What the CBO doesn’t say about Baucus bill
We are in the bewitching trick-or-treat season when Democrats are telling us their nearly $1 trillion health reform plan is deficit-neutral and will reduce the nation’s soaring medical care costs.
These promises follow the dubious claim that Democrats in Congress intend to pay for their nationalized plan by carving nearly half a trillion dollars out of Medicare and Medicaid without reducing a single benefit, service or medical procedure in either program.
Doubting economists (and even some Democrats) say these claims are questionable at best, downright duplicitous at worst, and that if you believe them, there’s a bridge in Brooklyn you can buy for next to nothing.
“Only in government accounting could an additional 29 million people receive new health coverage with a [10 year] savings of $81 billion. By this congressional logic, America could insure all 6 billion people in the world at a savings of trillions of dollars,” wrote economist Diana Furchtgott-Roth on the Real Clear Markets Web site.
In its second estimate of the year on the Senate Finance Committee plan, the Congressional Budget Office (CBO) said the bill fashioned by Chairman Max Baucus, which passed the committee Oct. 13 on a 14-9 vote, would not add a penny to the nation’s debts, which are estimated to rise by more than $9 trillion over 10 years under President Obama’s budget projections.
Critics of the Democrats’ plan don’t believe it for a minute. “Sen. Baucus shoehorns a $1.5 trillion to $2 trillion ‘universal coverage’ scheme into an $830 billion sack,” says James C. Capretta, former chief health care analyst in the Office of Management and Budget.
“Some of the savings come from putting even more people on Medicaid, the most inefficient, wasteful health plan in America that confines people to substandard care,” writes health care policy analyst Grace-Marie Turner of the Galen Institute in an analysis of the bill.
“The bill will be paid for by new taxes and illusionary savings in Medicare and Medicaid spending. And it still leaves 25 million people without health insurance,” Ms. Turner said.
The Republican staff on the Senate Budget Committee ran the numbers in the Baucus bill two weeks ago and came up with a price tag of $1.8 trillion when it is fully implemented over 10 years.
“This is a staggering amount of money that will have to be paid for by either raising taxes, cutting Medicare, or borrowing huge sums of money that will shackle future generations with the burden of paying off trillions of dollars in unpaid debt,” said South Dakota Sen. John Thune. who chairs the Senate Republi- can Policy Committee.
The difference in the Republican Party’s numbers and the CBO’s have to do with the Baucus bill’s two main revenue-raisers: an excise tax on expensive health care plans and presumed savings from Medicare. “CBO underestimates the true cost of both components,” said Ms. Furchtgott-Roth, the Manhattan Institute economist.
“What CBO doesn’t tell Americans is that their health insurance premiums would increase substantially in the decades ahead. The level of health insurance premiums does not have to be incorporated in CBO estimates, because it is not a tax and it is not paid by the federal government,” she says in her analysis.
According to her projections, by 2019 Americans would be paying $46 billion in excise taxes on their health insurance plans and more than $100 billion in higher premiums.
Her higher premium forecasts also were contained in a cost analysis done for America’s Health Insurance Plans, the industry’s association, by the giant auditing company PricewaterhouseCoopers.
The audit found that under the Baucus committee bill, a typical family health insurance premium in 2019 would be $4,000 more than projected.
Among the reasons: The bill would not draw enough younger, healthier policyholders into the insurance industry’s risk pool, while new federal mandates on additional coverage would drive up the industry’s insurance payments.
“Most Americans would have to pay a far higher cost for health insurance since plans would have to accept everyone, regardless of health or pre-existing conditions,” Ms. FurchtgottRoth said.
As for those promised Medicare savings, CBO Director Douglas W. Elmendorf said Congress and the executive branch have a history of avoiding such politically sensitive reductions. “The long-term budgetary impact could be quite different if those provisions were ultimately changed and or not fully implemented,” Mr. Elmendorf said in his report to Mr. Baucus.
That is why some Democrats greeted the CBO’s report with a healthy dose of skepticism two weeks ago. Indiana Sen. Evan Bayh, for one, voiced doubts that CBO’s savings forecasts could ever be realized. Nebraska Sen. Ben Nelson doesn’t believe the savings claims, either. “I don’t know that outside the Beltway people believe those numbers,” he told Congress Daily.
As of this week, the health insurance industry’s decision to turn against the Baucus bill — breaking its alliance with the White House — has dealt a major blow to Obama administration lobbying efforts.
Mr. Obama has consistently argued that his health care reform plans would significantly lower the nation’s health care costs. Now the health insurance industry has mounted a major offensive charging that just the opposite is true: that Obamacare will drive your medical insurance costs through the roof.
Donald Lambro is chief political correspondent for The Washington Times.