Baucus plan costs triple in second decade

posted at 11:36 am on October 14, 2009 by Ed Morrissey

The Baucus plan passed by the Senate Finance Committee yesterday amounts to a massive middle-class tax increase, according to one columnist today, and a dishonest shell game on taxes according to another.  Douglas Holtz-Eakin, former CBO director, argues that the Baucus plan will hit consumers with a deluge of taxes, many of which deliberately lack transparency, and 90% of which hit the middle class:

The bill creates a new health entitlement program that the Congressional Budget Office (CBO) estimates will grow over the longer term at a rate of 8% annually, which is much faster than the growth rate of the economy or tax revenues. This is the same growth rate as the House bill that Sen. Kent Conrad (D., N.D.) deep-sixed by asking the CBO to tell the truth about its impact on health-care costs.

To avoid the fate of the House bill and achieve a veneer of fiscal sensibility, the Senate did three things: It omitted inconvenient truths, it promised that future Congresses will make tough choices to slow entitlement spending, and it dropped the hammer on the middle class. …

Most astounding of all is what this Congress is willing to do to struggling middle-class families. The bill would impose nearly $400 billion in new taxes and fees. Nearly 90% of that burden will be shouldered by those making $200,000 or less.

It might not appear that way at first, because the dollars are collected via a 40% tax on sales by insurers of “Cadillac” policies, fees on health insurers, drug companies and device manufacturers, and an assortment of odds and ends.

But the economics are clear. These costs will be passed on to consumers by either directly raising insurance premiums, or by fueling higher health-care costs that inevitably lead to higher premiums. Consumers will pay the excise tax on high-cost plans. The Joint Committee on Taxation indicates that 87% of the burden would fall on Americans making less than $200,000, and more than half on those earning under $100,000.

This should not be news to Hot Air readers.  Most already understand that corporations don’t really pay taxes; they pass the costs to consumers in the form of higher prices or in lost jobs and economic opportunities.  While populists love to see Congress stick it to corporate America, in essence this is nothing more than a form of economic masochism.

In this case, as with the coming cap-and-trade bill, those costs get borne across the board because everyone accesses medical care.  Taxes on pharmaceuticals, providers, and medical devices will get paid by consumers regardless of their income levels.  The federal government will provide subsidies for families up to $88,000/year income level, but those subsidies come basically from the higher taxes imposed on the industry.  The result will be an escalation of premiums and service prices that will either negate a large chunk of the proposed subsidy levels, or force the government to spend money from elsewhere to make up the difference — which would turn into a huge deficit explosion in a short period of time.

How short?  According to Jeffrey Anderson in the New York Post, that could be immediately, thanks to the shell game Baucus created to hide the real costs of his plan:

Baucus’ most elementary trick was to have the bill’s “first 10 years” include several years when it hadn’t really kicked in. It was scored for 2010 to 2019, yet it wouldn’t be in full swing until 2015 — when its costs would exceed those of its first five years combined.

In fact, the bill wouldn’t cost anything in 2010. In its real first decade (2011-20), it would cost more than $1 trillion.

Furthermore, the CBO projects that, by the end of 2030, the Baucus bill would have cut spending on Medicare and other existing health programs by more than $2.6 trillion.

But the real shell game, and the real danger to patients, comes in Medicare reimbursement cuts:

As the CBO notes, his bill would cut Medicare payments to doctors by 25 percent in 2011, then hold them at that level perpetually. In other words, given inflation, Baucus proposes endless cuts in what the program pays physicians and others.

Assuming 3 percent annual inflation, by 2014 doctors’ real incomes from Medicare payments would be cut by a third from 2010. By 2025, they’d be cut in half.

If Baucus’ cuts actually go through, physicians’ willingness to see Medicare patients would dwindle alongside their pay. But if the cuts don’t actually get made, Baucus’ plan would explode the federal deficit.

Without the savings from Medicare and related programs, the CBO projects that the bill would raise our deficits by $1.3 trillion over the next 20 years — and rising.

Provider flight from Medicare has been in motion for years already.  This reimbursement plan would turn that from a steady flow to a stampede.  What would that mean for Medicare patients?  They would have very few choices in providers and long wait times to access them.  And if the Senate sticks a public option tied to Medicare reimbursement rates into the package, that problem will expand to include massive numbers of Americans who like the coverage they have now, but will get thrown out of it by employers taking advantage of the cost savings between rising premiums and a fixed penalty for non-coverage.

The Baucus plan is both dishonest and a disaster.  Blame the 14 Senators who voted for this pig in a poke without demanding actual legislative language before passing it out of committee.


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Comments

Has CNN performed a fact check on Douglas Holtz-Eakin, Jeffrey Anderson, and Ed?

BuckeyeSam on October 14, 2009 at 1:22 PM

Has CNN performed a fact check on Douglas Holtz-Eakin, Jeffrey Anderson, and Ed?

BuckeyeSam on October 14, 2009 at 1:22 PM

Burn them! Burn them! They’re witches!

