The Spectacle Blog

CBO Finds Revised Bill Raises Taxes and Spending More than Original One

By on 12.19.09 | 12:51PM

The Congressional Budget Office has just released its score (PDF) of Senate Majority Leader Harry Reid’s health care bill, which is now expected to pass on Christmas Eve.

The new bill relies on a number of familiar accounting gimmicks that have allowed Democrats to claim that legislation is cheaper than it actually is, and that it reduces the deficit. Broadly speaking, the revised bill includes more spending than the original Reid bill, but more taxes to offset the spending increases.

The numbers will that will get the most media attention will be the CBO’s estimate that the major coverage provisions of the bill will cost $871 billion over 10 years, reduce the deficit by $132 billion, and extend coverage to 31 million Americans.

Like in previous versions of legislation, Democrats delayed the major spending provisions in the bill from being implemented until 2014, making the bill appear less expensive over CBO’s 10-year budget window. Just $17 billion, or 2 percent, of the cost of expanding coverage under the bill comes in the first four years, while the remaining 98 percent of spending comes in the following six.

The 10-year deficit projections include $72 billion in revenue from the Class Act, but that boost from the new government long-term care insurance program will be short lived, according to the CBO. “In the decade following 2029, the CLASS program would begin to increase budget deficits,” the CBO report says. The reason is that the program begins to collect premiums before it starts paying out benefits, so it achieves a surplus at first, but then runs into deficits down the road.

The report assumes that a 21 percent cut in doctors’ payments under Medicare will actually take affect next year, yet this very morning, the Senate passed the $636 billion defense spending bill that delayed the cuts until the end of February, and it’s all but assured that they’ll take action before that deadline to avoid the cuts again.

The tax hikes total $498 billion in the revised bill, higher than the original Reid bill. Specifically, the revised bill stiffens the tax penalties for those who don’t purchase insurance, raising an additional $7 billion. It also raises the new Medicare tax on individuals making over $200,000 and families making over $250,000. The new additional tax on payrolls during a time of double-digit unemployment would now be 0.9%, instead of the 0.5% originally proposed by Reid.

And while it expands coverage overall, the bill violates the spirit of Obama’s declaration to the American Medical Association that “If you like your health care plan, you'll be able to keep your health care plan, period. No one will take it away, no matter what.” In fact, CBO estimates that between 8 million and 9 million people would lose their employer-based coverage under the bill.

In order to win over the vote of Sen. Bernie Sanders, the avowed socialist who was upset at the stripping of the public option, Reid allocated $10 billion in spending to one of Sanders’ pet projects, expanding the role of “community health centers.”

The CBO also poured cold water on the idea of having the entity that runs the federal benefits program oversee the creation of new plans, arguing that it wouldn’t make much of a difference in coverage or enrollment, because any insurers participating in the program were likely to offer plans in the exchange anyway.

As always, the CBO cautions that its projections are based on the assumption that “These longer-term calculations assume that the provisions are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation.”

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