion” over the 10-year period from 2014 to 2023.
This calculation has sparked some dissent. The Congressional Budget Office, the nonpartisan analytical arm of Congress, has calculated the gross cost of Obamacare’s coverage provisions at approximately $1.8 trillion over the same 10-year period. These costs include spending on increased payments for Medicaid and the Children’s Health Insurance Program, subsidies for insurance purchased on the newly created marketplaces, and tax credits for small businesses.
In any case, we found at least three entitlement programs — Social Security, Medicare and Medicaid — that CBO estimates will have higher costs over the same 10-year period that Chambliss was referring to.
- Social Security: According to CBO, the 10-year cost of Social Security — both old-age benefits and disability payments — is about $11 trillion.
- Medicare: The cost for Medicare, the health program that serves all Americans 65 and older, is estimated to be $8 trillion over the same 10-year period, according to CBO.
- Medicaid: The federal share of Medicaid, the joint state-federal program to provide health care for low-income Americans, is projected to be $4.3 trillion over the same 10-year period, CBO says.
Each of these three programs exceeds even the higher, $2.6 trillion estimate of Obamacare’s costs over the exact same 10-year period.
But this isn’t the way Chambliss was looking at it.
Chambliss’ rationale
Instead, Chambliss’ office said he was referring to the initial estimated costs of those programs when they were launched.
Chambliss’ office provided us with the initial cost estimates for all three programs. The estimate for Medicaid is not precisely comparable, so we’ll focus instead on Social Security and Medicare.
For Social Security, we didn’t have figures for all 10 years, but we averaged the 1940, 1945 and 1950 figures and multiplied the results by 10. When we adjusted the cost for inflation, the initial 10-year estimated cost worked out to be about $34 billion in today’s dollars.
For Medicare, we did have estimates for Medicare Part A (hospital insurance) between 1966 and 1975. For Part A, we added up the first 10 years’ estimates, adjusted for inflation, and came up with a total of about $215 billion in today’s dollars.
Analysis
It’s not clear that the comparison Chambliss is making is valid.
A somewhat better way to do it is to measure the cost as a percentage of gross domestic product, economists told us. So we took the one-year average for each program’s initial 10-year period, then divided this by the midpoint year’s GDP.
We found that during its first 10 years, Social Security, on average, accounted for 0.1 percent of the 1945-level GDP. The equivalent figure for Medicare, using the 1970 GDP, was 0.3 percent. And for Obamacare, using the Senate Budget Committee Republicans’ number and the CBO’s GDP projection for 2019, it worked out to 1.1 percent of GDP. The percentage is lower if you use the CBO estimate (0.8 percent of GDP).
In other words, using the GDP-adjusted calculation and conceding Chambliss’ terms, the senator from Georgia has a point.
That said, there are still problems with Chambliss’ methodology. While Medicare and Obamacare are both health insurance programs, the cost of medical care has skyrocketed since the mid-1960s. This biases the comparison.
Also, Chambliss’ comparison doesn’t factor in population growth. The universe of possible Social Security beneficiaries in 1940 — those 65 or older — was just 12 million. By comparison, by 2022, CBO expects 22 million people to obtain insurance on the Obamacare exchanges and an additional 17 million people to obtain insurance through the law’s expansion of Medicaid and the Children’s Health Insurance Program.
Our ruling
Chambliss said that with Obamacare, “we’re fixing to get hit with the biggest entitlement program the American taxpayers have ever seen.”
Measured by the most obvious standard — whether there’s ever been a bigger entitlement program — Obamacare is hardly the biggest. Over the next 10 years, Obamacare ranks no higher than fourth, trailing Social Security, Medicare and Medicaid. If you use a less obvious standard — restricting it to the initial projected costs for the first 10 years of any entitlement program — Obamacare does rank as the biggest as a percentage of GDP, though that’s shaped by differences in population growth and medical inflation that make comparisons questionable. We rate his statement Mostly False.
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