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The Baucus Bill: CBO Luvs It


The Congressional Budget Office has released its preliminary score (pdf) of Max Baucus's bill. According to the CBO, the bill covers 94 percent of legal residents and actually reduces the deficit. More to the point, it keeps reducing the deficit as time goes on.

The CBO score, which does include a rough sketch of the bill's second decade, clarifies Kent Conrad's desire for a 20-year score considerably: It makes the Senate Finance Committee's bill look better than the House's bill, at least from a deficit-reduction perspective. Unlike in the House bill, the Senate Finance Committee's bill sees its revenue and savings increase more quickly than its costs over time. Not only does it reduce the deficit in the first 10 years, but it reduces it by even more in the second 10 years.

According to the CBO, the provisions of the bill that cost money -- the Medicaid expansion, the subsidies and so forth -- will grow by 7 percent annually over the second decade. But the tax on high-cost insurance plans, which doesn't raise all that much money in the first 10 years, would grow by 15 percent a year. The savings in Medicare and Medicaid would grow by 10 percent to 15 percent. In other words, if you're worried about the deficit, you should vote for, rather than against, health-care reform, as health-care reform actually improves the deficit.

This means that I owe Kent Conrad an apology for this post. The 20-year score strengthens, rather than weakens, the case for his bill. And he probably knew that. The 20-year outlook makes it impossible to say that health-care reform has to increase the deficit.

But it also suggests some real dangers in the bill's second decade. The unpopular elements of the bill become a lot bigger and more onerous. The excise tax on high-cost insurance plans begins affecting insurance plans that aren't particularly high-cost. The Medicare and Medicaid savings begin to tighten. That said, there are a lot of potential savings that the CBO isn't taking into account here, so that might ease the pain. Plus, at some point, we are going to have to start cutting costs in the system, and you can't escape some eventual hurt in that. But you can be sure the GOP is going to run these numbers aggressively and spin them viciously.

One last point: This good score is the product of the Finance Committee's sources of funding, not the relative stinginess of its subsidies. The Finance Committee could make the bill more generous, raise a bit more in revenues and still keep it deficit-improving over the next two decades. And it should.

Photo credit: Melina Mara -- The Washington Post

By Ezra Klein  |  September 16, 2009; 4:35 PM ET
Categories:  Health Reform  
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Next: The Center on Budget and Policy Priorities on Baucus's Plan


As the CBO says- the savings are in large part because it stomps on what medicare pays to providers but those are exactly the kinds of cuts that politicians over and over have repealed.

Posted by: spotatl | September 16, 2009 4:46 PM | Report abuse

So what's the take over all? Good, bad, to be ignored?

Posted by: TWAndrews | September 16, 2009 4:54 PM | Report abuse

This is the reason why the GOP should jump on to this plan and outflank Nancy Pelosi's liberal plan with a moderate-conservative coalition around the Baucus plan for Health Insurance reform.

Posted by: lancediverson | September 16, 2009 4:55 PM | Report abuse

It appears as all the other drafts I've looked at that the reforms do not occur until 2013 and later. How is that supposed to help the millions without insurance, losing their insurance or being denied benefits by the tricks of the trade? If it is so important to reform our health care system, do it now. Millions of people are going to die or go bankrupt or without care while the fools in Washington continue to play games and delay the reforms until after the next major election.

Posted by: martywpost | September 16, 2009 4:56 PM | Report abuse

I thought Obama said that "The moment I sign this bill there will be no more pre-existing conditions or recissions." Not so?

And agree that Wyden, Kerry, Rocky and Schumer should demand higher subsidies along with some meaningful choice and expanded exchanges for getting behind this or vote no.

Posted by: Mimikatz | September 16, 2009 5:12 PM | Report abuse

Hmm Ezra? Anything about this Table I extracted out of the CBO score that might concern anyone?


I fully understand the concept of not letting the Perfect be the enemy of the Good. But that doesn't mean not favoring the Pretty Good being the Enemy of the Unacceptable.

Solving half of the problem of uninsured Americans does not even approach any sort of lowered threshold. I hope the GOP does jump on this bandwagon, those Democrats who have not yet entirely sold out the ideals of the New Deal will be all over them.

25 MILLION Americans. Uninsured AFTER reform. Huh?

Posted by: BruceWebb | September 16, 2009 5:34 PM | Report abuse

And this scoring presumably means that the MaxTax draft becomes the benchmark for every amendment and every parallel version in the Senate and House. Which is a stupid, stupid way to go about healthcare reform. And a subversion of the legislative process. Smells like a stitch-up.

