That loud sound you heard just a moment ago from Capitol Hill was the collective exhale of Democrats: Sen. Max Baucus's Finance Committee health care proposal won't add to the deficit over 10 years, according to the magical Congressional Budget Office. Read their score summary here: Baucus.pdf. In fact, it would reduce deficit projections by $81 billion, costing a total of $829 billion. The bill wouldn't achieve universal coverage -- excluding illegal immigrants, it would leave about 16 million non-elderly Americans without health insurance.
How did the CBO arrive at those figures, a gross cost of $829 billion and net savings of $81 billion? The bill's combination of an excise tax on insurance plans with high premiums, the money that'll come from people paying premiums for their new insurance plans in the exchange mechanism, savings from cuts to Medicaid and Medicare, and the tax impact that comes with the expansion in federally subsidized insurance. The bill provides subsidies to those earning between 100 and 400% of the poverty level.
Here's what the CBO says about the co-ops: they "had very little effect on the estimates of total enrollment in the exchanges or federal costs because, as they are described in the specifications, they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments."
Baucus says he can get this bill to the floor. It's a bill that at least one Republican -- Sen. Olympia Snowe -- could vote for. And no Democrat -- or Republican -- can argue that, based on the shared reverence for the CBO source, health care will add to the deficit...even though, as the CBO admits, a projection is just a projection.
So it saves less money than a strong public option bill and it covers fewer people? Sounds like an awesome compromise. Well done, Max!
Is this the plan that collects revenue for ten years, but doesn't provide benefits until year six?
Tommer: It starts providing benefits in year four, but the benefits don't ramp up to their full value until year five or six.
It would, however, add to the deficit over any time period of around 15 or 20 years or more. It's got a neat trick of not spending much until 2014 (and ramping up after that), but the taxes start before that. So from 2010 to 2014 it decreases the deficit; from 2015 to 2019 it increases the deficit (Source: page 3 of the linked PDF of the CBO letter). The tax revenue grows incredibly slowly after 2014, not even close to enough to pay for the increased spending. At that point the cuts to Medicaid and Medicare are supposed to kick in and are necessary to pay for the increased spending on other people.
So it saves money from 2010 to 2014 by imposing taxes but not providing benefits; from 2015 to 2019 it spends more money, and only manages to stay deficit neutral by slashing Medicare and Medicaid spending. I don't think that the Medicare and Medicaid cuts will happen (this Congress voted again, like all previous Congresses, to suspend automatic Medicare doctor payments cuts that would have happened otherwise).
So this bill absolutely will increase the deficit.
John, this is absolutely not correct with respect to the Baucus bill (it was true for the House bill). The taxes imposed actually grow faster than cost. See the CBO: "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. "
Hey John Thacker,
I think you're misinformed. The Max! bill - while gutless - looks to save even more money in the out years and is projected to have a positive financial effect:
Pg 2: "In subsequent years [after 2019], the collective effect of those provisions [the Max bill] would probably be continued reductions in federal budget deficits."
Pg. 11: "After that [2019], 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 [the first 10 years]—with a total effect during that decade that is in a broad range between one-quarter percent and one-half percent of GDP."
Pg: 12: "However, in view of the projected net savings during the decade following the 10-year budget window, CBO anticipates that the proposal would probably continue to reduce budget deficits relative to those under current law in subsequent decades."
Now they are ringing the bells...but how soon will they be wringing their hands?
I hope Ron Wyden votes against this bill in committee.
Dear Pineview: Mr. Thacker's point is exceedingly reasonable. Congress isn't going to wack Medicare spending by $400-500 billion. It's all pie in the sky. If Congress really wanted to cut the supposed waste and fraud out of Medicare, they would have done so long ago; they don't need to take over one-sixth of the economy to do so. The only certainty in this monstrosity is more taxes.
BTW, Mr. Ambinder: The Republicans are not accepting the CBO numbers, if only because the CBO scoring had to assume future Congresses will cut spending they have never done before. Please apply some critical thinking skills to this debate, instead of accepting whatever the Democrats in Congress publish for public consumption.