NCPA - National Center for Policy Analysis


October 9, 2009

Washington spent the week waiting for the Congressional Budget Office (CBO) to roll in with its new cost estimates of the Senate health care bill, a new $829 billion entitlement that will subsidize insurance for tens of millions of people and reduce deficits by $81 billion at the same time.  Anyone who reads beyond the top-line numbers will find that the bill creates massive new spending commitments that will inevitably explode over time, and that this is "paid for" with huge tax increases plus phantom spending cuts that will never happen in practice, says the Wall Street Journal.

For example:

  • The better part of the 10-year $829 billion overall cost will finance insurance "exchanges" where individuals and families could purchase coverage at heavily subsidized rates.
  • Senate Finance Chairman Max Baucus (D-Mont.) kept a lid on the cost by making this program non-universal: Enrollment is limited to those who aren't offered employer-sponsored insurance and earn under 400 percent of the poverty level, or about $88,000 for a family of four. CBO expects some 23 million people to sign up by 2019.

But this firewall is unlikely to last even that long, says the Journal.  Liberals are demanding heftier subsidies, and once people see the deal their neighbors are getting on "free" health care, they too will want in.  Even CBO seems to find this unrealistic, noting "These projections assume that the proposals are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation."

Then there are the many budget gimmicks, says the Journal:

  • Baucus spends $10.9 billion to eliminate the scheduled Medicare cuts to physician payments --but only for next year.
  • In 2011, he assumes they'll be reduced by 25 percent, with even deeper cuts later.
  • Congress has overridden this "sustainable growth rate" every year since 2003 and will continue to do so because deeper cuts in Medicare's price controls will cause many doctors to quit the program.
  • Fixing this alone would add $245 billion to the bill's costs, according to an earlier CBO estimate.

Source: Editorial, "The Greatest Show on Earth; Step right up: A new entitlement that cuts the deficit!" Wall Street Journal, October 9, 2009.

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