We'll be shutting down the BudgetBrigade a bit early today to head off to OMB Watch's 25th Anniversary celebration. Yup, that's right. OMBW is 25 years young this year and we're primed and ready for our quarter life crisis! We're taking some time to celebrate tonight with friends and supporters and remember 25 years of fighting for a more transparent and accountable federal government.

While we are looking back over some of our accomplishments of the last quarter century (and honoring the unsung work of some of our public sector colleagues), we are also looking forward to the challenges we'll face over the next 25 years and beyond.

You will be a key part of overcoming those future challenges, just as you've been crucial to our past accomplishments. Your involvement, along with hundreds of thousands of people just like you has helped to make us the success we are today. So thank you for your commitment to the open and accountable ideals that have helped guide OMBW over the past 25 years.

And if you want to help make sure those ideals continue to be realized, consider making a small donation to OMB Watch in honor of our 25th birthday. Your contribution will join with hundreds of others who want to ensure we are able to continue our mission and the important work we do everyday.

Ellen Miller blogs today over at the Sunlight Foundation about the legacy of the Federal Funding Accountability and Transparency Act of 2006 (Transparency Act). The Transparency Act mandated that all federal spending be easily accessible and searchable in the Internet. After the law passed in 2006, the federal government launched USASpending.gov in 2007, which was built on the software platform that powers OMB Watch's FedSpending.org.

Ellen reports the legacy of this federal law is being felt at the state level, all over the country:

Since 2007, 11 states (Hawaii, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Oklahoma, South Carolina, Texas, Utah and Washington) have established, via legislation or executive order, free and searchable Web sites that give access to state spending. And 24 other states are working on it, with more than half introducing spending transparency bills this year. B2G Exchange blog wrote in May that transparency Web sites were the "hottest new trend" in state government.

The original cosponsors of the Transparency Act bill - Barack Obama (D-IL) and Tom Coburn (R-OK) - as well as the hundreds of advocacy groups and transparency organizations, blogs, and regular citizens who helped push this legislation to enactment should be very proud of this legacy. Let's hope it continues to spread.

Last week the Congressional Budget Office (CBO) released a new report with updated long-term projections for Social Security. This report is a follow up to the last projections for Social Security released by CBO back in December, 2007. CBO Director Peter Orszag blogged last week on improvements made in this updated report:

The projections released today differ somewhat from earlier results because of newly available programmatic and economic data, updated assumptions about future demographic and economic trends, and improvements in CBO's models. For example, these projections assume that future immigrants will be younger and more numerous than was assumed in 2007. (This change was included in the 2008 Social Security trustees' report; CBO adopts the trustees' aggregate demographic assumptions.) As a result of this and other changes, CBO projects somewhat smaller future deficits than we did in our 2007 projections.

This report, while not focused on this issue, continues to show the crux of our long-term fiscal problem lies elsewhere - namely in rapidly rising health care services delivered through an inefficient system.

CBO: Updated Long-Term Projections for Social Security

Commentary and Analysis
EconomistMom: Useful Lessons from CBO's New Report on Social Security
EPI: Social Security — government report shows healthy program for decades
Andrew Biggs: Treatment of uncertainty in new CBO Social Security projections
Dean Baker: The Washington Post War On Social Security Continues

On Tuesday, August 19, the Coalition on Human Needs is once again hosting a webinar to help advocates and analysts prepare for the release of annual data from the Census Bureau about poverty, income, and health insurance in the U.S. The webinar will take place from 2:00 - 3:30 (EST) on the web, and feature Jared Bernstein of the Economic Policy Insitute, Douglas Hall, Acting Managing Director of Connecticut Voices for Children, Deborah Weinstein, Executive Director of the Coalition on Human Needs, and will be moderated by Ellen Teller, Director of Government Affairs, Food Research and Action Center.

