The Real Cost of the Baucus Bill: $2 Trillion+

Thursday, October 8, 2009

Michael D. Tanner, senior fellowmtanner@cato.org:

The CBO scoring makes it clear that the Baucus bill's reduction in future budget deficits comes not from controlling government spending or reducing health care costs, but because of a rapid escalation in tax revenues. The bill imposes a 40 percent excise tax on health-insurance plans that offer benefits in excess of $8,000 for an individual plan and $21,000 for a family plan. Insurers would almost certainly pass this tax on to consumers via higher premiums. As inflation pushes insurance premiums higher in coming years, more and more middle-class families would find themselves caught up in the tax.

In fact, overall, the tax increases in the bill are more than double the amount of deficit reduction. This isn't a health care efficiency bill or a cost containment bill. It is a tax and spend bill, pure and simple.

Michael F. Cannon, director of health policy studiesmcannon@cato.org:

The CBO score of the Baucus bill is like a mystery novel with the last 50 pages missing. It fails to reveal both the full cost of the bill and the budget gimmicks that Mr. Baucus uses to hide that cost.

The Baucus bill will not reduce the deficit, and it would ultimately cost taxpayers more than $2 trillion—just like every other bill Congress has produced so far.

The biggest gimmick employed by the bill is that its individual mandate pushes more than half of the legislation's cost off-budget, and onto businesses and individuals who will have to shoulder that burden. A real-world parallel already exists in the Massachusetts health care plan, where private-sector mandates account for 60 percent of the cost. In 1994, CBO counted those mandated private payments in the federal budget, and it helped kill the Clinton health plan. This time around, Democrats were very careful to craft their mandates so that they just barely avoided having the CBO include those payments in the federal budget. But the CBO's decision does not change the fact that those private-sector mandates are part of the cost of this bill.

The second-biggest gimmick is assuming that Congress will let the "Sustainable Growth Rate" cuts in Medicare physician payments to occur. Starting in 2003, Congress has repeatedly blocked those cuts, and there is no reason to think that Congress will behave any differently in the future. So yes, provided that the sun rises in the West, the Baucus bill would reduce the federal deficit.

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