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.