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Trivia Tidbit of the Day: Part 699 -- Government Aggressively Underestimates Spending Projections.

Government Spending Ratchets Ever Upward-

The Center for Freedom and Prosperity Foundation released a study this week showing that the Congressional Budget Office tends to underestimate the fiscal impact of health care legislation:

1. When Medicare was created in the mid-l960s, actuaries projected the program's hospital insurance budget would reach $9 billion by 1990.23 The actual 1990 cost was $67 billion. 2. The long-run forecasts estimated that the entire Medicare program would cost about $12 billion by 1990.25 In reality, it cost more than $100 billion that year (and now costs $500 billion). 3. Medicaid was also created in 1965 and was supposed to be a very small program with annual expenditures of about $1 billion. It has now become a huge $250 billion entitlement. 4. Medicaid's disproportionate share hospital (DSH) program is a sobering example. Created in 1987 to subsidize hospitals with large numbers of Medicaid and uninsured patients, the programs was supposed to cost less than $1 billion in 1992, but the actual cost that year was a staggering $17 billion. 5. The Medicare Catastrophic Coverage legislation was adopted in 1988 and then repealed less than two years later, in part because some provision were already projected to cost six times more than forecast.

Medicaid was also created in 1965 and was supposed to be a very small program with annual expenditures of about $1 billion. It has now become a huge $250 billion entitlement – and that's just the cost to federal taxpayers.

There is a very real bias in government toward underestimating the costs associated with proposed legislation. Costs almost always overrun projections, especially over the long-run.

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Posted by Will Franklin · 17 November 2009 11:22 AM

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