Deficit claim on health bill is questioned

Deficit reduction as part of healthcare reform is a major selling point for centrist Democrats, but the effectiveness of the proposals in a bill written by Senate Finance Committee Chairman Max Baucus (D-Mont.) is subject to considerable uncertainty, according to experts.


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Baucus’s proposal would spend $774 billion over 10 years to reduce the number of uninsured people by 29 million while actually reducing the federal budget deficit by $49 billion, according to a preliminary Congressional Budget Office (CBO) analysis.

For the 10 years after that, CBO offered a rough estimate that the bill would further reduce spending by 0.5 percent of the gross domestic product because the “added revenue and cost savings are projected to grow more rapidly than the cost of the coverage expansion,” CBO Director Doug Elmendorf wrote.
These projections are “subject to substantial uncertainty,” particularly for the years outside the 10-year budget window, Elmendorf cautioned.

Moreover, budget experts said, the estimated reductions in healthcare spending would require Congress to make politically difficult decisions about Medicare and other healthcare spending in future years — the likes of which lawmakers are typically loath to make.

“The Baucus bill on paper looks like it’s more fiscally responsible, but the question is, Will Congress actually follow through?” said Diane Lim Rogers, the chief economist for the Concord Coalition, a budget watchdog group.

“Our somewhat cynical worry about the Baucus bill is that it’s counting on Congress to make the tough choices later.”

“It depends on politicians doing what they say they’re going to do,” said Marc Goldwein, the policy director at the Committee for a Responsible Federal Budget, noting that lawmakers historically have not shown a willingness to make cuts to costly entitlement programs nor to raise tax revenue to pay for them, leading to escalating deficits.

Baucus, whose committee will begin marking up his bill Tuesday, trumpeted the figures, which received an enthusiastic response from centrist Democrats. “Unlike any other plan that has come from any other source, this plan is not only paid for and produces deficit savings over the first 10 years but also holds out the prospect of having over a trillion dollars of savings over the second 10 years,” said Senate Budget Committee Chairman Kent Conrad (D-N.D.), Baucus’s closest ally on healthcare reform.

Sen. Blanche Lincoln (D-Ark.), another centrist Finance Committee member, likewise highlighted the budget numbers as a reason she could support the bill. “We’re seeing that it’s deficit-neutral, we’re seeing that we’re increasing insurance coverage. Those are a lot of the hot points. Looks good,” she said.

Centrist Sens. Olympia Snowe (R-Maine), Ben Nelson (D-Neb.), Joe Lieberman (I-Conn.) and Claire McCaskill (D-Mo.) — who could play decisive roles in the outcome of the healthcare debate — also praised Baucus for introducing a bill with a positive CBO score. Baucus and the White House have heavily courted Snowe, who is a Finance Committee member, to support healthcare reform.

Fiscal conservatives in the House, unnerved by the $1 trillion-plus price tag of the lower chamber’s bills and Elmendorf’s comments that they would increase the deficit in future years, welcomed the Baucus bill.

But achieving the budgetary savings the CBO says are possible required compromises that displeased liberals, including several Finance Committee Democrats.

In order to keep the price tag below the $900 billion limit established by President Barack Obama, Baucus included less generous health insurance subsidies for the middle class. In addition, he would generate $215 billion in revenues by levying a 35 percent excise tax on insurance companies when they sell plans valued at $21,000 for a family.

Already, Baucus has admitted he will have to raise the price tag for his bill — and thus decrease its deficit-reduction potential — to appease liberals. Baucus plans to increase the subsidies and reduce the number of people affected by the excise tax, he said Monday in interviews with The Wall Street Journal and The New York Times. According to the Times, those changes would cost an additional $28 billion.

The bill calls for more than $400 billion in cuts to spending on federal health programs, mostly by cutting pay rates for medical providers. In addition, the bill would raise hundreds of billions from the excise tax and fees on healthcare companies.

But those savings and new revenues mostly would be redirected to pay for expanding Medicaid and providing tax credits to help people purchase health insurance.

“It’s not spelling out these hard choices,” Rogers complained.

One of the most ambitious elements of Baucus’s bill is the creation of an independent Medicare commission that would recommend payment policies that Congress must take up. But as it is constituted in the bill, Rogers said, the decisions of the panel would be subject to lobbying and political influence that could result in difficult spending cuts being avoided — and deficits continuing to rise.

From 2019 on, the commission would have to recommend cuts in Medicare when spending grows at a rate 1 percent faster than gross domestic product per capita. But the commission would be forbidden to suggest cuts in benefits, changes in eligibility or new taxes, leaving those decisions to lawmakers who have eschewed such policies in the past, Rogers said.

For evidence that Congress leaves crucial fiscal problems unsolved in healthcare, Rogers and Goldwein each pointed to the problem with the Medicare pay rates to physicians.

Under a formula widely regarded as deeply flawed, physicians have faced increasingly steep annual payment cuts this decade. Next year, their fees would drop by 21.5 percent. Congress has been enacting short-term patches to this problem but has failed to replace the flawed payment formula because the price tag is too high. The Baucus bill proposes a one-year fix.