House Bill Fails Budget Tests
Monday, July 20, 2009 at 12:09 AM EDT
Lawmakers face more work if they want to pay for health reform. According to the latest analysis by the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation, the House health bill fails two key budget tests:
These budget challenges stem from the fact that the House bill would increase spending in two major ways:
As Iâ€™ve noted in previous posts (e.g., here), a key risk is that health reform would put the U.S. on an even worse fiscal trajectory. As shown in the following graph, thatâ€™s exactly what would happen under the current House bill:
The various offsets â€” primarily tax increases on high earners and reductions in other parts of Medicare â€” do not keep pace with the new spending under the bill.
Over the next ten years, the offsets in the House bill ($1.047 trillion) are almost exactly equal to the net budget impact of expanding coverage ($1.042 trillion). Thus, one could argue that the bill fully pays for the coverage expansion. Of course, that would also imply that the bill completely fails to pay for the increase in physician payments in Medicare. Moreover, the net cost of the coverage expansion in later years is higher than the offsets. For example, in 2019, the net cost of expanding coverage is $202 billion, while the offsets total only $177 billion.
Data Note: CBO provides two pieces of information about the cost of changing physician payment rates: (1) year-by-year estimates of the direct effect of the change, which total $228 billion and (2) a statement that the total costs of the change, including interactions with other programs, is $245 billion. To estimate the total year-by-year impacts in the graphs above, I assumed the $245 billion total had the same annual pattern as the $228 billion of direct impacts.
This article originally appeared on Donald Marron.