The Congressional Budget Office (CBO) has completed a preliminary analysis of the Senate Finance Committee’s health care bill, and they estimate that the bill could lower the budget deficit by $81 billion over the 2010-2019 period.

CBO estimates that it would cost $829 billion from 2010 to 2019 to cover the credits and subsidies, increases in the number of people eligible for Medicaid, increased funding for the Children’s Health Insurance Program (CHIP), tax credits for small employers, and other expenses created by the bill. 

These costs would be partially offset by taxes on “high-premium” health insurance plans, penalties paid by people who do not purchase health insurance, reductions in Medicare and Medicaid payments to hospitals that serve a large number of low-income patients, and cuts in spending in various areas.

The CBO estimates that, by 2019, the number of nonelderly, legal U.S.residents with health insurance would increase by eleven percent.  This would leave around 16 million nonelderly, legalU.S. residents still without health insurance.

While the overall analysis is good news for fiscal conservatives, it should be noted that this is a preliminary analysis.  First, the CBO’s analysis is of the Chairman’s Mark, an early draft of the bill, and the cost of the bill is likely to continue to change before it reaches the full Senate.  Also, enacting the bill would significantly increase the operating costs of Internal Revenue Service and the Centers for Medicare and Medicaid Services, and these expenses have not bee included in the estimate.  The estimate also does not include possible savings from improvements to electronic record keeping, which could amount to billions of dollars.

It should also be noted that the CBO does not exactly have a flawless track record of forecasting expenses.  A report by the Urban Institute states that “The average error made in the forecast of the budget balance…  is over $100 billion for the first year covered by the resolution and over $400 billion five years out.  …The projection for the budget balance in 2007 changed over $800 billion between early 1997 and the summer of 2000.”

There are still some decisions to be made about what will be in the bill when it comes to the full Senate.  Of course, Fifth Freedom will keep you informed.

Sources:

Letter to Senator Max Baucus, Chair of the Senate Finance Committee, from the Congressional Budget Office  (27 pages, .pdf) http://www.cbo.gov/ftpdocs/106xx/doc10642/10-7-Baucus_letter.pdf

Bloomberg.com – U.S. Health-Costs Panel to Rebut ‘Stingy’ Budget Office Savings

http://www.bloomberg.com/apps/news?pid=20601103&sid=a09dX4NiJ714

Urban Institute – Role of the Congressional Budget Office

http://www.urban.org/publications/900507.html

Filed under: health care reform, News by admin