If you are not familiar with CHN's webinar or the annual data release of poverty information from Census, here's a bit of information about what you can expect if you sign up and participate. The webinar will help you:

* to find and understand national numbers and the findings for your state when they're released on August 26
* to see accurate trends over time; whether your state fares better or worse than the national average
* to compare the new data (from 2007) with what we know about the economic woes of 2008, and
* how to talk about the new findings to help build the growing movement for a national commitment to dramatically reduce U.S. poverty.

To sign up to participate and for more information, see CHN's webinar webpage.

The Bush administration announced yesterday that it will not enforce new requirements that would have made it more difficult for states to enroll children in the State Children's Health Insurance Program (SCHIP). USA Today reports that the administration will not be taking "compliance action" at this time on regulations that would have forced states to wait until children are uninsured for one year before being covered by SCHIP and also require states to enroll 95 percent of extremely low-income children in the state before expanding health care coverage to only somewhat low-income families:

The directive was aimed at 15 states that extended health insurance to children in families with incomes above 250% of the federal poverty level — $44,000 for a family of three.

Many governors and Democratic lawmakers criticized the administration's new guidelines as impossible to meet. They said the final result would be that more children would go without health coverage as states rein in their programs.

With the deadline fast approaching, the administration made clear that states were under no immediate threat of losing federal funding.

We commented at the end of July about how Democrats in Congress really dropped the ball in using the Congressional Review Act to impede the Bush administration's efforts to keep kids from having health care. Fortunately, at least for the time being, it looks like they are off the hook.

The OMB Watch Fiscal Policy Program is looking for an intern for the fall of 2008. Yup, that's right. This is your chance to get in on the ground floor at one of the most dynamic nonprofit watchdog groups in Washington, DC. We're looking for energetic undergraduate or graduate students who have excellent writing, critical thinking, and communications skills, and who are dedicated to public policy and government accountability (see current intern Josh at right for example).

The internship is unpaid, but you'll have the chance to gain first hand experiences and take on significant responsibilities related to a number of different aspects of policy analysis in DC. Plus, you'll get a chance to write for the BudgetBlog - what could be better?

Interested? Learn more about the position and how to apply.

The Congressional Budget Office (CBO) released their monthly budget review this morning. CBO Director Peter Orszag blogged on the release of the review on the CBO Director's Blog:

CBO estimates that for the first 10 months of fiscal year 2008, the federal budget deficit was about $371 billion—$213 billion more than the deficit recorded over the same period in 2007. While revenues were about 1 percent lower than in the same period last year, outlays over the same period have grown by almost 9 percent. CBO estimates that the federal budget deficit for fiscal year 2008 will be in the vicinity of $400 billion, close to the amount we projected last March after accounting for proposed supplemental appropriations.

CBO estimates that a deficit of $102 billion was recorded for ythe month of July, about $65 billion more than recorded in July 2007; approximately $14 billion of that increase was due to rebate payments resulting from the Economic Stimulus Act of 2008. Receipts were about $5 billion lower than those in July 2007; without the rebates, receipts would have been up by 2 percent. Outlays in July were $61 billion higher than in the same month last year; about $21 billion of that difference was the result of calendar-related shifts in the timing of certain payments. Another major factor contributing to the increase was the $15 billion disbursed in July 2008 by the Federal Deposit Insurance Corporation (FDIC) to cover insured deposits at failed financial institutions; much of that cost should be recovered in the future as the FDIC liquidates the assets held by those institutions and collects higher insurance premiums.

CBO: Monthly Budget Review

The Senate missed an opportunity this week to beat back a Bush administration policy that will keep low-income kids from receiving government insurance.

In August 2007, the Centers for Medicare and Medicaid Services (CMS) announced a policy, to take effect this August, which will make it more difficult for uninsured kids to qualify for the State Children's Health Insurance Program (SCHIP). For example, New York state wants to set its eligibility limit at 250 percent of the poverty level. While that may sound like a lot, it's only about $44,000 for a family of three. Unfortunately, CMS thinks those folks are too wealthy to qualify.

