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CBO Gives Dems A $132B Christmas Present

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Congression Budget Office Douglas Elmendorf

Christmas is coming early this year for the Dems.

With the news that Ben Nelson is falling in line so Dems can avoid a filibuster, the passage of this health care bill has become much more likely (almost a certainty?).

Basically, Republicans can cry foul about socialism and fiscal irresponsibility all they want, but they really can’t do much more than that.

And now the Congressional Budget Office reports that the new health care bill will cost $871B (far less than the original $1T price tag), reduce the budget deficit by $132B in the first 10 years alone and possibly reduce deficits by $1.3T (yes, trillion) in the decade after that.

Let’s check out the details…

First, how the next decade looks and how the money will be spent and saved…

CBO and JCT estimate that the direct spending and revenue effects of enacting the Patient Protection and Affordable Care Act incorporating the manager’s amendment would yield a net reduction in federal deficits of $132 billion over the 2010-2019 period. Of that total amount of deficit reduction, the manager’s amendment accounts for about $2 billion, and the act as originally proposed accounts for the remaining $130 billion.

The estimate includes a projected net cost of $614 billion over 10 years for the proposed expansions in insurance coverage. That net cost itself reflects a gross total of $871 billion in 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 $149 billion in revenues from the excise tax on high-premium insurance plans and $108 billion in net savings from other sources. Over the 2010–2019 period, the net cost of the coverage expansions would be more than offset by the combination of other spending changes that CBO estimates would save $483 billion and other provisions that JCT and CBO estimate would increase federal revenues by $264 billion. In total, the legislation would increase outlays by $366 billion and increase revenues by $498 billion between 2010 and 2019.

Next, the long term savings, which the CBO concedes are just educated guesses right now as long as we stay on the path proposed by the legislation…

These longer-term calculations assume that the provisions are enacted and remain unchanged throughout the next two decades. However, the legislation would maintain and put into effect a number of procedures that might be difficult to sustain over a long period of time. Under current law and under the proposal, payment rates for physicians’ services in Medicare would be reduced by about 21 percent in 2010 and then decline further in subsequent years. At the same time, the legislation includes a number of provisions that would constrain payment rates for other providers of Medicare services. In particular, increases in payment rates for many providers would be held below the rate of inflation. The projected longer-term savings for the legislation also assume that the Independent Payment Advisory Board is fairly effective in reducing costs beyond the reductions that would be achieved by other aspects of the legislation.

Based on the longer-term extrapolation, CBO expects that inflation-adjusted Medicare spending per beneficiary would increase at an average annual rate of less than 2 percent during the next two decades under the legislation—about half of the roughly 4 percent annual growth rate of the past two decades. It is unclear whether such a reduction in the growth rate could be achieved, and if so, whether it would be accomplished through greater efficiencies in the delivery of health care or would reduce access to care or diminish the quality of care.

And how many folks would be covered? A lot more, but there are still some gaps that will need to be addressed…

By 2019, CBO and JCT estimate, the number of nonelderly people who are uninsured would be reduced by about 31 million, leaving about 23 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants). Under the legislation, the share of legal nonelderly residents with insurance coverage would rise from about 83 percent currently to about 94 percent. Approximately 26 million people would purchase their own coverage through the new insurance exchanges, and there would be roughly 15 million more enrollees in Medicaid and CHIP than is projected under current law. Relative to currently projected levels, the number of people purchasing individual coverage outside the exchanges would decline by about 5 million. The number of people obtaining coverage through their employer would be about 4 million lower in 2019 under the legislation, CBO and JCT estimate.

About illegal residents…at some point we’ll have to deal with the issue and figure out a way for them to get affordable health coverage too. Because if they continue to hit our hospitals and they’re not covered, that doesn’t help anybody out. But that can be figured out far down the line after the immigration reform issue is settled.

So, will the Dems finally pull it off?