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According to the CBO, the Baucus bill will reduce the deficit by $81,000,000,000 over the next decade:

The Congressional Budget Office (CBO) issued a cost estimate of the healthcare reform bill under consideration by the Senate Finance Committee, concluding it would increase federal spending by $829 billion over 10 years but be offset by enough spending cuts and tax increases to reduce the budget deficit by $81 billion.

The net number of legal U.S. residents without health insurance would reduce by 29 million over 10 years, the CBO further concluded.

Before Democrats start getting giddy about that report, they shouldn’t forget some important details contained in the CBO’s report:

The net cost of the coverage expansions would be more than offset by the combination of other spending changes that CBO estimates would save $404 billion over the 10 years and other provisions that JCT and CBO estimate would increase federal revenues by $196 billion over the same period. In subsequent years, the collective effect of those provisions would probably be continued reductions in federal budget deficits. Those estimates are all subject to substantial uncertainty.

In other words, the CBO’s estimates are tentative based on the fact that they don’t have the legislative language. Based on that alone, this summary figure is tentative at best.

It’s also important to note this information from the report:

Among other things, the Chairman’s mark, as amended, would establish a mandate for most legal residents of the United States to obtain health insurance; set up insurance “exchanges” through which certain individuals and families could receive federal subsidies to substantially reduce the cost of purchasing that coverage; significantly expand eligibility for Medicaid; substantially reduce the growth of Medicare’s payment rates for most services (relative to the growth rates projected under current law); impose an excise tax on insurance plans with relatively high premiums; and make various other changes to the Medicaid and Medicare programs and the federal tax code.

The income that the bill expects from the excise tax on “insurance plans with relatively high premiums” will be negligible because that provision will be killed by the unions. There’s a better chance that I’ll get struck by lightning twice while holding a winning lottery ticket than there is of that excise tax making it into the final bill.

That paragraph briefly touches on expanding Medicaid without talking about the impact that will have on states’ budgets. Simply put, that provision alone will explode state budgets and trigger massive tax increases nationwide. Those massive tax increases will kill entrepreneurial activity and job growth.

Here’s another important paragraph:

According to CBO and JCT’s assessment, enacting the Chairman’s mark, as amended, would result in a net reduction in federal budget deficits of $81 billion over the 2010–2019 period (see Table 1). The estimate includes a projected net cost of $518 billion over 10 years for the proposed expansions in insurance coverage. That net cost itself reflects a gross total of $829 billion in credits and subsidies provided through the exchanges, increased net outlays for Medicaid and the Children’s Health Insurance Program (CHIP), and tax credits for small employers; those costs are partly offset by $201 billion in revenues from the excise tax on high-premium insurance plans and $110 billion in net savings from other sources.

The $89,000,000,000 deficit reduction can’t be achieved without the $201,000,000,000 in revenues from the excise taxes imposed on Cadillac health care coverage.

By 2019, CBO and JCT estimate, the number of nonelderly people who are uninsured would be reduced by about 29 million, leaving about 25 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants).

This legislation would increase the deficit by $112,000,000,000 and it wouldn’t get close to universal coverage? I can’t believe that the American people are going to look kindly at legislation that contains (a) several major tax increases, (b) $404,000,000,000 in Medicare cuts, increases the deficits when the bill is finalized and that leaves 23,000,000 people uninsured.

That’s before talking about Medicare reimbursement rates:

Among other things, the Chairman’s mark, as amended, would establish a mandate for most legal residents of the United States to obtain health insurance; set up insurance “exchanges” through which certain individuals and families could receive federal subsidies to substantially reduce the cost of purchasing that coverage; significantly expand eligibility for Medicaid; substantially reduce the growth of Medicare’s payment rates for most services (relative to the growth rates projected under current law); impose an excise tax on insurance plans with relatively high premiums; and make various other changes to the Medicaid and Medicare programs and the federal tax code.

