The problem for Mr. Obama is that the Baucus bill is being sold on the strength of accounting tricks that make it appear that it won’t add to the deficit. (This is true for the other health-reform bills, too). If fiscally conservative Democrats sign on to the bill now after publicly saying they are doing so because it doesn’t add to the deficit, they may end up bailing once the tricks are revealed to the public.
One trick is easily explained. The bill imposes tax hikes and benefit cuts right away, including $121 billion of Medicare reductions between 2011 and 2015. But new spending really doesn’t start until five years out (2015) and isn’t fully operational until 2017. The bill uses 10 years worth of tax hikes and benefit cuts to fund a few years worth of benefits.
And that’s just the start. For example, the Congressional Budget Office (CBO) released a report last week claiming the bill won’t add to the deficit. But this assumes that employers who dump employee coverage under the Baucus bill will then increase worker paychecks by an amount equal to what they had spent on health care. This replaces a nontaxable event (providing health insurance) with a taxable one (increasing worker paychecks), magically producing $83 billion in revenues. Without this windfall, the Baucus bill adds billions of dollars to the federal deficit in the first decade.
Of course, why would a company drop employee coverage just so it could pay more (in fines, taxes and wages) than it did before?