January 13, 2013
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December 20, 2009

Merry Christmas from Harry

By Randall Hoven
According to the latest news, Harry Reid has the 60 votes needed to pass Obamacare. While the legislation itself is not available for reading to my knowledge, the Congressional Budget Office did report on it December 19. I parse that CBO report here, so we know what is about to happen to us.

The CBO does not make the accounting all that easy, despite its many tables of numbers. The number Democrats like to cite is that this plan will reduce the deficit by $132 billion over the ten years from 2010 to 2019.

Imagine that: more people insured and the deficit reduced. How do they do that? The short answer is over $1 trillion in Medicare cuts and tax increases. For the longer story, read on.

First, the ten-year cost of insuring 27 million more people is $871 billion. But that money is not evenly spread over the ten years. The CBO does not make this part totally clear; that cost comes mostly after 2015. In those later years (mostly after Obama is no longer president, even if elected to a second term), the cost per year is easily $165 billion. Call it over $6,000 per person insured per year.

As a sanity check on that number, my current high-deductible plan costs $4,000 to cover my family of four, or $1,000 per person covered. A "Cadillac" comprehensive plan might be more like $16,000 for a family of four, or $4,000 per person per year. So the federal government will spend over six times as much as my high-deductible plan, and 50% more than even a generous comprehensive one. So much for efficiency.

That is the gain part of the bill.  Now for the pain. Below is the tally of spending cuts and taxes, all over the ten years of 2010-2019.

  • "Spending changes" (e.g., Medicare cuts): $483 billion.
  • Excise tax on high-premium plans: $149 billion.
  • Savings from "other sources" (like penalties for being uninsured): $108 billion.
  • Other "revenues": $264 billion.

Add up those numbers and you get $1,004 billion. Subtract that from the $871 billion gross cost and you get $132 billion in "deficit reduction" (with a $1 billion round-off error).

Let me repeat. You get "deficit reduction" by cutting Medicare and raising taxes by more than $1 trillion: Medicare and other program cuts of $483 billion, and an extra $521 billion in new taxes and fees.

The cuts include cuts across Medicare, Medicaid, and the Children's Health Insurance Program: $186 billion from permanent reductions in payment rates for fee-for-service, $118 billion for payment rate reductions based on bids submitted, and $43 billion from reducing payments to hospitals that serve low-income patients. In all, it's a $483-billion cut from Medicare, Medicaid and CHIP.

Can you imagine what the Democrats would say if a Republican proposed such a thing? You don't have to imagine. Here is what Senator Max Baucus, one of Obamacare's architects, said when President Bush proposed smaller cuts.

This administration ought to know that five years' worth of Medicare and Medicaid cuts totaling $200 billion are dead on arrival with me and with most of the Congress.

The "other revenues" include extra taxes on drugs, medical devices, and health insurance providers ($101 billion), and also a hospital insurance tax ($87 billion).

As in all predictions of revenues from tax changes, the CBO assumes no real change in behavior. If, for example, people with high-premium plans choose to not have such plans any more rather than pay the extra taxes, the predicted revenue will not show up. Raise your hand if you really think the federal government is going to raise over $500 billion in revenue with these new taxes and fees.

The "deficit reduction" comes in the earlier years: $111 billion of the $132 billion reduction comes in the first five years (2010-2014). That is because the taxes start early, but insuring the uninsured comes later, mostly after President Obama is long gone from office. By 2019, the "deficit reduction" will be only $16 billion, per the CBO. The overall deficit will be over $1 trillion by then, and the federal debt held by the public will be over $17 trillion.

In short, this legislation, even if you believe the CBO's numbers, does nothing to solve the debt crisis, despite President Obama's hyperbolic claims.

This plan will strengthen Medicare and extend the life of that program. And because it gets rid of the waste and inefficiencies in our health care system, this will be the largest deficit reduction plan in over a decade.

The CBO's own numbers indicate that this "largest deficit reduction" is within the round-off error of its estimates: just over 1% of the projected deficit in 2019.

So much for federal government spending and taxing. What about the states and the private sector? Here is what the CBO says.

... 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 ...

Like what?

... the legislation would require individuals to obtain acceptable health insurance coverage...

The legislation also would penalize medium-sized and large employers that did not offer health insurance...

The legislation would impose a number of mandates, including requirements on issuers of health insurance, standards governing health information, and nutrition labeling requirements.

But at least no "public option," right?

[This legislation would replace] a 'public plan' that would be run by the Department of Health and Human Services with ‘multi-state' plans that would be offered under contract with the Office of Personnel Management ...

Are we sure that means no "public option"? Do multiple "multi-state" plans under OPM sound that much better than one federal plan under HHS? The devil is in the details, and this legislation is about 2,000 pages of such details.

And no "death panels" either, right?

The legislation also would establish an Independent Payment Advisory Board, which would be required, under certain circumstances, to recommend changes to the Medicare program to limit the rate of growth in that program's spending. Those recommendations would go into effect automatically unless blocked by subsequent legislative action.

I hope you are comforted. When that "advisory" board says no expensive cancer drug for you -- cheap pain pills only -- you can still hope that "subsequent legislative action" is taken to reverse that decision. That is to say that the only thing that prevents the "advisory board" from being a "death panel" is the hope that Congress will override it.

Could we please find a death panel to pull the plug on health care legislation?

Randall Hoven can be contacted at randall.hoven@gmail.com or  via his web site, randallhoven.com.
on "Merry Christmas from Harry"