Because the program would begin taking in premiums immediately
but would not start paying benefits until 2016, congressional budget
analysts have forecast that it would generate a nearly $60 billion
surplus over the next 10 years, cash that would help the larger
measure's balance on paper.
Not long ago I filed this under "Department of Uh-Oh." In the longer run it is very bad for the budget and it is simply an accounting trick. It's a sign that fiscal responsibility will never come to U.S. health care. And yes there is a long-term care provision in the Senate bill. Although I have not read through its current incarnation of 2000-some pages, I am willing to bet we are getting the cost back-loaded version of the idea.
>It’s a sign that fiscal responsibility will never come to U.S. health care.
It has never come to U.S. Government.
Why would it come to U.S. Government health care?
This would be a plausible argument, (and was true of the original House bill) except that there is a 20-year score too and this isn’t the case.
The CBO scored the bill as reducing the deficit by $127B in the first decade (the decade included in the official score) and reducing the deficit by $650B in the second decade, i.e. the 10 years *AFTER* the initial 10 year scoring window. This seems counter to your reasonable assumption that the reason that this bill doesn’t expand the deficit is b/c the revenue raisers start earlier than the expenditures.
However, the likely mechanism driving these supposed deficit reductions is that more and more plans will be caught by the “Cadillac Tax” and similar to the AMT program, instead of merely taxing the absurdly excessive plans, it will tax a much larger proportion of people with reasonable plans. Casting a wider net is what has led the AMT to raise so much money and expand much farther beyond its original mission; the same may be seen with the “Cadillac Tax” on supposedly gold-plated health plans because eventually, anyone who has a decent (not excessive) plan will be included.
Since this tax increase is a) obscure and b) over a decade away, no one seems to care. It will, however, likely help to bend the cost curve, b/c people will not be able to afford as much insurance, and thus will consume less healthcare. If the flap over the mammogram recommendataions is any indicator, though, Americans may not go quietly into the realm of less is better w/r/t to their healthcare.
They promised Hope and Change, not Honesty and Fiscal Responsibility.
I am European. This con trick was pulled on us when states across the continent instituted pay-as-you-go pensions in the post-war period. The consequence is that those who pay in will not accept any diminution in terms, let alone radical reform, which would reduce the future value below that which they expect to pay in. Meanwhile, we continue with pension plans that were drawn up when the demographic pyramid was bottom-heavy, and ever-increasing immigration and tax burdens are the necessary consequences. Enjoy, America.
Amy and Noah both make great points. Amy suggests that The CBO score isn’t as bad as it could be because the slick trick employed of NOT indexing the cut-offs – either on the income surtaxes or the “Cadillac” health plans – to inflation. In this way, as price levels rise, more and more people every year will be hit by these taxes, raising tremendous amounts of revenue down the road, but also eventually levying huge costs on middle class families and small businesses. Thus Obama can keep his promise not to hit the middle class today, but you getter believe he’s going to get them tomorrow.
Noah’s point is that these revenue-generators are all illusory anyway and exist only on paper to help the CBO score. Once the day of reckoning comes, politicians will do what they’ve done with Medicare and the AMT year-after-year and vote to delay the onset of the more onerous provisions, kicking the can down the road to future legislatures.
Medicare is set to be cut by 21% next year only because past Congresses, conscious of political image and re-election prospects, have consistently refused enforce the both the mandated Medicare cuts tied to the “sustainable growth rate” and the expansion of the AMT.
Long story short, you can count on our legislature to use budgeting legerdemain to improve CBO scores and thus make proposed legislation more superficially palatable to the electorate, all with the quite understanding that the future will never play out as advertised and that actual outcomes will be much worse and much more expensive.
That’s your government at work. The wards of the State are actively misleading the populace. And few seem to care. Quis custodiet ipsos custodes?
There is a big move down today in the stock market.
But there was a way to make money from this move, if only your DJIA index timing signal told you TWO DAYS AGO that the market is in correction mode.
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If they do the medicare cuts, I suspect we will have a severe doctor shortage in the near term. Medicare reimbursements are already down to the bone, not a lot of fat left. More sense for older doctors to retire — they can’t work much harder.
Johnrobert, I do not have the link to the official CBO document that states the $127B and the $650B savings, but here is where Ezra Klein of the Washington Post quotes it: http://voices.washingtonpost.com/ezra-klein/2009/11/cbo_senate_bill_cuts_127_billi.html
As to the source of the savings, CBO does not publish their Excel spreadsheet, to my sadness. Back of the envelope, though, the bill spends money to bring folks onto the govt rolls and that costs cash money, so those must be offset plus have net gain to reduce the deficity. Must be either a) spending reduction or b) revenue raising. Most of the spending reduction elements are fixed. The only ones that are not fixed are a) savings from HCIT (not $65B),b) comparative effectiveness (good luck with this after MammogramGate), or c) the SuperMedPAC body within the executive branch that will get to make cuts to Medicare without Congressional approval, but assuming that this can save $65B/year net at a time that Medicare spending is exploding based on demographics (baby boomers hitting their highest spend years) would require massive cuts to payments or care, and last time I checked, seniors vote early and often.
So this brings us to revenue raisers, and that is primarily the Cadillac Tax. There is also the new Medicare tax of 0.5% above $200K individual/$250K filing jointly. The latter is a sleeper, b/c my understanding is that the levels are not indexed to inflation, and in 15 years, $200K is going to be solidly middle class (esp with imploding dollar). This is likely part of the $65B/year, but hard to believe it is the much of it, but I would have to go look at income distribution charts to get a feel for how much this will raise. But other than the Medicare tax, the big nut on the revenue raising side is the Cadillac Tax.
In response to Noah, I agree that the CBO numbers are illusory and policy will be modified in the future to avoid paying the piper; I was merely attempting to pose a logic for why they are what they are.
In response to Charlie, I also agree. I heard a statistic (rumor…I have no tangible source) that >40% of cardiologists are >55 years old. These doctors were at peak productivity during the boom years and are financially secure. Are they going to keep working 70 hr weeks and taking call all night for GP wages of $125K/year? Unlikely. And how do we attract young folks to train for years to be no better off than their friend the CPA who started earning a living wage 10 years before the physician? That is an NPV negative decision. The silver lining is, I guess, that having fewer doctors will surely bend the cost curve.
The threshold for the Cadillac tax is indexed to CPI plus 1%. From the part of the Reid bill imposing the Cadillac tax (sec. 9001):
“In the case of any calendar year after 2013, each of the dollar amounts under clauses (i) and (ii) shall be increased to the amount equal to such amount as in effect for the calendar year preceding such year, increased by an amount equal to the product of — (I) such amount as so in effect, multiplied by (II) the cost-of-living adjustment determined under section 1(f)(3) for such year (determined by substituting the calendar year that is 2 years before such year for ‘1992’ in subparagraph (B) thereof), increased by 1 percentage point. If any amount determined under this clause is not a multiple of $50, such amount shall be rounded to the nearest multiple of $50.”
Of course, if premiums increase at a faster rate than CPI plus 1%, we’ll still have the bracket creep problem.
With regard to the income surtax in the House bill, an earlier version (H.R. 3200) indexed the brackets to CPI, but the version passed by the House (H.R. 3962.EH) does not index at all (the tax rate is lower, however). (Compare sec. 441 of H.R. 3200 to sec. 551 of H.R. 3962).
Andrew,
I think you’re taking 2000 pages too literally. The bill is about the same word length as a Harry Potter book. Its 2000 pages because of spacing and formatting conventions (i.e., its double or triple spaced, margins are pulled in, and there are a ton of paragraphs consisting of a line or less.)
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