Loxodonta on October 14, 2009 at 1:44 PM

As a solo, rural M.D. with 8 employees, my office overhead runs nearly half a million a year before I get to take home my first dime. If they cut Medicare payments by 25% and increase the number of people on Medicaid (which pays me $17 for a basic exam), are they also going to cut my overhead? I think not. I’d probably make more money quitting medicine and going on welfare.

EyeSurgeon on October 14, 2009 at 1:47 PM

Medicare COSTS have gone up even with the restrictions imposed on doctors and hospitals. Medicare for all won’t keep costs from going up. Not paying doctors and hospitals will. . . but they’ll go out of business.

ThackerAgency on October 14, 2009 at 1:06 PM

This part is somthing that people don’t seem to understand.

If Medicare pays Less for services, those costs are passed on to the OTHER customers… it does not reduce costs so much as redistribute, unfairly, the cost burden.

I wonder how much HIGHER health insurance premiums are right now, to cover the costs of Medicaid and Medicare, and I hate to say it, Champus Prime (military retiree insurance) folks…

Romeo13 on October 14, 2009 at 2:22 PM

There is no compromise the left can put forth that can attract the moderates to pass healthcare at this time.
Their only chance for a health care reform bill is a giant crap bill that angers everyone. No public option, huge taxes on the middle class, no reduction in health care pricees, and a metric tonne of pork loaded in to buy off oposition.

jhffmn on October 14, 2009 at 1:12 PM

The left doesn’t need to compromise. They run it all. Only reason they are doing this song and dance with Snowe and now her bitch of a collegaue Collins is to appear bipartisan. But they could have voted for this 4 months ago with 0 Reps in the house or senate and passed it.

angryed on October 14, 2009 at 2:28 PM

The left doesn’t need to compromise. They run it all. Only reason they are doing this song and dance with Snowe and now her bitch of a collegaue Collins is to appear bipartisan. But they could have voted for this 4 months ago with 0 Reps in the house or senate and passed it.

angryed on October 14, 2009 at 2:28 PM

They still don’t have 60 votes, and until they do nothing is happening.

jhffmn on October 14, 2009 at 3:23 PM

I guess Mexico is my only option, I don’t have a lifetime to wait for this monstrosity to reverse itself.

hachiban on October 14, 2009 at 3:46 PM

Baucus’ most elementary trick was to have the bill’s “first 10 years” include several years when it hadn’t really kicked in. It was scored for 2010 to 2019, yet it wouldn’t be in full swing until 2015 — when its costs would exceed those of its first five years combined.

Baucus is, like most Democrats, pond scum.

drjohn on October 14, 2009 at 4:07 PM

Most astounding of all is what this Congress is willing to do to struggling middle-class families. The bill would impose nearly $400 billion in new taxes and fees. Nearly 90% of that burden will be shouldered by those making $200,000 or less.

Actually, no it won’t. The lower end will get tax credits and the middle and upper groups will be killed with new taxes.

Like I have been saying repeatedly, this is nothing but redistribution of wealth. It’s NOT about health care.

drjohn on October 14, 2009 at 4:18 PM

As the CBO notes, his bill would cut Medicare payments to doctors by 25 percent in 2011, then hold them at that level perpetually. In other words, given inflation, Baucus proposes endless cuts in what the program pays physicians and others.
Assuming 3 percent annual inflation, by 2014 doctors’ real incomes from Medicare payments would be cut by a third from 2010. By 2025, they’d be cut in half.

Good luck finding a doctor.

It’d be nice if we could price fix lawyers’ salaries like this.

drjohn on October 14, 2009 at 4:19 PM

What will happen.

Even without public option.

1 Forcing people to have health insurance under penalty of fine if they do not purchase it is probably unconstitutional and will be challenged hundreds of times at a cost of billions.

2 The fine for refusing health insurance, at best, only 10 % the cost of the health insurance itself-thus millions of the young and healthy will willingly take the fine in lieu of the vastly more costly insurance.

3 Forcing insurance companies to accept preexisting conditions means that the young and healthy will take health insurance only after they are unyoung and unhealthy-meaning disastrous cash flows and GUARANTEED LOSSES for the health insurance companies. This will mean financial collapse of the health insurance companies-and of the nation.

With the public option

With a profit motive, insurance companies CANNOT compete with the government. Hello socialized medicine, goodbye quality health care. Goodbye doctors. Hello third world.

MaiDee on October 14, 2009 at 5:16 PM

In addition to the provider flight from Medicare due to endless cuts, the demand is about to explode. My parents were born in 1944, and are on the leading edge of the boomers. 1944+65=2009.

The next twenty years will not only see the SocSec ratio of payer to recipient drop from 5:1 to 2:1, but also add millions to the seniors chasing the more and more elusive Dr. who will treat them for peanuts.

Never mind the lower quality of care from the less capable, but still overloaded Dr’s who stay in because they can’t make it on patients who have a choice.

This disaster must be stopped or we’ll be heading to Canada or the UK because their long wait times will be shorter than ours… The reversal of American fortune will be complete. Nikita will be proud and we’ll be poor.

Empiricist on October 15, 2009 at 1:37 AM