Sens. Max Baucus (D-MT) and John Rockefeller (D-WV) are trying to stop the policy by using a little-known law called the Congressional Review Act which allows Congress to disapprove of agency regulations.

But the Senate has run into a bit of a sticky wicket. CMS did not release the policy as a formal rule; rather, they issued it as a guidance document — a less formal class of government policy that is not subject to Congressional Review Act challenges.

On April 17, 2008, the Government Accountability Office said that the CMS guidance document should be considered a rule for the purposes of the Congressional Review Act. So that means Congress can challenge the rule…right?

The problem, it turns out, is timing. Congress only has 60 "session" days to introduce a resolution of disapproval. The 60-day clock starts the day the agency informs Congress of its rule. After GAO's April ruling, CMS sent a letter May 7 saying the agency would ignore GAO, and it refused to submit the policy to Congress as it would a normal rule.

So GAO says the policy is a rule, a decision Baucus and Rockefeller prefer because it means they can file a Congressional Review Act challenge; but CMS says the policy is not a rule and won't submit it to Congress. The question becomes: When does the 60-day clock start?

The Senate parliamentarian sent a letter to Baucus and Rockefeller this week that says the clock started April 17, the day of the GAO ruling. That means the deadline for introducing the resolution was July 8. (Don't bother trying to figure out how the Senate counts days. Nobody knows.) Baucus and Rockefeller introduced the measure on July 17.

The parliamentarian's determination doesn't make much sense — not that any other date would make much sense either. This is uncharted territory for the Congressional Review Act.

But this shouldn't even be an issue. Why did it take Baucus and Rockefeller so long to introduce the resolution? As a result of the parliamentarian's decision, they had to postpone a scheduled markup of the resolution. Now, the Senate will miss out on the expediencies that an official Congressional Review Act challenge carries (limited debate and no filibuster).

Those expediencies could have been valuable, since time is of the essence for low-income families. If Congress can't find another way to nullify the CMS policy by August 17, many deserving kids will be left without insurance.

The law that created the Medicare drug benefit, or Medicare Part D, mandates that Medicaid beneficiaries who were also eligible for Medicare ("dual eligibles") receive their drug coverage from the Medicare drug program rather than Medicaid. So, rather than be allowed dual eligibles to choose between two programs, when the new Medicare law went into effect, it shifted Medicare-eligible Medicaid beneficiaries into the new program. As it turns out, drug manufacturers benefited handsomely from the switch.

In 2006 and 2007, the private Part D insurers spent $18.7 billion to purchase the top 100 drugs for dual eligible beneficiaries. On average, the Part D insurers received rebates and otherdiscounts from drug manufacturers that reduced these costs by 14%, lowering the total cost of providing these drugs to dual eligible beneficiaries to $16.2 billion.

Medicaid purchases the same drugs for low-income beneficiaries who are not dual eligible and pays significantly lower prices. If the private Part D insurers had paid the same prices as Medicaid, their total cost for the drugs used by the dual eligible beneficiaries would have been $12.4 billion. The higher prices paid by the private Medicare Part D insurers increased the costs to the taxpayer for these drugs by 30%.

Responding to the committee's findings, CMS Acting Administrator Kerry Weems said, "Beneficiaries moved from a state-run price fixing program into a risk-based insurance product where they have the dignity of choice, broader access to more drugs and no limits on the number of prescriptions," "Diginity of choice" is an odd way to say that Medicaid beneficiaries must participate in the Medicare drug benefit. It's certainly a "choice" that drug manufactures certainly prefer.

House Committee on Oversight and Government hearing: The Medicare Drug Benefit: Are Private Insurers Getting Good Discounts for the Taxpayer?

