Health-Care Reform Scores With the CBO


Health-care reformers just got their best break in months: The CBO has released a preliminary score of the health-care bill put forward by Max Baucus, and their analysis claims it's easy on the wallet. According to the CBO, the bill, if enacted exactly as is, will reduce the deficit by $49 billion over the first ten years, and continue to reduce the deficit over the ensuing decade.

For most people, those up-front deficit numbers will be the big takeaway. But I think the key lines come toward the end:

These projections assume that the proposals are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation. For example, the sustainable growth rate (SGR) mechanism governing Medicare's payments to physicians has frequently been modified (either through legislation or administrative action) to avoid reductions in those payments.

To get the result they did, CBO assumed that cuts in Medicare payment rates, which comprise the bulk of the plan's alleged savings, will actually happen, even though, as the report admits, Congress has been loath to make those cuts in the past. It's true that the Baucus plan, which creates a commission to figure out how to cut Medicare costs, sets up a slightly more robust framework for cost-cutting than currently exists. But that commission still only gets to make recommendations, and Congress still has the power to block them.

But I suspect, however, that such concerns will be dismissed. Despite the CBO's caution that
their "estimates are all subject to substantial uncertainty," the score, and not concerns about assumptions and methodology, will be what people remember.

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  1. Congress has been loathe to make those cuts in the past

    You mean “loath.” “Loath” is an adjective, meaning “reluctant.” “Loathe” is a transitive verb, meaning “to hate intensely.”

    Although I guess by these days you can spell the adjective “loathe” with only some pedantic complaint, in the same way as you can pronounce “forte” like it’s Italian as “for-tay.”

  2. Greg Mankiw compares the plan to someone promising that “this time” their plan is really to go and work out at the gym, so it’s okay to have that extra dessert since they’ll still lose weight in the long run.

  3. Thacker: Thanks for the correction. This is why you shouldn’t blog quickly, especially when you’re angry. Fixed!

  4. Nancy Pelosi said to ignore the CBO.

  5. Angry? Sorry to hear that.

    Note that no one actually likes this bill. That’s because no one is happy with a bill that’s actually paid for. So I’m not sure how good news this is for the reform camp, since they have members swearing not to vote for this.

  6. Thacker: Angry… maybe not quite the best word to have used. But certainly irritated.

  7. Big shock. Hell, everyone knew that even the most grandiose plan could look budget neutral if you just raised taxes enough and made enough people go into their own pockets to pay for it. Baucus is just the first one to show us what that might look like.

  8. …creates a commission to figure out how to cut Medicare costs,…

    AAAARRRRGGGGHHHHHH! If this were a business, there would be a FUCKING PERMANENT “commission to figure out how to cut Medicare costs!!!”



  9. Yeah, I’m gonna say that db beats Suderman in the expressing anger department.

    Suderman gets angry? Misspells “loath”.
    db gets angry? Types like a pirate.

  10. sorry I misspelled “FUCKING BROKE.”

  11. Very interesting. Definitely gives the plan a temporary boost. It’s really sad when a policy that balances or reduces the budget is shocking. Common sense would dictate that EVERY POLICY SHOULD AT BEST KEEP THE BUDGET BALANCED. I appreciate Baucus at least moving in this direction.

    However, I watched the press conference and many of the actual policy details were fairly nauseating.

  12. CBO assumed that cuts in Medicare payment rates, which comprise the bulk of the plan’s alleged savings, will actually happen

    Did the CBO also factor in the fact that providers will offset any cuts in Medicare payment rates by charging more for non-Medicare services thus obviating any gains at all from that little bit of accounting trickeration?



  14. Let us list the was in which the Baucus bill is an absulute utter horror of a monstrosity.

    1. Insurance mandate – everyone will now be FORCED to buy insurance, whether they want it or not.

    2. Said insurance will be heavily regulated as to content, and all plans would be required to cover maternity (even if you are a man), dental, prescription drugs, vision and preventive care. In other words, the “mandatory minimum” would cover virtually everything.

    3. Insurance companies will be forced to take all comers, hence your premiums will be higher, and be used to subsidize healthcare for people who are already sick. This is stealth socialism.

    4. Employers would be penalized for not offering employees healthcare coverage, further entrenching the perverse link between employment and insurance.

