The Senate reform fraud

THE Senate Finance Committee yesterday voted on a fraud: Sen. Max Baucus’ “responsible” health-reform bill is actually a recipe for fiscal disaster — and the Congressional Budget Office report that supposedly bolstered the bill actually exposes it.

As others have noted, Baucus used all manner of budgetary gimmicks to oblige the CBO to give him the headlines he needed — a supposed price tag of “just” $829 billion over 10 years, with enough other spending cuts and tax hikes to avoid adding to the federal deficit. But the CBO exposed the truth by taking the rare step of calculating what the bill would cost in its second 10 years.

In its second decade alone, the CBO projects, the bill’s costs would triple — to $2.8 trillion. The taxes and fines it levies would also triple — to $1.8 trillion. And its cuts to Medicare and related federal health programs would quadruple– to $1.9 trillion.

In its first two decades combined, the bill would cost $3.6 trillion and would raise taxes by $2.3 trillion.

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.

This spring’s trustees report warned that the Medicare Hospital Trust Fund — which finances the largest part of Medicare — will be bankrupt by 2017. Baucus has identified hundreds of billions in Medicare savings — but uses it to finance his other spending, not to rescue the Trust Fund.

Responsible lawmakers in both parties know that we need to find savings in Medicare merely to keep it solvent. It isn’t the place to loot for cash to spend elsewhere.

Also, Baucus’ savings are highly suspect. 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.

Jeffrey H. Anderson is a senior fellow in health-care studies at the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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