Those wacky legislators in Congress are at it again. Democrats have added language to once again increase the national debt ceiling, or debt limit, which is the maximum amount of debt the federal government can issue. Democrats added language to a housing relief bill increasing the limit by another $800 billion to an astounding $10.615 trillion (that's trillion with a "t"). While the current national debt stands at $9.456 trillion, about $400 billion below the current debt limit according the Treasury Department, their projections show that limit might be reached before the year is over and after Congress has ajourned for the year. It seems the Dems are taking this action mostly as a precautionary move.

This will mark the sixth time in the last seven years that Congress has increased the debt limit (see chart below). Most of those increases came during Republican control of Congress, although the last two increases have been while Democrats control both chambers.

Unfortunately, it is unlikely the trend will change anytime soon as Congress has only given lip-service to issues of fiscal responsibility. Congress' current committment to pay-as-you-go (PAYGO) rules is tenuous at best, and Craig posted last week about a Congressional Budget Office report showing some pretty dire consequences for the national debt if Congress does not adopt more responsible tax policies than they are currently considering.

The Center on Budget and Policy Priorities has once again released an analysis of state government budget health, and the news continues to deteriorate. In their lastest analysis, they rank all 50 states according to changes in three main economic indicators - employment, poverty, and housing foreclosures. The report finds:

States across the country have projected budget shortfalls totaling at least $48 billion for 2009. To meet their balanced budget requirements, they are being forced to raise taxes and/or cut expenditures — both of which reduce overall demand and thereby weaken the impact of the recent federal stimulus package. Federal fiscal relief would limit the need for such actions.

CBPP argues pretty convincingly that because the states that are showing the most economic problems are the same ones that are having budget issues, fiscal relief for state budgets would go a long way to improving econonmic conditions. Good stuff. Maybe Congress should consider this, huh?

CBPP: ECONOMIC DATA CAN BE USED TO TARGET STATE FISCAL RELIEF EFFECTIVELY

The Center on Budget and Policy Priorities has released a report from leading economists and budget experts criticing a recent paper from the Brookings Institute and the Heritage Foundation called "Taking Back Our Fiscal Future." From the CBPP press release:

Sixteen leading economists and budget experts issued a major critique today of a recent proposal to address future federal budget deficits through radical changes in budget procedures for Social Security, Medicare, and Medicaid.

These experts, who include a Nobel Laureate in economics, two former Office of Management and Budget Directors, and a former Deputy Director of the Congressional Budget Office, agree that the nation faces large, persistent budget deficits that would ultimately risk significant damage to the economy. They also concur that policymakers should begin now to make the tough choices needed to avert such deficits.

But they believe the methods set forth in "Taking Back Our Fiscal Future" (TBOFF), a recent proposal by some analysts at the Brookings Institution, the Heritage Foundation, and other groups, are misguided. Instead, they believe policymakers should begin the hard work of building consensus on specific spending and tax measures that would start reducing longterm deficits, and they recommend a series of such measures.

So, the Brookings/Heritage paper was signed by 16 "longtime federal budget and policy experts" and now CBPP has released their own report from another 16 prominent and expert folks. Seems like the right-of-centrists and left-of-centrists are gearing up for what could be major reforms to fundamental federal government supports and programs in 2009. Should be quite a fight - stay tuned.

Reports:
CBPP: A Balanced Approach to Restoring Fiscal Responsibility
Brookings/Heritage: Taking Back Our Fiscal Future

Commentary:
Matthew Yglesias (The Atlantic): Fiscal Sanity How?
Matthew Yglesias (The Atlantic): Leninism's Return
Robert Kuttner (The American Prospect): Sensible Budget Wonks Strike Back Against Conservatives
Mark Schmidt (The American Prospect): "Leninist Strategy" 2.0
Matt Lewis (Inclusionist): A Better Way on Long-Term Deficits
Diane Lim Rogers (EconomistMom): But Really, Fiscal Responsibility Is Easier Under a Benevolent Dictatorship

Happy Fourth of July!
Just wanted to let our loyal BudgetBlog readers know we're going on a short hiatus next week. With Congress heading out of town for a short summer recess and the upcoming Fourth of July holiday next week, the Fiscal Policy team is heading out of town in order to escape the heat for some well-deserved vacation. This means, though, that the BudgetBlog will be dormant next week.

