CBO: Senate health bill could reduce spending and lower the deficit

The Senate healthcare reform bill could maintain the federal government’s commitment to healthcare spending over the long run as well as reduce the budget deficit while extending coverage to tens of millions of people, according to the Congressional Budget Office (CBO).

The CBO issued its preliminary analysis late Wednesday of a healthcare reform bill introduced by Senate Majority Leader Harry Reid (D-Nev.). During the first 10 years, the budget office concluded, the bill would spend $848 billion to extend insurance coverage to 31 million people but reduce the budget deficit by $130 billion through a mix of spending cuts and tax increases.

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Democrats crowed over the CBO’s findings. “We will not add a dime to the deficit — quite the opposite, in fact: We will cut it by $130 billion in the first 10 years and by as much as three-quarters of a trillion dollars in the first 20,” Reid said.

Republicans accused Democrats of gaming the budget rules. “What has been skillfully done in order to make it look less expensive in this proposal is phasing in benefits and taxes at different times,” Senate Minority Leader Mitch McConnell (R-Ky.) said. “When fully implemented, it will cost $2.5 trillion.”

Lawmakers and the White House have also pressed the CBO this year for projections of the effects of healthcare legislation on federal healthcare spending and the budget deficit in the years following the first decade of reforms.

CBO Director Doug Elmendorf, in a letter to Reid, included emphatic caveats about the uncertainty of his office’s estimates about the second 10 years of the bill’s life and beyond, not least based on skepticism that Congress would permit hundreds of billions of dollars in Medicare cuts to actually take effect.

That blend of new spending, budget cuts and tax revenue could actually result in Washington spending about the same amount of money on healthcare while covering significantly more people, Elmendorf wrote.

“CBO expects that, during the decade following the 10-year budget window, the increases and decreases in the federal budgetary commitment to health care stemming from this legislation would roughly balance out, so that there would be no significant change in that commitment,” the CBO letter says.

The underlying reason, Elmendorf explains, is that projected cuts in Medicare and increases in tax revenue would grow faster than the new spending in the bill during the second 10-year period and beyond.

That effect, however, is contingent on a plethora of factors CBO cannot project. “The range of uncertainty surrounding that assessment is quite wide, and the commitment could turn out to be higher or lower than under current law,” Elmendorf wrote.

The biggest uncertainty is the unpredictability of what future Congresses will do. Medicare cost-containment measures could be cancelled or reduced, tax increases could be scaled back and Congress could disregard the findings of a new independent commission that would be tasked with making Medicare payment policy recommendations, for example.

Based on some of the same assumptions, and with similar caveats, about the bill, the CBO projects that the bill could reduce the budget deficit in the 10 years after 2019. “CBO anticipates that the legislation would probably continue to reduce budget deficits relative to those under current law in subsequent decades, assuming that all of its provisions would continue to be fully implemented,” Elmendorf wrote.

Specifically, the reform legislation could reduce the budget deficit by about one-quarter of gross domestic product in the second 10 years. Reid estimated that to be as much as $650 billion. That figure, while large, represents a “small share of the total deficits” in future years, Elmendorf notes.

The CBO, however, did not offer any projections about the effects of the bill on total national health expenditures (NHE), or the combined spending of the federal, state and local governments, businesses and individuals. “CBO does not analyze NHE as closely as it does the federal budget, however, and at this point the agency has not assessed the net effect of the current legislation on NHE, either within the 10-year budget window or for the subsequent decade,” the letter says.

J. Taylor Rushing contributed to this article.


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