CBO: Senate healthcare bill would reduce deficit by $132B

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The Congressional Budget Office (CBO) and the Joint Committee on Taxation have estimated that the direct spending and revenue effects of enacting the Patient Protection and Affordable Care Act incorporating the manager’s amendment would yield a net reduction in federal deficits of $132 billion between 2010 and 2019.

Also, the office has not completed an estimate of the legislation’s potential impact on spending that would be subject to future appropriation action in its Dec.19 report to Senate Majority Leader Harry Reid, D-Nev.

The organizations also noted that approximately $81 billion of that reduction would be on-budget. Other effects related to Social Security revenues and spending as well as spending by the U.S. Postal Service are classified as off-budget.

This estimate incorporates the effects of the manager’s amendment, which would make a “number of changes” to the Patient Protection and Affordable Care Act as originally proposed, the CBO stated. The changes with the largest budgetary effects include:

  • Expanding eligibility for a small business tax credit;
  • Increasing penalties on certain uninsured people;
  • Replacing a public plan that would be run by the Department of Health and Human Services (HHS) with multi-state plans that would be offered under contract with the Office of Personnel Management;
  • Deleting provisions that would increase payment rates for physicians under Medicare; and
  • Increasing the payroll tax on higher-income individuals and families.

Of the total deficit reduction of $132 billion projected to result from the legislation, according to the office, the manager’s amendment accounts for about $2 billion and the act as originally proposed accounts for the remaining $130 billion.

The CBO and the JCT have determined that the legislation contains several intergovernmental and private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA). The total cost of those mandates to state, local and tribal governments, and the private sector would greatly exceed the thresholds established in UMRA ($69 million and $139 million, respectively, in 2009, adjusted annually for inflation).

Since this Dec. 19 report, the CBO issued one correction on Dec. 20. The office said that the error has no impact on the estimated effects of the legislation during the 2010–2019 period; however, the correction reduces the degree to which the legislation would lower federal deficits in the decade after 2019.

Based on the correction, the CBO expects that Medicare spending under the legislation would increase at an average annual rate of roughly 6 percent during the next two decades—below the roughly 8 percent annual growth rate of the past two decades (excluding the effect of establishing the Medicare prescription drug benefit). Adjusting for inflation, Medicare spending per beneficiary under the legislation would increase at an average annual rate of roughly 2 percent during the next two decades—below the roughly 4 percent annual growth rate of the past two decades.

“It is unclear whether such a reduction in the growth rate could be achieved, and if so, whether it would be accomplished through greater efficiencies in the delivery of healthcare or would reduce access to care or diminish the quality of care,” the office wrote in its correction.