But don't despair. Craig and I will return in one short week on July 7 to continue to bring you all the news, gossip, information, and analysis on federal fiscal policy you've come to expect.

Hope everyone has a safe and festive Independence Day next week - be careful with those fireworks.

A recently released GAO report finds that (surprise!) Medicare Advantage providers predicted lower profit margins in 2005 than actually materialized.

[Medicare Advantage (MA)] organizations, on average, reported spending 85.7 percent of total revenue on medical expenses in 2005, but had projected medical expenditures of 90.2 percent of total revenue. Because organizations spent less revenue on medical expenses than projected, they earned higher average profits than projected. On average, MA organizations' self-reported actual profit margin was 5.1 percent of total revenue, which is approximately $1.14 billion more in profits in 2005 than MA organizations projected.

And while these MA providers would have been paid the same regardless of their projections, they would have been required to provide beneficiaries either more services or lower premiums had they accurately projected their profit margins.

File this one under "W" for "Well, Duh." A system that depends profit maximizing firms to divulge information that would result in lower profits will, time and time again, result in less-than-accurate information.

If you want to bring the Magic of the Marketplace^TM to government services, transparency matters -- it matters a lot. Just because the government pays a firm to provide services doesn't mean the government won't get taken.

Our friends over at the Government Accountability Office released another great report a week or two ago concerning how Medicare providers (hospitals, nursing homes, and doctors) are failing to pay federal taxes to the tune of at least $2 billion a year. Findings from the report:

Our analysis of data provided by CMS and IRS indicates that over 27,000 health care providers (i.e., about 6 percent of all such providers) paid under Medicare during calendar year 2006 had payroll and other agreed-to federal tax debts totaling over $2 billion. The $2 billion in unpaid tax debts only includes those debts reported on a tax return or assessed by IRS through its enforcement programs. This $2 billion figure is understated because some of these Medicare providers owed taxes under separate tax identification numbers (TIN) from the TINs that received the Medicare payments or they did not file their tax returns.

GAO found some pretty crazy stuff in their investigation, including abusive and potentially criminal activity, and found that many individuals associated with their investigation used the proceeds of their tax evasion for personal profit. Again from GAO:

Furthermore, individuals associated with some of these providers at the same time used payroll taxes withheld from employees for personal gain. Some of these individuals accumulated substantial wealth and assets, including million-dollar houses and luxury vehicles, while failing to pay their federal taxes.

While the actions of these providers is pretty bad, the failure of the Centers for Medicare and Medicaid (CMS) to take any actions to prevent these abuses might be worse:

CMS has not developed a policy to require contractors (1) to obtain consent for IRS disclosure of federal tax debts and (2) to screen providers for unpaid taxes. Further complicating this issue, absent consent by the taxpayer, which CMS does not require, federal law generally prohibits the disclosure of taxpayer data to CMS or its contractors.

IRS can continuously levy up to 15 percent of each payment made to a federal payee—for example, a Medicare hospital—until that tax debt is paid. However, CMS has not incorporated most of its Medicare payments into the continuous levy program. As a result, for calendar year 2006, the government lost opportunities to potentially collect over $140 million in unpaid taxes.

Health care providers receiving federal resources should be treated no differently than contractors who fail to pay their taxes. Congress recently passed legislation to prevent contractors from using off-shore tax havens to avoid paying federal taxes. They should do the same to make sure all entities who benefit from our common resources pay the taxes they owe.

One-Page Summary of GAO Report
Full Report: Thousands of Medicare Providers Abuse the Federal Tax System