UBP blog

09/30/2009

Gross total of Baucus’ proposed health care reform bill estimated at $774 billion over 10 years: Where will all this money go?

Filed under: health care reform legislation — ubpblogger @ 10:12 am
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After their preliminary analysis of Senate Finance Committee Chairman Max Baucus’ proposed health care reform bill, the Congressional Budget Office (CBO) estimates its gross total cost to be $774 billion over 10 years. The CBO states that if enacted, this bill will increase the rate of insured non-elderly Americans from approximately 83 to 94 percent.

Also, although the CBO estimates 25 million Americans will purchase insurance under the newly established exchanges, the number of people purchasing health insurance outside of the exchanges (or getting it through an employer) will only decline slightly.

But where will the proposed $774 billion in Baucus’ bill go?

Here’s a breakdown of the bill’s costs:

  • $287 billion will go towards expanding Medicaid and the Children’s Health Insurance Program
  • $463 billion in subsidies will help low income people buy insurance 
  • $24 billion tax credits will go towards helping small employers insure their workers
  • $10.9 billion will go towards stopping payment cuts to physicians under Medicare for a year
  • $54 billion will go towards other costs such as bonus payments to encourage more primary care physicians and creating an innovation center within Medicare

How will we pay for it?

We all know money doesn’t grow on trees and our government is going to need some way to pay for all of these expansions, subsidies and tax credits.

To pay for all of this, Baucus’ bill proposes the following, cuts, taxes and fees: 

  • An excise tax of 35% on insurance plans worth more than $8,000 a year per-person or $21,000 a year per-family (expected to generate $215 billion in revenues)
  • An annual maximum FSA contribution amount of $2,000 per-person (expected to generate $16.5 billion in revenues)
  • Fees imposed on drug and medical device manufacturers, health insurers and clinical laboratories (expected to generate $93.3 billion in revenues)
  • Paying for penalties incurred by employers for employees who enroll in government subsidized care (expected to generate $27 billion in revenues)
  • Payment cuts to private Medicare Advantage plans (expected to generate $125 billion in revenues)

Senator Baucus proposed a solution, but to what problem?

Whenever something is proposed as a “solution”, there needs to first be a clearly defined “problem” that it addresses. In the minds of employers and employees alike, what is the most pressing problem with U.S. health care?

With health insurance premiums skyrocketing at 2-3 times the rate of inflation and wage growth alike, the huge problem is clearly out-of-control costs.

Baucus’ bill is designed to help lower-income Americans afford health insurance through new exchanges, but most people will continue to purchase insurance outside of these exchanges (i.e. through their employers). So in the grand scheme of things, the bill only subsidizes the health insurance coverage of a few.

While the bill does have some plusses for employers, such as tax credits to help them insure their workers, it falls short of addressing the reason why they need these credits in the first place. Namely, health insurance is growing costlier by the year for employers to provide.

Is the health care crisis an issue of “health care for all” or is it a crisis in affordability?

Is it even possible to solve one issue without solving the other one? If so, which issue is most pressing for our government to tackle first?

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