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CBO Scores House Health Reform Bill

By November 2, 2009Commentary

In a letter to House of Representative Committee leaders, the Congressional Budget Office has given its preliminary analysis of the federal budgetary effects of the current House reform bill.  (CBO Letter) The CBO finds that the bill would reduce the deficit modestly over the next decade and by a very small amount the following decade.   It also finds that the bill would increase coverage to about 96% of Americans (more if you don’t include illegal immigrants), primarily by forcing individuals and employers to buy coverage or be fined and by expanding Medicaid eligibility significantly.  It should be noted that states would have to spend about $34 billion more on Medicaid during the first decade, funds that presumably will come out of taxpayers’ pockets.

The CBO notes that the House bill does nothing about the current physician payment system.  That fix costs at least $245 billion and Democratic House leaders intentionally left it out of this bill.  If it were included, the bill would increase deficits by well over a $100 billion in the first decade.  The bill relies on extensive Medicare payment cuts to fund the cost of subsidies to expand coverage.  There is literally no chance that Congress will allow cuts as deep as are proposed in this bill to stay in place, nor that providers could or would accept such cuts, but CBO has to take the bill as is.  CBO also declined to opine on the effect on total national health expenditures, but this bill has nothing in it other than naked price cuts that will do anything meaningful in regard to the arc of health care costs.  It is likely that CBO and Congress are either underestimating or ignoring the substantial likelihood that this bill will push costs up by expanding coverage.

In regard to the public plan, the CBO expects only modest enrollment because it will have to pay providers negotiated rates and will likely not manage care as effectively as private insurers.  That has certainly been the case with fee-for-service Medicare and Medicaid.  CBO is being quite diplomatic, probably because of intense criticism from Congressional leaders and the Administration about some of its earlier scoring of reform bills..  One suspects its internal views are more akin to those of the Office of the Actuary.  It should be critical to all concerned that CBO express its views fully and freely and that it provide estimates of likely impacts from the bill on National Health Expenditures and on private insurance premiums before anyone votes on it.

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