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CBO Scores Baucus


The Congressional Budget Office has done a preliminary score of the Senate Finance Committee health care plan. It’s preliminary because there isn’t yet an actual text of the bill, only legislative specs. The bottom line: CBO estimates that bill would cost $829 billion over the next ten years, but that because of the new taxes and penalties, various Medicare cuts, and cost-control measures the bill promises, it would actually reduce the deficit projection for the next ten years by about $81 billion, from $7.14 trillion to $7.06 trillion — assuming all those taxes, cuts, and measures were in fact carried out as proposed.

The CBO letter is here, and I would highly recommend Tevi Troy’s quick preliminary take on it at Critical Condition. One striking feature of the letter is the tone of skepticism about the likelihood that the cost-saving measures laid out in the bill would in fact be enacted and effective. On page 12 of the document, CBO notes:

These projections assume that the proposals are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation. For example, the sustainable growth rate (SGR) mechanism governing Medicare’s payments to physicians has frequently been modified (either through legislation or administrative action) to avoid reductions in those payments. The projected savings for the proposal reflect the cumulative impact of a number of specifications that would constrain payment rates for providers of Medicare services. In particular, the proposal would increase payment rates for physicians’ services for 2010, but those rates would be reduced by about 25 percent for 2011 and then remain at current-law levels (that is, as specified under the SGR) for subsequent years. Under the proposal, increases in payment rates for many other providers would be held below the rate of inflation (in expectation of ongoing productivity improvements in the delivery of health care). The projected longer-term savings for the proposal also assume that the Medicare Commission is relatively effective in reducing costs—beyond the reductions that would be achieved by other aspects of the proposal—to meet the targets specified in the legislation. The long-term budgetary impact could be quite different if those provisions were ultimately changed or not fully implemented.

Anyone who has watched the frequent congressional debates surrounding Medicare provider rates can tell you how likely a 25% cut is in 2011. And Jim Capretta further explains why the savings projections in the bill (carefully designed in a way that CBO had to count) are absurd. But even if we accept the rosiest assumptions implicit in the bill and imagine that the program it envisions will basically not increase the deficit any more than President Obama’s budget is already slated to increase it, we are talking about using $800 billion to build a vast array of mandates, taxes, subsidies, regulations, and new government programs intended over time to replace the American health-insurance industry with an enormous new government entitlement, while doing little to control the basic problem of health-care costs, and most likely actually increasing the cost of health insurance premiums, and exacerbating the chief causes of rising health-care costs more generally (the lack of competitive pressure on prices in health care, and highly inefficient entitlement spending — which this bill would massively increase). All of this, CBO says, to increase the portion of Americans with health insurance from the current 83% to 94% over ten years. Does anyone really believe this is the only way to do so?

Some more thoughts on the Baucus bill here.


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