The Senate finally released its version of the House health care reform bill titled, “The Patient Protection and Affordable Care Act,” last night. After scoring was done by the CBO (Congressional Budgetary Office) and the JCT (Joint Committee on Taxation) some interesting numbers started to appear.
First off let’s take a look and see if Senator Reid’s proposed health care reform bill meets the President’s decree of being deficit neutral, under the $900 billion cap, and extends coverage to all Americans.
From the Wall Street Journal.
The WSJ-Senate Majority Leader Harry Reid set the stage for a health-care debate in the Senate by unveiling a 10-year, $848 billion bill that would extend insurance to 31 million Americans without coverage
If this report is correct then the Senate Majority Leader’s legislation fits the bill, so to speak.
When scored by the CBO, it was shown that the bill is indeed deficit neutral.
CBO-The estimate includes a projected net cost of $599 billion over 10 years for the proposed expansions in insurance coverage. That net cost itself reflects a gross total of $848 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 $100 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 $491 billion and other provisions that JCT and CBO estimate would increase federal revenues by $238 billion.
In total, CBO and JCT estimate that the legislation would increase outlays by $356 billion and increase revenues by $486 billion between 2010 and 2019.
If you have been following the health care debate with any sort of interest then you might have notice a few of the simple budgetary gimmicks the Democrats have been employing to pass their legislation off as “deficit neutral.”
Anytime there is a mention of “increased government revenues,” that means tax increases, or 370 billion of them over ten years. Former Bush White House economics adviser and Director of the National Economic Council in 2008, Keith Hennessey, has a nice breakdown of the tax increases, via the JCT.
- 40% excise tax on health coverage in excess of $8,500 (individuals) /$23,000 (families). Amounts are indexed for inflation by CPI-U + 1% – begins in 2013 – $149 B tax increase.
- Additional 0.5% Medicare (Hospital Insurance) tax on wages in excess of $200,000 ($250,000 for joint filers) – begins in 2013 – $54 B tax increase.
- Impose annual fee on manufacturers and importers of branded drugs – begins in 2010 – $22 B tax increase.
- Impose annual fee on manufacturers and importers of certain medical devices – begins in 2010 – $19 B tax increase.
- Impose annual fee on manufacturers and importers of certain medical devices – begins in 2010 – $60 B tax increase.
- Cut in half (to $500K) the amount of an executive’s compensation that a health plan can deduct from its corporate income taxes – begins in 2013 – $600 million tax increase.
- Impose 5% excise tax on cosmetic surgery and similar procedures – begins for surgery in 2010 – $6 B tax increase!
E21 also makes mention of two more interesting schemes which the Democrats are engaging in.
E21-However, CBO notes that the bill includes two budget gimmicks that hide the true cost of the bill. Doctors are assumed to get a 23 percent cut in 2011 which would carry into subsequent years. Fixing the SGR would cost $247 billion. Additionally, the CLASS Act (Community Living Assistance Services and Supports Act) generates $72 billion over the budget window, but later turns to deficits. Eliminating these two gimmicks means the bill would be $189 billion in the red. It would also put the real cost of the bill over a trillion dollars.
This is also in accord with information put out by the Heritage Foundation.
Heritage Foundation-A New Program. Despite concern and criticism that the CLASS Act is not fiscally sound over the long term, it has been included as a budget gimmick. The federal government will collect revenues for 5 years before paying out any benefits. This allows the Reid bill to offset the cost of the Senate bill by $72 billion over 10 years.
The CLASS Act would create a new federal program for long-term care insurance to compete against private insurance. Individuals who have paid into the program for 5 years who experience limitations in their activities of daily living will become eligible for cash benefits. These limitations do not meet the current disability test which opens the program to abuse.
The nuances between this bill and the others proposed by Congressional Democrats are minor, the totality of the model is the same. Give the impression of debt reduction through slashing Medicaid and Medicare and revenue generation through increasing taxes.
What the government considers “deficit neutral” is not exactly neutral in terms of the average American’s pocket book. As the population of the US increases and gets older, inevitably more revenue will be required to fund these programs. What this translates to is more taxes coming out of the pocket books of the lower economic quintiles. Simply look at the difference in taxation between the Reid bill and Pelosi bill. Pelosi wanted to start off by taxing only those who made over $500,000 per year, in the Reid version we see this dropping significantly to $200,000 (single filer) and $250,000 (joint filers).
In the end this program, once passed, will have the same effect as Social Security, Medicare, Medicaid, and every other social entitlement the government is currently involved in. It will be more expensive than previously promised, it will be run ineffectively, and it will be too much of a pain in the ass to get rid of once fully implemented. All of this is a shell game and everyone, including the casino, is set to lose.