CBO Projects Budget Savings From Panel's Health Reform Bill

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The Senate Finance Committee's health care reform bill would cost $829 billion and reduce the budget deficit by $81 billion over a decade beginning next year, according to the cost analysis report of the bill that the Congressional Budget Office released yesterday, the New York Times reports (Pear/Herszenhorn, New York Times, 10/8).

According to the report, the committee's bill also would expand health coverage to 29 million more people by 2019 -- ensuring that as many as 94% of nonelderly U.S. residents would have insurance by that year (Young, The Hill, 10/7). That figure is up from 83% of nonelderly U.S. residents currently.

The report noted that 25 million residents would remain uninsured under the legislation, about one-third of whom would be undocumented immigrants.

The 27-page report stated, "The added revenues and cost savings [from the bill] are projected to grow more rapidly than the cost of the coverage expansion," adding, "Consequently, CBO expects that the proposal, if enacted, would reduce federal budget deficits (beyond 2019) relative to those projected under current law" by up to one-half of 1% of the national gross domestic product.

According to the Washington Post, those spending reductions could total hundreds of billions of dollars (Montgomery/Murray, Washington Post, 10/8).

According to the CBO report, the bill would be more costly than the agency's original $774 billion estimate of Finance Committee Chair Max Baucus' (D-Mont.) initial draft proposal.

However, the legislation would reduce the federal deficit by $32 billion more than Baucus' original plan.

With the score, the panel's bill becomes the only one of five separate proposals from House and Senate committees that would achieve President Obama's goal to expand access to health coverage without increasing the deficit (New York Times, 10/8).

According to the Post, much of the added cost came from the committee's decision to include more generous subsidies to help U.S. residents purchase private insurance through a network of state-run exchanges (Washington Post, 10/8).

The exchanges would help as many as 23 million people who do not receive health benefits at work or if they work for small businesses.

U.S. residents would be required to obtain some level of coverage, many by using tax credits that they would be eligible to receive. U.S. residents would be eligible for the subsidies if their annual income is between 133% and 300% of the federal poverty level.

U.S. residents whose incomes are between 300% and 400% of the poverty threshold also would be eligible for limited assistance (The Hill, 10/7).

Other Provisions

The CBO report also said that the bill would:

  • Require everyone to obtain health coverage, but the penalties for those who do not get insurance have been reduced. The Times reports that although senators from both parties expected the revision to alter the number of people who would be insured, it did not alter CBO's latest estimate. However, it did reduce the amount of money the penalties would generate, from $20 billion in Baucus' original draft proposal to $4 billion over a decade (New York Times, 10/8);
  • Add $345 billion in new federal spending under a proposed expansion of Medicaid and CHIP, and $33 billion more in state Medicaid spending, as 14 million additional U.S. residents would obtain coverage under the program;
  • Provide a total of $461 billion in subsidies over 10 years to help low- and middle-income residents purchase coverage (New York Times, 10/8);
  • Raise $201 billion over 10 years through new taxes on the so-called "Cadillac plans," or high-cost insurance policies, and $110 billion in other taxes over 10 years (Haberkorn, Washington Times, 10/8). Plans with annual premium costs of more than $8,000 for individuals or $21,000 for families would be affected (Washington Post, 10/8);
  • Assess $23 billion in penalties on large companies that do not provide their workers with coverage benefits, down from the $27 billion that the original bill envisioned;
  • Establish an independent Medicare commission that would be authorized to implement cost-cutting strategies for the program that could generate about $22 billion in savings over 10 years -- unless Congress enacted legislation to override those plans;
  • Establish a network of not-for-profit health cooperatives to compete with private insurers and provide residents with an affordable coverage option. The CBO report noted that such co-ops would not establish "a significant market presence in many areas"; and
  • Reduce payments to private Medicare Advantage plans by $117 billion over a 10-year period and slow the growth of Medicare payments to other health providers by $162 billion over the same period (New York Times, 10/8).

Baucus' Reaction

Shortly after the report was released, Baucus told reporters that the analysis is "good news" and touted it as "fully paid for," focusing on elements of the bill that would cut the federal deficit in its second 10-year period (Armstrong, CQ Today, 10/7).

Baucus said, "CBO further says it will further reduce the deficit in the second 10 years -- that is, bend the cost curve downward inside 10 years -- an objective that I've been pursuing and I dare to say the majority of the members of the committee have been pursuing" (Washington Times, 10/8).

He added, "Our balanced approach in the Finance Committee to health reform I think has paid off once again," and it "improves and expands health care coverage for tens of millions of American families" (Budoff Brown, Politico, 10/7).

New CBO Scores?

