Karl Rover in writing for the Wall Street Journal outlined some key reasons why the health budget massive billions in deficits disspaeared under the new bills. Below are four budget gimmicks and problems not being addressed.
– 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.
– 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?
– The CBO report also estimates that receipts from the 40% excise tax the Baucus bill would levy on “Cadillac” insurance policies “would grow by roughly 10 percent to 15 percent” a year after 2019. That’s nonsense. If you tax something heavily you’ll get less of it. If this tax is enacted, there will be fewer Cadillac plans””and hence less revenue.
– Some governors are also figuring out that the proposal in the Baucus bill to expand Medicaid will shift a big chunk of the federal health-care tab to states. States, after all, pick up an average of 47% of Medicaid’s costs””and expanding it will force states to spend more.