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The Senate Health Bill: Budget Gimmicks Galore

Posted By Nina Owcharenko On November 20, 2009 @ 7:21 am In Obamacare | Comments Disabled

Senate Majority Leader Harry Reid unveiled his 2,074 page health care bill with claims that the massive measure falls under the $900 billion cost threshold promised by the President.

To put it charitably, the truth is more complicated. The bill depends on budget gimmicks and unrealistic assumptions and projected savings to reach this goal over the 10 year budget window.

Consider the four most outrageous “Budget Tricks”. By its construction, the bill:

  • Excludes the Costly “Doctor Fix”. Like the House bill, the Senate bill conveniently ignores the over $200 billion price tag associated with stopping the unavoidable cuts to physicians under the Medicare program. Separating the health care bill like this enables Senator Reid to claim his bill will reduce the deficit. However, in a letter released today, CBO estimates [1] that combining the House bill (H.R. 3961) with the “Dr. Fix” bill (H.R. 3962) would actually “add $89 billion to budget deficits over the 2010–2019 period.”
  • Manipulates the new CLASS Act. The Senate bill, like the House, also includes a new government health care program for long term health insurance, the CLASS Act. The structure of the CLASS Act has premium collections raising revenues for the government in the first 10 years, appearing to aid in reducing the deficit. But the CBO points out [2] that while the CLASS Act would generate net receipts for the government in the initial years when premiums would exceed total benefit payments, but would eventually lead to net outlays when benefits exceed premiums.”
  • Delays Costly Benefits. The Senate bill is cleverly designed to gather revenues (higher taxes, fees, and other offsets) over the full 10 year window but delays paying out the major benefits, like subsidies, until the last 6 years. So, the 2010-2019 estimate is not a full cost estimate of all provisions fully implemented and will certainly add significantly to the true cost of the bill. Moreover, as with all government programs, they always cost more than originally promised.
  • Depends on Uncertain Cuts to Medicare. The Senate bill depends on using cuts to Medicare to pay for its $1.2 Trillion coverage expansion. As explained by the CBO Director [3]:

    Adjusting for inflation, Medicare spending per beneficiary under the bill would increase at an average annual rate of roughly 2 percent during the next two decades—much less than the roughly 4 percent annual growth rate of the past two decades.

    These dramatic savings, of course, assume that these spending cuts stay intact. If the “Dr. Fix” is an illustration, it is highly unlikely that Congress will live up to the deep cuts it proposes for Medicare. As the first round of cuts get close, a frenzied team of high powered lobbyists for the health care industry will no doubt be wearing out shoe leather going door to door in the corridors of Congress. They’ve been successful just about every time.

    Moreover, these cuts include over $118 billion in ‘savings’ resulting from changes to the highly popular Medicare Advantage plans, a move that will directly impact the benefits of millions of seniors. In his analysis [4] of the House bill, where the House of Representatives enacted similar reductions, the Chief Actuary for the Centers of Medicare and Medicaid Services has confirmed, these changes will result in “less generous packages” and enrollment “would decrease by about 64 percent.”

True Costs Unknown
The reality is this Senate bill, like its House counterpart, costs far more than the President’s $900 billion promise and is more likely to run in the trillions. How is it that a bill whose purpose is to save money starts out, with careful caveats and unrealistic assumptions, by spending nearly a trillion dollars?


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/11/20/the-senate-health-bill-the-true-costs-are-unknown/

URLs in this post:

[1] estimates: http://www.house.gov/budget_republicans/press/2007/pr20091119cboscore.pdf

[2] points out: http://www.cbo.gov/ftpdocs/107xx/doc10731/Reid_letter_11_18_09.pdf

[3] CBO Director: http://cboblog.cbo.gov/?p=403

[4] analysis: http://www.heritage.org/research/healthcare/upload/OACTMemoHR3962.pdf

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