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The New Economy

CBO: Baucus healthcare plan would cut deficit

By / September 16, 2009

Senate Finance Committee Chairman Max Baucus unveiled his healthcare-reform bill Wednesday on Capitol Hill.

Susan Walsh/AP

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Democratic Sen. Max Baucus's newly unveiled healthcare bill would cut the federal deficit by $49 billion over the next decade.

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That's right. Healthcare reform would cost less than doing nothing, according to a preliminary analysis released Wednesday by the Congressional Budget Office (.pdf) (CBO) and the Joint Committee on Taxation. While the bill would mean increased outlays of $774 billion between 2010 and 2019, it would raise $215 billion by taxing high-premium health-insurance plans and collecting $59 billion in other revenue.

Projected net cost for the decade: $500 billion.

The bill also calls for changes in the way healthcare funds are spent, which the CBO said would save $409 billion over 10 years. Add other tax provisions that would raise $139 billion and voila!, a bill that people worried would cost taxpayers might actually save them money.

"Those estimates are all subject to substantial uncertainty," the CBO and joint committee hasten to add in their letter to Senator Baucus. Still, the analysis will be closely watched because of the CBO's role as scorekeeper of bills on the federal budget.

That healthcare reform could actually save money doesn't surprise some observers. "It's not hard to imagine," says John Holahan, director of the health policy group at the Urban Institute. "You can easily get there."

He thinks the bill will run into problems because it's not generous enough, causing many healthy low-income people to opt out of the program because they can't afford it.

Conservatives charge the opposite of the CBO's projections: healthcare costs will go up and quality will go down. Forecasts of future government healthcare spending can be woefully under their actual cost, pointed out GOP staffers of the Joint Economic Committee report (.pdf) in July. In 2006, for example, Massachusetts passed a universal coverage plan that was predicted to cost roughly $472 million in fiscal year 2008. Instead, it cost $628 million.

"Initial public estimates appear to have simply underestimated the level of demand for the proposed new benefits," the report concluded, "perhaps due to insufficient data or a lack of experience administering benefits of that sort."
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