CBO: House healthcare reform bill will add to deficit

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The healthcare reform bill proposed in the U.S. House of Representatives last week would result in an estimated net increase in the federal budget deficit of $65 billion over the 2010-2019 period, according to a preliminary analysis performed by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT), and released July 17.

The CBO and JCT said their estimate reflects a projected 10-year cost of the bill's insurance coverage provisions of $1.04 trillion, partly offset by net spending changes that CBO estimates would save $219 billion over the same period, and by revenue provisions that JCT estimates would increase federal revenues by about $583 billion over those 10 years.

By the end of the 10-year period, in 2019, the agencies figured that coverage provisions would add $202 billion to the federal deficit. That increase would be partially offset by net cost savings of $50 billion and additional revenues of $86 billion, resulting in a net increase in the deficit of an estimated $65 billion.

The analysis highlighted this specification as particular costly: By 2019, the number of nonelderly people without health insurance would be reduced by about 37 million, leaving about 17 million nonelderly residents uninsured (nearly half of whom would be unauthorized immigrants). In total, CBO estimated that enacting this provision would raise deficits by $1.04 trillion over the 2010-2019 period.

The agencies highlighted the following provisions as having the largest savings:

  • Permanent reductions in the annual updates to Medicare's payment rates for most services in the fee-for-service sector (other than physicians' services), yielding budgetary savings of $196 billion over 10 years (excluding interactions--namely, the effects of the changes on payments to Medicare Advantage plans and collections of Part B premiums);
  • Setting payment rates in the Medicare Advantage program based on per capita Medicare spending in the fee-for-service sector, providing savings of $156 billion (before interactions) over the 2010-2019 period; and
  • Changes to the Medicare Part D program that would establish a new prescription drug rebate program for people who are eligible for both Medicaid and Medicare, while expanding drug coverage to beneficiaries that are currently subject to a coverage gap (often referred to as the Part D "donut hole"), saving $30 billion over the 2010-2019 period.

According to the CBO and JCT, the provision that would result in the largest increase in Medicare spending would change payment rates for physicians' services to replace the 21 percent reduction in payment rates scheduled for January 2010, under the existing sustainable growth rate formula, with an inflation-based update. In subsequent years, rates would reflect separate updates for "evaluation and management" services and for all other services. CBO estimated that those changes would cost $228 billion over the 2010- 2019 period (before taking into account interactions). Including those interactions, the net cost of the changes in physicians' payment rates would total $245 billion.

The entire analysis can be accessed through the CBO Web site.