Wednesday's CBO scores might not be the final word on the cost of the Senate Finance Committee's reform legislation, Roll Call reports.

In a letter on Wednesday to Baucus that accompanied the new scores, CBO officials wrote that the bill "as amended, has not yet been converted into legislative language," adding, "The review of such language could lead to significant changes in the estimates of the proposal's effects on the federal budget and insurance coverage" (Drucker/Pierce, Roll Call, 10/8).

Hospital Group Balks at Score

Hospital industry officials on Wednesday expressed concern that the coverage estimates for the Senate Finance Committee's reform bill do not meet the numbers requested in the 10-year, $155 billion cost-savings deal that the industry had agreed upon with Baucus and the Obama administration over the summer, CongressDaily reports (Edney, CongressDaily, 10/8).

Chip Kahn, president of the Federation of American Hospitals, previously had said that the agreement hospitals made to accept $155 billion in payment reductions was contingent on reform legislation insuring 94% to 95% of U.S. residents (California Healthline, 10/6).

However, the Finance Committee bill would cover 91% of all U.S. residents, or 94% of residents if undocumented immigrants are excluded.

On Wednesday, Kahn said the bill "does not provide sufficient coverage," adding, "The deal depends on sufficient coverage. We hope the Senate and the committee can fix this by the time we get to the floor" (CongressDaily, 10/8).

Experts Question Surplus Numbers

While Baucus on Wednesday praised the bill's estimated $81 billion surplus, some experts noted that complex Senate rules could prohibit any attempts to use the surplus to increase spending in the measure or reduce proposed tax increases, CQ Today reports.

According to CQ Today, the surplus is considered "off-budget," which means that the money is derived from Social Security revenues and is "very difficult to touch."

Meanwhile, the CBO score included an "on-budget" 10-year surplus "so negligible that [CBO] marked it with an asterisk indicating that it could be $500 million -- or even a $500 million deficit" (Rubin, CQ Today, 10/7).

Grassley, Other GOP Leaders Criticize Bill

Following the release of the CBO report on Wednesday, Senate Finance Committee ranking member Chuck Grassley (R-Iowa) issued a statement criticizing the bill for failing to do more than just remain deficit-neutral -- a key goal for Baucus and Obama, Roll Call reports. Grassley said that the bill "spends nearly $1 trillion and still leaves 25 million people without health insurance," adding, "That's not much bang for the buck."

According to Roll Call, the comments likely mean that Grassley will not support the legislation when it comes up for a final committee vote (Drucker, Roll Call, 10/7).

In a separate statement, Senate Minority Leader Mitch McConnell (R-Ky.) said, "This partisan Finance Committee proposal will never see the Senate floor, since the real bill will be written by Democrat leaders in a closed-to-the-public conference room somewhere in the Capitol," adding, "The real bill will be another 1,000-page, trillion-dollar experiment that slashes a half-trillion dollars from seniors' Medicare, raises taxes on American families by $400 billion, increases health care premiums and vastly expands the role of the federal government in the personal health care decisions of every American" (Politico, 10/7).

Senate Republican Policy Committee Chair John Thune (S.D.) criticized the upcoming private meetings that Reid is expected to convene to reconcile the two Senate bills. Thune said, "I think there's going to be a tremendous amount of backlash ... from people across the country," adding, "They view this as circumventing the process" (Drucker/Pierce, Roll Call, 10/8).

Finance Committee To Vote on Bill on Tuesday

The Senate Finance Committee is scheduled to vote on the legislation on Tuesday, Senate Majority Leader Harry Reid (D-Nev.) said during a floor speech on Thursday, The Hill reports (Bolton, The Hill, 10/8).

After the Finance Committee has voted on the bill, Reid will then authorize and oversee the process of merging the bill with the Senate Health, Education, Labor and Pensions Committee's bill (S 1679), which was passed over the summer.

Reid hopes to complete merging the bills by Oct. 17 and deliver the package to the floor a few days after that, according to Roll Call (Drucker/Pierce, Roll Call, 10/8).

In the meantime, Reid is expected to convene small private meetings in his Senate office next week with several key lawmakers and White House officials -- including Baucus and Sen. Christopher Dodd (D-Conn.), who shepherded the HELP Committee's bill markup -- to discuss the merger, the Post reports (Washington Post, 10/8).

Roll Call reports that although GOP leaders have not been invited to the meetings, some Republican lawmakers like Finance Committee member Olympia Snowe (R-Maine) may be consulted (Roll Call, 10/8). Snowe has been the only Republican receptive to the Finance Committee's proposal, and the only GOP vote on which Democrats are counting (Politico, 10/7).

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