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Reading Between the Lines: What the Democrats are Trying to Hide About the Pelosi Health Care Bill

October 30, 2009

The Democrats are touting a CBO analysis as proof their nearly 2,000 page government takeover of the U.S. health care system meets various budgetary tests.  But the analysis raises even more questions than it answers:

1. What is the true cost of the bill? At least $1.055 trillion, but more like $1.3 trillion.

Democrats keep saying that the coverage provisions cost “only” $894 billion.  CBO, however, notes the gross cost is actually $1.055 trillion, a fact they again clarified today.  Democrats reach the lower figure by reducing that by $167 billion in “collections,” which are taxes, paid by employers who fail to offer and individuals who fail to purchase government-approved qualifying health insurance.  Media isn’t buying the Democrats’ spin.  From the Washington Post editorial page to the New York Times, news reports agree the price tag is over $1 trillion.

The Washington Post went on to say that the bill, “is not financed in a sensible, sustainable way.” Now, keep in mind, that is before the $1.055 trillion figure grows to $1.3 trillion once the costs of the Medicare payment physician payment fix, which was introduced without any offsets, is added.  At a total of $1.3 trillion, this massive bill would be far from “paid for.”

2. Which way will this bend the cost curve?

Earlier this year, Peter Orszag, President Obama’s Director of the Office of Management and Budget said, “the single most important thing we can do to improve the long-term fiscal health of our nation is slow the growth rate in health care costs.”  So a natural question to ask about this bill is whether the goal is met.  CBO notes that the House Democrats’ bill contains an “increase of about $598 billion in the [federal] budgetary commitment to health care.” (Emphasis added) Clearly, the answer is “no.”

The non-partisan Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) also warned last week that an earlier version of the bill would increase national health spending by about $750 billion this decade.

CBO’s analysis contains warnings beyond the first ten-years of the bill: “On balance, during the decade following the 10-year budget window, the bill would increase both federal outlays for health care and the federal budgetary commitment to health care, relative to the amounts under current law” (p. 13).

3. Would Truth in Advertising laws require this to be called the “The Medicaid Expansion Act”?

CBO notes that of those who get health insurance coverage under this bill, more than 40% do so by entering Medicaid, a program notorious for its poor payment rates and limited access to doctors and hospitals for its enrollees.  When so many are gaining coverage from increasing Medicaid eligibility, wouldn’t it be more accurate to refer to this bill as entitlement expansion rather than health reform?

4. How much will seniors’ access to care be affect by ever-growing Medicare cuts?

The Democrats’ bill would cut Medicare by one-half trillion dollars over the next 10 years.  In trying to project the long-term budget impact of this plan, CBO included an ominous warning for seniors:  the Medicare cuts “will increase by 10 percent to 15 percent per year in the next decade” (p. 12).  Given what we know today about how difficult it can be for seniors to find doctors willing to accept Medicare patients because of low reimbursement levels, one wonders what will be left of seniors’ health care if this bill is enacted.

5. How many millions of seniors lose access to Medicare Advantage?

This fall, the Obama Administration tried to silence Medicare health plans and prescription drug plans that were alerting seniors to the possibility they could lose access to their plan or see reduced benefits and higher out-of-pocket costs as a result of Democrats’ health care proposals.  In the face of clear evidence to the contrary by CBO, the Administration reversed its misguided policy.  Unfortunately, CBO’s letter to Chairman Rangel about this version of health reform doesn’t include any information on how many seniors will either lose their Medicare health plan entirely or see their costs go up and their benefits slashed.

6. How many million lose their employer-sponsored coverage?

CBO’s analysis does not show how many individuals will lose their current employer-sponsored insurance — the coverage they have and like and the coverage the President promised they could keep.  CBO only reports the net change in employer coverage, which hides the fact that millions will lose access to their current plan if the Democrats’ bill becomes law.  In fact, by making more employers eligible to toss their employees into the exchange, this problem likely has gotten worse than when the bill was reported by the three Committees in July, but you wouldn’t know that by looking at the CBO letter.

7. What other provisions haven’t been scored?

The letter contains the usual caveats about the estimate being preliminary and subject to change but also includes this interesting passage, which makes one wonder what else aren’t they estimating:

 “Moreover, the analysis does not reflect all of the provisions of the bill. In particular, the analysis does not reflect the impact of section 110 of Division A, which would impose certain requirements on employers that currently provide health insurance to retirees.” (p. 9).

8. What other major costs will be funded later?

CBO’s letter helpfully notes that implementing this gargantuan government takeover of our health care system will require tens of billions in other federal spending, the burden of paying for which will fall to future years’ spending bills and are not accounted for in CBO’s estimate.  The letter speaks for itself on this point:

“The federal agencies that would be responsible for implementing the provisions of H.R. 3962 are funded through the appropriation process; sufficient appropriations would be essential for them to implement this legislation in the time frame it specifies. Major costs for programs subject to future appropriations would include these:

“* Costs to the Internal Revenue Service of implementing the eligibility determination, documentation, and verification processes for subsidies. Those costs would probably be between $5 billion and $10 billion over 10 years.

“* Costs to HHS (and especially CMS) of implementing the changes in Medicare, Medicaid, and CHIP as well as certain reforms to the private insurance market. Those costs would probably be at least $5 billion to $10 billion over 10 years. (The administrative costs of establishing and operating the exchanges, which are direct spending, are included in Table 1.)

“* Costs of a number of grant programs and other changes in Divisions C and D of the legislation. CBO has not completed a review of those provisions.” (p 8-9)

9. Did they properly account for temporary tax increases?

The CBO letter to Chairman Rangel says “the increase in revenues from those (tax) provisions is estimated to total about $52 billion in 2019 and is growing a little faster than 5 percent per year toward the end of the budget window. As a rough approximation, CBO assumes continued growth at about that rate during the following decade.”  Interestingly though, one of the largest pieces of that is a provision that sunsets after 2020.  One wonders how to square CBO’s estimate that the revenue will continue to climb with the fact a provision that raises $3.8 billion in 2019 disappears after 2020.  Moreover, with the Senate set to use at least some of the revenue of that temporary provision to pay for an amendment to the unemployment benefit bill next week, one can only wonder how this revenue hole will be filled.

10. What if we didn’t create the next AMT?

The surtax on individuals with incomes above $500,000 ($1 million for couples) is not indexed for inflation, making it a candidate to be the next AMT.  Twenty years from now, a future Congress will laugh that Democrats thought a tax aimed at this group would only hit a few very wealthy individuals.  Unfortunately, by not indexing these thresholds for inflation, the surtax will hit more and more families and small businesses as time goes on.

11. How much higher will Part D premiums be?

This summer, CBO estimated the Committee-passed version of this bill would increase Part D premiums by about 20%.  While closing the donut hole will be of value to a small minority of seniors, for most it will mean substantially higher premiums.  Unfortunately, CBO failed to quantify those amounts.