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CBO Report on Senate Bill

By November 19, 2009Commentary

The latest iteration of the seemingly interminable health reform process is Senator Reid’s introduction of the revised Senate bill.  The Congressional Budget Office has given its preliminary review of the bill’s effects.  (CBO Letter) CBO finds that the bill would result in coverage of about 31 million additional persons by 2019, or about 94% of legal residents.  About 15 million net people would get coverage from the proposed insurance exchanges and about 15 million would be added to Medicaid and CHIPs plans.

The bill as written would reduce the federal deficit by $130 billion in the period up to 2019 and probably continue to reduce it in the following decade.  But the bill assumes that physician payments from Medicare take a huge reduction in 2011, which almost certainly won’t be the case.  The bill pays for itself by reductions in Medicare spending and by significant tax increases.  The Medicare Commission to keep spending under control is included in the bill.

The public plan option survived, but it will pay negotiated rates to providers and states can opt-out.  CBO again finds that the public plan will likely only attract modest enrollment but will suffer adverse selection as its premium rates may be above those of private payers since it will be less effective in managing utilization and care.  The ill-advised long-term care program is in the bill, which has the effect of reducing deficits in its early years, making the bill look better, but increasing it in subsequent decades.

Only in Congressland could this bill be considered as deficit reducing.  The AMA won’t support the bill without a Sustainable Growth Rate fix and the bill won’t pass without AMA support.  When that payment change is made, Medicare costs go up significantly and “reform” adds to the deficit.  As the CMS Office of the Actuary has noted and CBO acknowledges, there are good reasons to think that the payment reductions to other providers are also not sustainable.  The CBO continues to not opine on the effect of the bill on either National Health Expenditures or private health insurance premiums, but the Office of the Actuary has estimated that similar bills would significantly increase National Health Expenditures.  Political circumstances are creating a rush to pass some health reform legislation; a rush which is particularly ill-advised given the role of health care in our economy, the potential impact on federal and state government finances and the effects on individuals’ health care and health.

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