The Senate Bill Would Increase Health Spending

Ezra Klein quotes the Congressional Budget Office’s latest cost estimate of the Senate health care bill when he writes:

“CBO expects that the legislation would generate a reduction in the federal budgetary commitment to health care during the decade following 2019,” which is to say that this bill will cover 30 million people but the cost controls will, within a decade or so, leave us spending less on health care than if we’d done nothing.  That’s a pretty good deal. But it’s not a very well-understood deal.

Indeed, because that’s not what the CBO said.

First, the CBO said the “federal budgetary commitment to health care” would rise by $210 billion between 2010 and 2019 under the Senate bill.  Then, after 2019, it would fall from that higher level.  And it could fall quite a bit before returning to its current level.

Second, the “federal budgetary commitment to health care” is a concept that includes federal spending on health care and the tax revenue that the federal government forgoes due to health-care-related tax breaks, the largest being the exclusion for employer-sponsored insurance premiums.  If Congress creates a new $1 trillion health care entitlement and finances it with deficit spending or an income-tax hike, the “federal budgetary commitment to health care” rises by $1 trillion.  But if Congress funds it by eliminating $1 trillion of health-care-related tax breaks, the “federal budgetary commitment to health care” would be unchanged, even though Congress just increased government spending by $1 trillion.  That’s what the Senate bill’s tax on high-cost health plans does: by revoking part of the tax break for employer-sponsored insurance, it makes the projected growth in the “federal budgetary commitment to health care” appear smaller than the actual growth of government.

Third, the usual caveats about the Senate bill’s Medicare cuts, which the CBO says are questionable and Medicare’s chief actuary calls “doubtful” and “unrealistic,” apply.  If those spending cuts don’t materialize, the “federal budgetary commitment to health care” will be higher than the CBO projects.

Fourth, Medicare’s chief actuary also contradicts Klein’s claim that the Senate bill would “leave us spending less on health care than if we’d done nothing.”  The actuary estimated that national health expenditures would rise by $234 billion under the Senate bill.

And really, Klein’s claim is a little silly.  Even President Obama admits, “You can’t structure a bill where suddenly 30 million people have coverage and it costs nothing.”