Health bill may not shave deficits as CBO says

McClatchy NewspapersMarch 19, 2010 

WASHINGTON — One big reason the Congressional Budget Office projects that federal budget deficits would drop by $138 billion over the next decade under the Democrats' pending health care overhaul is that the bill includes a tax on high-end insurance policies. That alone accounts for almost 25 percent of the expected savings.

However, the tax wouldn't go into effect until 2018, and experts warn that's a very shaky assumption.

"How can anyone have confidence this will go into effect?" asked Paul Ginsburg, the president of the Center for Studying Health System Change, a Washington research group.

The tax was so unpopular this year that Democrats basically gutted its initial version, then postponed its impact for eight years. Now opponents have eight years to lobby for its full repeal by a future Congress.

The tax estimate is part of the preliminary analysis from the nonpartisan Congressional Budget Office, a report that Democrats are using to trumpet their plan's big deficit savings and to persuade fiscal conservatives to vote for the bill. Analysts warn, however, that it's based on several highly uncertain assumptions.

"CBO is the most trusted analysis out there, but everything they say, you should take with a humongous grain of salt," said Marc Goldwein, the policy director of the Committee for a Responsible Federal Budget, a Washington budget watchdog group.

After all, former CBO Director Rudolph Penner said, "Any CBO estimate involving human behavior and social programs is very hard to figure."

It's tough because of legislative items such as these in the revamped health bill:

- Medicare and other government health programs. The legislation assumes nearly $500 billion in 10-year savings from curbing waste, fraud and abuse and changing the way that health care providers such as doctors and hospitals are paid.

It also assumes that the plan to cut physician payments by 21 percent this year remains in effect, although Congress has a long history of canceling scheduled pay cuts to doctors.

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The CBO knows that, but it can analyze legislation only as it's presented. It can't make a judgment that politicians are almost certain to change the legislation before it takes effect. Therefore its analysis shows some budget savings that are unlikely to happen.

Republicans say the savings are artificial, since the doctors' pay cut is expected to be canceled. Democrats counter that the bill would make up the difference with other savings by inducing more efficiency in the system, but analysts are skeptical.

"The question is will providers try to improve efficiency or come back to Congress to get their payments raised?" asked Robert Bixby, the executive director of the Concord Coalition, another Washington budget watchdog group.

- Excise tax. The Senate had sought to impose a tax on high-end insurance policies starting in 2013. Labor unions balked, and the final version delays the tax's implementation until 2018 and raises the income levels on what can be taxed.

The changes dramatically reduced the amount of likely revenue — from $149 billion in the Senate bill to $32 billion now, and analysts doubt that even that may be realized.

- Long-term care insurance. Some $70 billion is counted as savings from including a new long-term care program in the legislation. Participants would pay premiums into the program for years before they entered the system, building up the fund, but the premiums would be spent in the future to pay benefits, so how's that a savings?

In addition, premiums and benefits are supposed to adjust automatically to match each other, but what if the program's income falls short, Goldwein asks. Politicians are unlikely to cut back on promised long-term care if funds run short, history suggests; instead, they're more likely to spend more money.

"A lot of people have interpreted the (long-term care program) as setting up the next major entitlement," Ginsburg said.

- Subsidies. The CBO assumes that the bill's changes — in Medicaid, the state-federal program for lower-income people, in the government's children's health program and in subsidies for people who need help to pay premiums — would cost $940 billion over 10 years. That's all supposed to be offset by the measure's tax increases and spending cuts.

Goldwein cites several variables that could change all the numbers, however: No one knows how many people will be working over the next 10 years, which would affect whether they have insurance through their employers. Further, no one can say how much health care will cost, who will get sick and so on.

Even top Democrats concede that the CBO's numbers are best guesses.

"They're neutral and they're well qualified," said House Budget Committee Chairman John Spratt, D-S.C. "But quite a few things have to be judgmental. It's a tough business."

ON THE WEB

Joint Committee on Taxation analysis

CBO analysis of Senate health care bill

House Nov. 7, 2009, roll call vote on health care plan

CBO analysis of reconciliation legislation

White House health care plan

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McClatchy Newspapers 2010

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