How Much the Baucus Bill Costs -- and Why the Numbers Differ
By Lori Montgomery
As if health care reform weren't confusing enough.
When the chairman of the Senate Finance Committee released his long-awaited reform plan on Wednesday, his staff announced that it would cost $856 billion over the next decade. Hours later, the nonpartisan Congressional Budget Office released its preliminary analysis, saying the plan would provide coverage to about 30 million uninsured people and cost ... $774 billion over the next decade.
Normally, what the CBO says goes on cost estimates. Most participants in the health care debate, including dozens of reporters, shifted quickly to the $774 billion figure. But Finance Chairman Max Baucus (D-Mont.) is insistent about the $856 billion figure -- presumably so Democrats, who want to make the package more generous, get the message that they can't add much without sending the cost soaring over President Obama's self-imposed limit of $900 billion.
So which number is right? Depending on your point of view, they both are.
The CBO tends to focus on the cost of expanding coverage to the uninsured, then tallies up the other parts of the package to make sure the coverage expansion is paid for. In this case, $774 billion is the cost of expanding eligibility for Medicaid ($287 billion), providing subsidies to participants in the insurance exchanges ($463 billion) and giving tax credits to small businesses that offer their workers health insurance ($24 billion). (The comparable number for the House bill is nearly $1.28 trillion over 10 years.)
By the CBO's calculations, that cost would be offset by fees and taxes related to the expansion of coverage, including penalties on people who failed to buy insurance and businesses that failed to offer it, as well as a new tax on high-cost insurance policies. Those provisions would bring the net cost of Baucus's coverage model down to $500 billion over 10 years, according to the CBO. (The comparable number for the House bill is the oft-cited $1.042 trillion.)
Finally, THAT cost would be more than offset by $549 billion in other new fees and taxes ($139 billion) and the net impact of changes to other programs, particularly within Medicare ($409 billion). Subtract $500 billion from $549 billion, and the bill would be $49 billion in the black over the next 10 years, according to CBO, reducing future deficits.
Baucus takes a different approach. His estimate of $856 billion represents the sum of every provision in the bill that costs money, from expanding coverage ($774 billion) to giving Medicare doctors a one-year pay raise ($11 billion) to closing the coverage gap in the Medicare prescription drug benefit ($17 billion) to dozens of other, much tinier things. (It would take a while to figure a comparable number for the House bill.) Baucus then calculates every provision in the bill that saves money, for a total of $904 billion. Which leaves you, again, with an extra $48 billion or $49 billion to play with.
As long as we're in math class, here's a bonus extra-credit question: The House bill would increase deficits by nearly $240 billion over the next decade. What simple change would make that bill balance?
That's right, health-care fans: Remove the 10-year pay raise for Medicare doctors. If the House bill only raised their pay for one year, as Baucus does, the bill would shift pretty easily into deficit neutrality. And, despite the screaming that would emanate from the American Medical Association, some House Democrats are proposing to do just that.
But the House bill would still have big problems after 2019, when it would quickly fall into deficit again. Baucus's package of tax hikes and spending cuts, on the other hand, would grow faster than the cost of expanding coverage, making his proposal the only one so far that would keep Obama's promise not to make future deficits worse.
September 18, 2009; 3:33 PM ET
Categories: Health Reform
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