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What The CBO Said About Baucus Plan

From the Congressional Budget Office’s website:

Senate Finance Committee Chairman Sen. Max Baucus, D-Mont., holds up notes for photographers, on Capitol Hill in Washington, Thursday, Oct. 1, 2009, before the start of the afternoon session of the committee’s continuing hearing on health care reform legislation.

Preliminary Analysis of the Senate Finance Committee Chairman’s Mark As Amended

CBO and the staff of the Joint Committee on Taxation (JCT) have just issued a preliminary analysis of the Senate Finance Committee Chairman’s mark for the America’s Healthy Future Act of 2009, incorporating the amendments that have been adopted to date by the committee. That analysis reflects the specifications posted on the committee’s Web site on October 2, 2009, corrections posted on October 5, and additional clarifications provided by the staff of the committee through October 6. CBO and JCT’s analysis is preliminary in large part because the Chairman’s mark, as amended, has not yet been embodied in legislative language.

Among other things, the Chairman’s mark, as amended, would establish a mandate for most legal residents of the United States to obtain health insurance; set up insurance “exchanges” through which certain individuals and families could receive federal subsidies to substantially reduce the cost of purchasing that coverage; significantly expand eligibility for Medicaid; substantially reduce the growth of Medicare’s payment rates for most services (relative to the growth rates projected under current law); impose an excise tax on insurance plans with relatively high premiums; and make various other changes to the Medicaid and Medicare programs and the federal tax code.

According to CBO and JCT’s assessment, enacting the Chairman’s mark, as amended, would result in a net reduction in federal budget deficits of $81 billion over the 2010–2019 period. The estimate includes a projected net cost of $518 billion over 10 years for the proposed expansions in insurance coverage. That net cost itself reflects a gross total of $829 billion in credits and subsidies provided through the exchanges, increased net outlays for Medicaid and the Children’s Health Insurance Program (CHIP), and tax credits for small employers; those costs are partly offset by $201 billion in revenues from the excise tax on high-premium insurance plans and $110 billion in net savings from other sources. The net cost of the coverage expansions would be more than offset by the combination of other spending changes that CBO estimates would save $404 billion over the 10 years and other provisions that JCT and CBO estimate would increase federal revenues by $196 billion over the same period. In subsequent years, the collective effect of those provisions would probably be continued reductions in federal budget deficits. Those estimates are all subject to substantial uncertainty.

By 2019, CBO and JCT estimate, the number of nonelderly people who are uninsured would be reduced by about 29 million, leaving about 25 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants). Under the proposal, the share of legal nonelderly residents with insurance coverage would rise from about 83 percent currently to about 94 percent. Roughly 23 million people would purchase their own coverage through the new insurance exchanges, and there would be roughly 14 million more enrollees in Medicaid and CHIP than is projected under current law. Relative to currently projected levels, the number of people either purchasing individual coverage outside the exchanges or obtaining coverage through employers would decline by several million.

Although CBO does not generally provide cost estimates beyond the 10 year budget projection period (2010 through 2019 currently), Senate rules require some information about the budgetary impact of legislation in subsequent decades, and many Members have requested CBO analyses of the long-term budgetary impact of broad changes in the nation’s health care and health insurance systems. However, a detailed year-by-year projection, like those that CBO prepares for the 10-year budget window, would not be meaningful because the uncertainties involved are simply too great. CBO has therefore developed a rough outlook for the decade following the 10-year budget window by grouping the elements of the proposal into broad categories and assessing the rate at which the budgetary impact of each of those broad categories is likely to increase over time.

All told, the proposal would reduce the federal deficit by $12 billion in 2019, CBO and JCT estimate. After that, the added revenues and cost savings are projected to grow more rapidly than the cost of the coverage expansion. Consequently, CBO expects that the proposal, if enacted, would reduce federal budget deficits over the ensuing decade 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. The imprecision of that calculation reflects the even greater degree of uncertainty that attends to it, compared with CBO’s 10-year budget estimates.

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. The long-term budgetary impact could be quite different if those provisions were ultimately changed or not fully implemented. (If those changes arose from future legislation, CBO would estimate their costs when that legislation was being considered by the Congress.)

It would seem that the CBO’s analysis is not quite as rosy as our media masters are portraying it.

But what else is new?

This article was posted by Steve on Thursday, October 8th, 2009. Comments are currently closed.

10 Responses to “What The CBO Said About Baucus Plan”

  1. P. Aaron says:

    But IF, any government agency used REAL ACCOUNTING PRACTICES that private businesses have to use, the bill would be recognized for the fecal matter it is.