Does anyone think that hospitals and doctors will sit still while they get shortchanged compared with what they’re getting now? Hospitals and doctors are already getting shortchanged, causing them to shift costs to people with private insurance. Imagine how this will affect rural hospitals and nursing homes, too.

Here’s some preliminary reaction to the unfunded mandates being shipped to the states through increased enrollment to Medicaid:

GOV. TED STRICKLAND (D-OH): “Still, Strickland warned on a recent visit to Washington that ‘the states, with our financial challenges right now, are not in a position to accept additional Medicaid responsibilities.’ Strickland said that he wants ‘a health-care package that is inclusive and provides for all citizens,’ but he added that if Medicaid is expanded, he hopes to ‘see the federal government assume the greater portion of the costs, if not the total costs.’”

GOV. JOHN LYNCH (D-NH): Six Democratic governors did not sign the letter for various reasons. In the case of New Hampshire Gov. John Lynch, he did not sign because the letter failed to ‘address concerns regarding potential cost shifting to the states,’ said Colin Manning, a spokesman for the governor. ‘And this concern has been shared by a number of governors that Gov. Lynch has spoken to across the country,’ Manning said.”

GOV. PHIL BREDESEN (D-TN): “My Guess Is That Most Other States Would Face A Similarly Painful Situation If These Costs Are Passed Down.” “In his letter to Sen. Bob Corker (R-Tenn.), Bredesen also urged the senator and his fellow lawmakers to temper down their proposed changes to the low-income healthcare entitlement, an expansion Corker later described as an ‘unfunded mandate’ that could overburden states at a time when many are struggling to manage the recession. ‘My guess is that most other states would face a similarly painful situation if these costs are passed down,’ Corker explained in his own statement on Tuesday.”

GOV. BEV PERDUE (D-NC): “The Absolute Deal Breaker For Me As Governor Is A Federal Plan That Shifts Costs To The States.” “We are all hungry for a solution, but the absolute deal breaker for me as governor is a federal plan that shifts costs to the states.”

GOV. ED RENDELL (D-PA): “I Don’t Think It’s An Accounting Trick, I Think It’s An Unfunded Mandate…We Just Don’t Have The Wherewithal To Absorb That Without Some New Revenue Source …”

GOV. BILL RICHARDSON (D-NM): “We Can’t Afford That, And That’s Not Acceptable.”

GOV. BILL RITTER (D-CO): “Our Only Point Was That A Significant Medicaid Expansion Should Not Operate As An Unfunded Mandate For The States.”

GOV. JOE MANCHIN (D-WV): “They Thought The Best Way, The Federal Government Thought The Best Way Is By Expanding Medicaid To Make That Happen. But We Have Said, ‘Under No Conditions Can We Take Unfunded Mandates.’ You can’t raise the eligibility of Medicaid 133% and put a $100 billion back on the states to pick up.”

In my opinion, there’s no way that state legislators and governors will consent to getting hit with the mother of all unfunded mandates. They’d be the villain in the public’s eyes for passing a huge tax increase that they’d need to pay for the unfunded mandate that the federal government would dump on them.

The best way to characterize the CBO’s report is to say that it’s a great headline for Democrats but the details don’t help Democrats. In fact, I’m betting that, within a week, the CBO’s report will be a net negative for Democrats.

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Cross-posted at California Conservative

10 Responses to “The Devil’s In the Details”

  • J. Ewing says:

    Why expand Medicaid when about 1/3 of the people now uninsured are eligible but won’t sign up for it? Why cut Medicare when many health care providers are already refusing to take Medicare patients? If Medicaid works, why do we need a public option? If the reason we need “reform” is because health care, er, insurance costs too much, why does this reform cost more than we’re spending now? Why hasn’t a preliminary bill to eliminate all that waste, fraud and abuse been passed already?

  • Gary Gross says:

    There you go again, Jerry, asking important logical questions of liberals.

    Seriously, all of those questions are worthwhile questions that deserve a straight answer. Unfortunately, those answers won’t be forthcoming because the Finance Committee isn’t into the transparency thing.

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