New health care bill: Deficit cuts hinge on Congress circa 2020

Think this weekend's vote on the new health care bill was tough? Congress's 2020 decisions will be tougher.

Larry Downing/Reuters
Pro Life Democrat Rep. Bart Stupak (center), Rep. Steve Driehaus (left), and Rep. Kathleen Dahlkemper announced their support for the new health care bill Saturday after they received an executive order from President Obama claiming no money from the bill would fund abortion. While getting the bill passed was tough for Congress, maintaining its fiscal discipline a decade from now will probably be tougher.

The Concord Coalition has released a series of videos, blog posts, and statements explaining the fiscal risks and challenges in the health reform reconciliation bill. One of the videos is shown above, but you can get to the others through this page. We basically elaborate on the quick points I made in my blog post from last week. We think the bill does a lot of good things and has tremendous potential to be fiscally responsible–if the political will is there, not just now, but more crucially (and unfortunately much more dubiously) ten years from now.

What if the fiscally-courageous “follow through” doesn’t materialize and Congress and whichever Administration is in place ten years from now says “never mind”? On Friday the Congressional Budget Office did just this calculation. While the reconciliation bill modifying the Senate bill as written would reduce the budget deficit in the second ten years by about one half of one percent of GDP, CBO director Doug Elmendorf explains in his blog post that without the fiscally-courageous “follow through” the deficit would instead rise in the second ten years (emphasis added):

Today, in a letter responding to questions from Congressman Ryan, CBO described the effects on the federal budget of enacting the reconciliation proposal and the Senate-passed health bill if:

  • The excise tax on insurance plans with relatively high premiums—which would take effect in 2018 and for which the thresholds would be indexed at a lower rate beginning in 2020—was never implemented;
  • The annual indexing provisions for premium subsidies offered through the insurance exchanges continued in the same way after 2018 as before—in contrast with the reconciliation proposal, which would slow the growth of subsidies after 2018;
  • The adjustment to physician payment rates under Medicare that was passed by the House last fall was included; and
  • The 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, and whose recommendations would go into effect automatically unless blocked by subsequent legislative action—was never implemented.

We estimated that if this set of changes was made, the legislation as modified would increase federal budget deficits during the decade beyond 2019 relative to those projected under current law—with a total effect during that decade in a broad range around one-quarter percent of GDP.

That’s a three-quarter percent of GDP difference between the bill(s) as written and a new “health policy extended” baseline that would apply for several years after passage of the bill. And it’s the difference between being able to call this a major deficit reduction plan (which was a sketchy label anyway for a plan with a primary purpose of expanding health coverage), and more realistically calling it a deficit-financed expansion of a new entitlement. So Concord’s position is that we’ll have to remain “vigilant” about cost control going forward, and we’ll certainly have to “follow through” on the good stuff in this package that isn’t supposed to happen for awhile.

(PS: We’re going to need a lot of help with this fiscal vigilance, and this isn’t a message that attracts a lot of lobbying money, trust me. If you believe in Concord’s mission and policy positions, please consider joining us and supporting our efforts! I don’t make any money in doing this blog (note: not even any ads!), but instead I hope I can at least broaden Concord’s community through it.)

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