  2. here’s the bottom line.. CBO says it will result in lowering of the Deficit.

    Which isn’t lying.. if the bill it examined is what will pass.. even given the incredible penalties and NEW Taxes included.. But… there WILL be a public option added, and it will be done as stealthily as can be.

    THEN.. there is a concern that Illegals will STILL be able to get in as being part of the “population,” rather than separated as non citizens..

    Same poo.. different day

  3. proreason says:

    Of course, the whole thing is a fantasy.

    But here is the breakdown teased out of the garbly-gook:

    New Taxes (treated as “income” to the government:):
    …..201 B……New excise tax on insurance policies (avg about $300 annually per family)
    …..196 B……”Other provisions”. i.e., Taxes. (Avg about $300 annually per family)

    Service Reductions (Treated as “cost reductions”):
    …..404 B…..Medicare reductions (avg about $100 per year per Medicare recipient)
    …..110 B…..Savings from “other sources”

    New Costs:
    …..829 B….Credits and subsidies, Medicaid and Chips costs

    – Medicare has gone up by 9% annually forever. Now they claim 1/2 billion in savings. Zero chance. Real growth will be more than 9% because the baby boomers are coming online.
    – 397 billion in new taxes
    – 829 billion in new costs over 10 years for 29 million people. $2858 per year per new covered life. This is laughably low. The only policy you could buy for that would be a $20,000 deductable policy, and that wouldn’t count the costs of deductables and co-pays

    Proreason’s analysis:

    – the 829 B cost will be at least 1,600 B
    – the 514 B in cost reductions won’t happen. Medicare is projected at 420B in 2009. Over 10 years, if we assume an unrealistically low growth factor of 6%, cost will increase by 2 trillion (2,000 Billion)
    – the 397 B in new taxes is low, because tax estimates are ALWAYS low, but I’ll leave it as is

    Conclusion, the true cost will be at least 829 B + 2,000B + 397B = 3.2 Trillion.

    The reason it’s low is that if you take Medicare out of the equation, the cost is 2,900 per person per new covered life (in other words, the 829B must be low by a factor of 2). The current Medicarie budget is 420 B for about 50 million covered lives, or about 8,000 per person p.a., and it is HEAVILY subsized by private industry because Medicare only pays about 82% of true costs. So they are telling us that the cost per person will be reduced by 64% per person. SURE it will. And Bill Ayers didn’t mean it either.

    My understated 3.2 Trillion is about 4,200 per taxpaying taxpayer every year. For two-income families that’s 8,400 per year…..and up…..forever…..to insure 29,000,000 people who already have medical care. (but to be honest, 60% of that is increased medicare costs, which they falsely assume will actually decrease, even though the baby boomers are aging and people are living longer.)

    And this is the cheap bill.

    • Petronius says:

      Sound analysis, Pro.

      In addition to the tax on medical insurance policies, the plan includes Sen. Baucus’ proposed innovation tax on manufacturers of medical devices and diagnostics, and pharmaceuticals. (I am uncertain whether the $196B “Other provisions” (taxes) includes the innovation tax — there are too many gimmick taxes concealed in this plan.)

      As a general rule, you do not tax something unless you want less of it.

  4. proreason says:

    FYI, there is no Baukus Bill.

    The CBO scoring was done on “concepts”. The legal languagehas not been written.


    It’s vapor ware.

  5. Tater Salad says:

    To the Democrats in Congress who don’t quite get it: I want to offer a personal pledge. I – and a lot of other people – have every intention of removing you from Congress in the next election if you stand in the way of health care legislation that the people want. That is not a hollow or idle threat. We will come to your district and we will work against you, first in the primary and, if we have to, in the general election. We do not want the “Public Option”…..period!

  6. Chuckk says:

    I can not think of a single time when CBO projections came in close to being correct. I’ll bet a dollar to a donut that the “plan” will cost 3-5 times more than projecteed, and the benefits will be fewer than promised.

    • proreason says:

      They are telling us that they will provide health insurance for 29 million unemployed people at 1/5th the cost of Medicare.

      And since the “new” people being covered do not currently have health insurance, their health care costs will certainly be above average.

      And the cuts in Medicare to “pay” for it are a joke. Medicare costs are going up 9% per year, and the Baby Boomers are just now starting to enter the system.

      This whole thing is a criminal lie by criminal politicians.

  7. Right of the People says:

    Is this the new math? Paying $829 billion for something will save us $81 billion?????? WTF are they talking about? I guess it’s like when my wife goes to the big sale because she will save so much on stuff we don’t need instead of just not spending the money. Now that’s a real savings!

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