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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.

Class dismissed.

By Lori Montgomery  |  September 18, 2009; 3:33 PM ET
Categories:  Health Reform  
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Any way you look at it, the bill is going to be expensive. The question is, can America afford it right now with the biggest deficits and debts in our history? Even more amazing is how the Baucus plan tries to pay for the cost of the bill. Again, it goes after small businesses with this corporate reporting proposal hidden on page 208 of the bill.

Posted by: fitiwalt1 | September 18, 2009 5:09 PM | Report abuse

Ms. Montgomery, while your quantitative analysis demonstrates a strong command of elementary mathematics, perhaps we should consider the possibility that 10 year budget forecasts require more than simply addition and subtraction. The Medicare physician payment provisions contained in the House tri-committee legislation reflect a nuanced understanding of an inherently flawed policy. Far from a "raise," these reforms would avert a 21% cut in reimbursements scheduled for January 2010 and provide realistic projections for future medical costs and spending. Year after year, Congress has enacted off-budget, temporary fixes to the payment system in order to stave off these damaging cuts that threaten those small physician practices central to the care of our nation's seniors. Should the final health care reform package fail to address this problem, we can be assured that this destabilizing approach to health care financing will reemerge in 2010 and beyond.

Further examination of the House bill's provisions reveals a restructuring of the payment methodology that will begin to address the growing shortage of primary care physicians, projected to reach 40,000 by 2020. There is undisputed peer-reviewed evidence that increased investment in primary care services increases the quality and efficiency of care delivery systems. Yet these services are consistently undervalued. Under the House legislation, we would establish a more equitable payment system that recognizes the value of primary care, thereby increasing access.

With all due respect Ms. Montgomery, I would encourage you to complete your homework before class.

Posted by: macdock | September 18, 2009 5:15 PM | Report abuse

This column by Ms. Montgomery omits almost all specifics. Exactly what is proposed to be cut from or added to Medicare reimbursements and when? Ms. Montgomery needs to cite the source of information so someone else can find it.

Posted by: AppDev | September 18, 2009 7:20 PM | Report abuse

I thought it was funny at the Baucus news conference when he said that what the Federal Government pays doctors under Medicare is not really part of Health Reform.

That's like saying what the Federal Goverment pays its soldiers is not really part of the cost of the Army :-)

Also, you might look at the "Doc Fix" issue the other way, if Baucus was to include the $239 billion dollar SGR formula fix in his bill it would put it well over what the President said in his speech of $900 billion ($775B+$239B= $1.013 trillion).

The issue of future year deficits has everything to do with setting the growth rate of his benefits tax threshold ($21,000 in 2013) at the CPI as the cost of premiums ($13,375 in 2009) grow at the rate of medical inflation. Eventually everyone's employer provided premiums will be taxed.

Lets see how far the Baucus taxes get.

Posted by: cautious | September 19, 2009 2:38 AM | Report abuse

There is no choice here, there is no doubt that health care needs to be under government control. The health care costs are going to take this country down economically and physically. When 20% of a nation has no medical insurance and the reason is because the costs are threatening to become 35% of our GDP, inaction is not an option. Florida Health Insurance Reform is our advocacy website loaded with a list of the free programs available now for people suffering without health coverage.

Posted by: jeremyeast | September 19, 2009 4:12 PM | Report abuse

Can someone please tell me if any or all of these proposed plans will apply to Congress? They have a history of enacting laws for the rest of us but exempting themselves and their employees.

Posted by: Ex-Fed | September 19, 2009 9:57 PM | Report abuse

The costs differ because no one is giving out information in the medical or drug field.A small glimpse came when Lily laid off a large portion of the workforce.
The 1/6th of the GDP controlled by medicine has never been accurately measured.
No one knows the profit margins at hospitals because they are non-profits like churches.
Not one person knows the income of doctors since they are closely held corporations who do not report to the SEC.
It's pretty evident the drug companies do not wish to publish their margins since the Indians came out with AIDS drugs which cost 5% of similar drugs made in the US.
It's very hard to know how much ambulance companies make on each call. We can estimate the cost,but cannot get them to come forth with per visit costs and profits.Few clinics are not incorporated into closely held corporations which also fail to report to the SEC.
We know the term negligence created a fire storm in Texas.In fact,we also know a US wide definition of negligence would greatly help the medical profession and greatly reduce the vast amounts of documentation now required by insurance companies and their allies the Trial Lawyers.In fact, this would hit the medical equipment manufacturers the hardest for many tests would be deemed superfluous. This would also alter amortization rates since equipment would not be used so frequently.
This business is as complex and as large as the automobile industry.But,it is far different because we have not made agreements with other nations to take care of our patients.This competition would probably help everyone in the world.
And each and every group hides behind

Posted by: TarheelChief | September 19, 2009 10:57 PM | Report abuse

We need to bring the price-shopping medical services consumer back into the picture. He is one key to bringing down healthcare costs. I cannot get insurance because I have a pre-existing condition. The annual cost for my condition is $700.00, but because I am lumped in with others with my diagnosis, I am denied. When I obtain healthcare I just buy it, but I have learned to shop around and wow, what a difference you find at different doctors and hospitals. Recently while shopping for an opthalmologist, I found that a simple office visit to a Duke physician was several hundred dollars. The same visit to the doctor I chose was only $140.00. Where do you think BCBS usually wants to send patients - that's right, to Duke. Patients with insurance do not exert pressure on the cost of care because healthcare is the one outlay for which we never ask, "How much will this cost?". We just pay our copay and hope the insurance company pays for it. I can afford the $140.00 for the eye doctor, and I think most middle class people can. They will make darn sure they really need to see a doctor before they go, but they will go if the discomfort merits it. Even a mammogram only costs $125.00 in my area and other routine testing is similarly inexpensive. What many people really need is catastrophic coverage. Under a catastrophic plan, my pre-existing could be exluded from my coverage. If I could just obtain coverage for cancer and diabetes and other big-ticket conditions without having coverage for office visits and routine tests, my premium would be low and I would buy it and stop taking chances with fate. I have been told the reason the catastrophic plans don't exist is because of government mandates on what insurers have to cover. My husband and daughter who are healthy only pay $250.00 per month for both of them. It's low because there is competition for their business. Let's put more competition in the proposals. The providers will find the cost cuts when they actually have to compete with each other. We don't need a government takeover, just some common sense adjustments.

Posted by: diane21 | September 20, 2009 10:47 PM | Report abuse

Not one news source comparing the many bills out for conideration mentions anything about the many extras in HR 3200 compared to the other bills which does in fact provide assistance to the medical student which is one thing the selfish people were screaming about having no doctor to see them or having long waits for service. Where is the comparisons to the entire bills? Why only portions? Why does only certain portions become an issue when the money everyone is griping about having to pay or not pay has more to do with than just providing insurance for the unisured? This creates a narrow view of what is being offered and the affects each will have on the industry as a whole for future generations.

Posted by: bonnieblue12 | September 21, 2009 9:18 AM | Report abuse

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