Posted by: pseudonymousinnc | September 16, 2009 5:35 PM | Report abuse

Ezra, so, if no Republicans are going to vote for this thing anyway, what are the changes that liberals could make that would maximally improve the bill without affecting this positive CBO score? Allow anyone to enter the co-ops and allow the co-ops to bargain together for Medicare rates?

Posted by: MosBen | September 16, 2009 5:38 PM | Report abuse

Yup, hold your nose; keep apologizing Sen. Baucus (because I also never uttered good words for him) and vote for his bill. That seems to be the case here.

It cannot be underestimated how Dems just need to keep on pounding and thumping their chests for the CBO nod, especially the longer term deficit reduction. This CBO approval is ‘the answer’ to David Brooks, Megan McArdlee and Robert Samuelson of the world.

The real risk with this bill is somewhere else – effective tax, due to mandate, on lower middle class. For example, as Ezra mentioned early, for a family of 4 with annual income around $65K; monthly premium could be $700 with no possibility of subsidy. This ‘exposure’ of lower middle class will have to be politically weathered out to see light at the end of the tunnel. Saving grace could be that there may not be that many families without employer coverage in that range. Besides, State’s current existing programs might be covering kids. Meaning a real family of 4 with this much income, but without insurance; chances are less.

The real deal is if indeed deficit reduction happens, economy improves, Institute of Medicine projected numbers (much better than CBO for Obama Health Care) turn out to be true; then later Fed can give more subsidy to all such lower middle income families if that burden becomes too much. That is a potent cover down the line (but not good politics since politics is all about ‘now’).

So this means ‘avoidance of bankruptcy due to illness’ at a price – that is the best defense for the coming political attack. Another good thing will be since lower middle class is never in the universe of GOP (even Johnny come late show of Steele for seniors for Medicare failed miserably, so he would not dare again); they will not bother to attack Sen. Baucus bill for this class. It will be Liberal Dems who will have to be bought for this vulnerability of lower middle class. Sen. Finegold has already raised his ante on the bill as well as Sen. Wayden is not happy too. Still at the end this ‘in house, intra party’ resistance can be overcome.

Posted by: umesh409 | September 16, 2009 5:50 PM | Report abuse

Haven't seen the specifics on how it reduces the outlays, but does Baucus' bill shift the burden to the states regarding Medicaid? Does it slash Medicare, reducing availability of care in rural areas? Does it impose massive taxation or compulsory purchasing of health insurance by those for whom it would ordinarily be unwise, at elevated premiums versus risk to cross-subsidize the new "wide open" underwriting mandated for the chronically ill and unhealthy?
All of the above are unacceptable.

Posted by: OttoDog | September 16, 2009 5:59 PM | Report abuse

What does the CBO model assume for the change in the number of subscriptions to high-cost insurance plans? I'd be amazed if any revenue at all were recognized after a few years on this. Employers will avoid these plans like the plague.

You can either use the tax code to provide disincentives, or you can use it to raise revenue, but you can do both at the same time for very long.

Posted by: theradicalmoderate | September 16, 2009 6:00 PM | Report abuse

Typo above:

You can either use the tax code to provide disincentives, or you can use it to raise revenue, but you **can't** do both at the same time for very long.

Posted by: theradicalmoderate | September 16, 2009 6:02 PM | Report abuse

If you cut Medicare payments to doctors by 21% and don't give them a raise for 20 years anyone could make the numbers look good.

Ask the CBO what the numbers look like if you add the SGR "Doc Fix" from the House bill to the Baucus draft.

Ezra, dont you ever stop and think?

Posted by: cautious | September 16, 2009 6:02 PM | Report abuse

What percentage of workers with employer sponsored insurance will have their benefits affected by the excise tax in year 20? About 90%? More?

Thank God the Millionaires avoided paying any taxes to fund health care for the poor.

Posted by: cautious | September 16, 2009 6:07 PM | Report abuse

We all knew the Baucus/Wellpoint Plan would score the best from the CBO. After all, the Elmendorf was sitting in on the Baucus Caucus. This was gamed from the start that this one would come out the best while giving away the most.

Deficit becoming the major talking point down the road of the Healthcare Debate? What a surprise that it plays into Elmendorf's bread and butter: deficits hawking.

A well gamed process.


Posted by: toshiaki | September 16, 2009 9:49 PM | Report abuse

As cautious pointed out, a permanent SGR fix is the House bill but not the Baucus plan. That's over $220 billion I believe.

And of course Baucus's subsidies will be increased because they're much lower than the House version which in turn are much lower than Massachusetts.

As Obama has seemingly ruled out other tax increases, the excise tax will have to be raised even more. Unions won't be happy.

Posted by: bmull | September 17, 2009 4:09 AM | Report abuse

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