    5. Rather than try to sever the link between employment and insurance, the plan would set up subsidized “exchanges” as a contrived mechanism to attempt to mitigate against some of the perverse effects of the employer based system.

    6. A whole host of new taxes and fees would be introduced, some with the explicit intent of fucking over anyone with health insurance that is “too good”. As if the subsidization of insurance, and the forced stealth subsidization of those with preexisting conditions under mandatory insurance doesn’t fuck us over enough.

  15. 7. The plan makes no serious attempt to control costs, all it does is (effectively) impose price controls on Medicare payments. It does NOT address the underlying causes of cost escalation (the effort to pay for everyone’s health care without rationing), but actualy exacerbates them by increasing demand for health care services. And as such it will be an utter failure in controlling costs.

  16. Robc,
    Right – that’s what I meant.

  17. Shorter Hazel:

    The plan forces everyone to pay for broad coverage they don’t want, and for broad coverage for other people, without making the slightest effort at global cost control.

    Prediction: massive cost increases, massive premium increases, massive migration to some kind of (stealth) public option, massive deficits.

  18. Very interesting. Theoretically, this plan could be made into an easy gateway for individual coverage.

    According to Time magazine “companies with no more than 10 employees who earn an average of less than $20,000 a year would be eligible for the full credit. In 2011 and 2012, the full credit would be up to 35% of a small business’s contribution, and starting in 2013, employers that purchase their policies through the state exchanges could claim a tax credit for two years of up to 50% of their contribution.”

    So if I organize my own “proprietorship” doing random small odd jobs, and I provide myself health insurance under that company, would I not qualify for a tax credit, eliminating the individual vs. employer discrepancy? I’m wondering if it distinguishes between a proprietorship and a corporation.

    The plan is pretty terrible, but this does look like a pretty nice loophole, worst case scenario.

  19. Anybody else feel relieved? Yeah, me too.

  20. is there any perspicacious sort around here who can explain how the baucus plan differs from the obama plan? they sound quite a bit alike, to me.

  21. i>So if I organize my own “proprietorship” doing random small odd jobs, and I provide myself health insurance under that company, would I not qualify for a tax credit, eliminating the individual vs. employer discrepancy? I’m wondering if it distinguishes between a proprietorship and a corporation.

    Well, you will be forced to buy insurance that covers dental, vision, prescription drugs, and preventive care, from a company that is forced to provide health care for people with any and all preexisting conditions, and which will be prevented from rationing such care.

    So it’s pretty much guarenteed that no matter WHO you buy it from, the price will be exhorbitant.

  22. Mandatory coverage is a tax. It doesn’t matter whether it’s called a premium, a fee, a penalty – or some other euphemism – it is a tax. It is a tax on simply being alive, and this is true even if the tax on some is paid by others. Welcome to serfdom, my fellow peons.

  23. “Despite the CBO’s caution that
    their “estimates are all subject to substantial uncertainty,” the score, and not concerns about assumptions and methodology, will be what people remember.”

    That’s why whenever any of these plan’s boosters starts citing the CBO as “proof” of their position people need to be reminded of the CBO’s abysmal track record in projecting Medicare costs:

    At the start of Medicare they predicted the annual cost in 1990 would be $12 B and it actually came in at $107 B.

  24. db for Congress! No one would even remember Joe Wilson calling the emperor naked once they observed db’s rant. Michael Emerling called it “macho flashing,” and sometimes it can be quite entertaining.

  25. It can be quite cathartic.

  26. Having some personal experience living under conditions like these (I’m in Massachusetts), let me pose the following brain-teaser:

    1. Vis-a-vis mandatory coverage, a high bar for “minimum” benefits, and no risk adjustment of premiums, we should expect costs and premiums to skyrocket.
    2. Those who go without insurance will have to pay some kind of fine, which is unlikely to be as high as the cost of premiums in the long run.
    3. Given (1) and (2), who the f— is going to be dumb enough to buy insurance unless they’re seriously ill? If you can’t be charged a higher premium or denied coverage based on pre-existing illness, and the premiums are really high, why buy “insurance” (in the strict sense of the word)? The most sensible approach will be to enroll only when you’re on death’s door, get others to pay for most of your care, and then disenroll from the plan as fast as you can afterward.
    4. This is sustainable how?

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