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How the Senate health care reform bill avoids increasing the deficit
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The crowning jewel in the unveiling of Harry Reid’s health care reform bill was the positive scoring by the Congressional Budget Office. The CBO estimated that H.R 3590 (Patient Protection and Affordable Care Act) would reduce the deficit by $130 billion over the next ten years. There are, however, several aspects of the report that Harry Reid did not mention.
Tax increases related to the bill are slated to begin in 2010, but coverage will not be available until 2014. Part of the reason that the bill does not add to the deficit in the first 10 years is because during more than a third of that timeframe, revenues are increased but expenditures are not. What will happen in the second decade of the program? The CBO appears to be reluctant to make a projection.
The CBO states that “the total cost of mandates imposed on the private sector, as estimated by CBO and JCT (Joint Committee on Taxation), would greatly exceed the threshold established in UMRA (Unfunded Mandates Reform Act) for private entities ($139 million in 2009, adjusted annually for inflation). The most costly mandates would be the new requirements regarding health insurance coverage that apply to the private sector.”
In addition, the CBO estimates that “the total cost of intergovernmental mandates would greatly exceed the annual threshold established in UMRA for state, local, and tribal entities ($69 million in 2009, adjusted annually for inflation)”.
As has been a concern for senior citizens, much of the savings projected in PPACA come from cuts to Medicare. Payments to physicians will be increased in 2010, but will then be reduced by 23% in 2011 and remain at that level in subsequent years. Rates of payments in the Medicare Advantage program will also be set at a fixed amount, saving approximately $118 billion over the next 10 years. In addition, Medicare and Medicaid payments to hospitals serving a large number of low income patients will be reduced, saving an estimated $43 billion.
The CBO states that in the first decade, premiums for the “public option” will be higher than those for private insurance, which is contrary to one of the main stated goals of health care reform. This may not be the case in the second decade, since fees will be levied on private insurance companies under the bill (as well as on non-generic pharmaceutical companies and medical device manufacturers). Each year, $6.7 billion in fees will be paid by private insurance companies, $2.3 billion by companies producing brand name prescription drugs, and $2 billion by medical device manufacturers. It is uncertain how this is expected to make health care more affordable.
Ultimately, the PPACA will cost American taxpayers $599 billion. While it is possible that it will not add to the deficit, this IS a cost of more than half a trillion dollars that must be funded. In this uncertain economy, with a national debt of $12.2 trillion and unfunded liabilities of $106 trillion, can we really afford this health care reform bill?
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