James Pethokoukis

Politics and policy from inside Washington

CBO: Baucus healthcare bill saves $81 billion over ten years

October 7, 2009

From the Congressional Budget Office:

According to CBO and JCT’s assessment, enacting the Chairman’s mark, as amended, would result in a net reduction in federal budget deficits of $81 billion over the 2010–2019 period. The estimate includes a projected net cost of $518 billion over 10 years for the proposed expansions in insurance coverage. That net cost itself reflects a gross total of $829 billion in credits and subsidies provided through the exchanges, increased net outlays for Medicaid and the Children’s Health Insurance Program (CHIP), and tax credits for small employers; those costs are partly offset by $201 billion in revenues from the excise tax on high-premium insurance plans and $110 billion in net savings from other sources. The net cost of the coverage expansions would be more than offset by the combination of other spending changes that CBO estimates would save $404 billion over the 10 years and other provisions that JCT and CBO estimate would increase federal revenues by $196 billion over the same period. In subsequent years, the collective effect of those provisions would probably be continued reductions in federal budget deficits. Those estimates are all subject to substantial uncertainty.

By 2019, CBO and JCT estimate, the number of nonelderly people who are uninsured would be reduced by about 29 million, leaving about 25 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants). Under the proposal, the share of legal nonelderly residents with insurance coverage would rise from about 83 percent currently to about 94 percent. Roughly 23 million people would purchase their own coverage through the new insurance exchanges, and there would be roughly 14 million more enrollees in Medicaid and CHIP than is projected under current law. Relative to currently projected levels, the number of people either purchasing individual coverage outside the exchanges or obtaining coverage through employers would decline by several million.Although CBO does not generally provide cost estimates beyond the 10 year budget projection period (2010 through 2019 currently), Senate rules require some information about the budgetary impact of legislation in subsequent decades, and many Members have requested CBO analyses of the long-term budgetary impact of broad changes in the nation’s health care and health insurance systems. However, a detailed year-by-year projection, like those that CBO prepares for the 10-year budget window, would not be meaningful because the uncertainties involved are simply too great.

All told, the proposal would reduce the federal deficit by $12 billion in 2019, CBO and JCT estimate. After that, the added revenues and cost savings are projected to grow more rapidly than the cost of the coverage expansion. Consequently, CBO expects that the proposal, if enacted, would reduce federal budget deficits over the ensuing decade relative to those projected under current law—with a total effect during that decade that is in a broad range between one-quarter percent and one-half percent of GDP. The imprecision of that calculation reflects the even greater degree of uncertainty that attends to it, compared with CBO’s 10-year budget estimates.


Set aside for a moment the ludicrous fantasy that now, after decades of failure to do so, we will suddenly have vigilant oversight of Medicare that will eliminate all the easily perpetrated ongoing fraudulent schemes.
The real issue is that the CBO provides only 10- year projections of a bill’s cost, including the just released 890 billion est. for the health care bill. But most provisions of the health bill don’t take effect until 2014. So the “10-year” cost projection only includes six years of the bill.

Fact is, over the first 10 years that the House bill would be in existence (2014 to 2024), its costs would be closer to $2.4 trillion. Similarly, the real cost of the Senate bill over its first 10 years of operation is estimated at $1.5 trillion.

Such gimmicks also effect the projections of how much a reform bill will add to the deficit. CBO says the House bill adds $235 billion to the deficit. But that, again, cuts off arbitrarily in 2019. Beyond that date, the bill adds enormously to the deficit, about $1.5 trillion in the second 10 years. In fact, if the health-reform bill were treated like other entitlements, such as Social Security and Medicare, which are required to have a 75-year actuarial forecast, its unfunded liabilities would exceed $9.2 trillion.

Posted by Robert Gainey | Report as abusive

We’ve now got a coverage/insurance reform bill that can pass. Way to go. Next will be the hard work of reforming the healthcare delivery process to achieve the promised savings. The key ways to save costs include:

1)Independent panels to do comparative effectiveness assessment to make sure we are using the most cost-effective treatments.

2)Changing doctor compensation from “pay for service” to salary, with incentives based on value (quality relative to cost). This is how the Mayo clinic gets better results at less cost than other centers.

3)Addressing end-of-life care, where 25-33% of costs are incurred. We should keep folks comfortable but cannot spend on heroic procedures if the standard of living cannot be improved. A key example is Alzheimers, at about $150 billion per year and rising rapidly.

4)Addressing obesity, with additional charges for the obese similar to smokers for insurance, taxing unhealthy foods, and encouraging young people and adults to exercise regularly. Obesity is 10% of the problem.

5)Tort reform to limit defensive medicine. Tort reform is 2-5% of the problem.

6)Encourage competition among insurers by removing state-level regulatory barriers.

Posted by David Doney | Report as abusive

It’s amazing after all of the debate we still approach the health care issue from a financial perspective.

It seems that people just don’t get it. Human life is far superior in value to some contrived currency. Money is a tool to facilitate the exchange of resources. Nothing more.

Profit and interest, and the love of these two things over the value of human life is the real reason we have the problems that we have. Remove profit and interest as motivators. We must adopt the grown up motivator of actually solving real problems for the sake of improving and enriching the quality of human life.

It doesn’t matter how much universal health care costs. It’s important enough to do it. Human beings are worth the effort of ensuring access to health care for all.

Who will pay for it doesn’t matter either. We should all be glad to shoulder some of the responsibility. We think nothing of bowing down to the powers that be when they ask us to pay for the sins of profiteers against us. But we argue about whether or not we should give to provide something that is clearly a benefit to everyone.

That is insanity at its worst. It should be an honor to be contributing member of society. Money has no value. It has no worth except that which we ascribe to it. By discussing this issue in terms of money we cheapen the human element and blatantly disregard it in favor of profit.

Choose the public option. It’s good for the citizen. To hell with private insurers. They care only for their profit and nothing for your health. Listen to the arguments against the public option and you will hear arguments against loss of profit and fear of government control. But they will NEVER guarantee you better quality, comprehensive, full coverage health care unless you can pay for it. If you can’t pay for it then you don’t deserve to be treated as a human being. Vote against the public option and vote against your family and your loved ones when something happens and income is lost.


@ David Doney:P

If we really handed doctors pay for service, I think a lot of them would never get paid. In my experience, most of them do little or nothing for their patients. My most recent exposure to these God-like healers was an attempt to have me use every piece of high tech equipment at their disposal. Then and only then would anyone have a crack at my injuries. When I resisted their attempts to maximize my bill, I was treated with disgust and disdain. I was dragged from the hospital by my elderly parents who asked for but did not receive a wheelchair for that purpose. I received a bill for more than $12,000 for two hours in the emergency room. I suffer with pain this day 6 months later.

Posted by Unemployed | Report as abusive


Your experience speaks to the point. We value money and nothing else. The insurance “business” has turned human suffering into a business opportunity. Rather than focusing on healing your injuries or illness, the “accountants” were at the wheel dictating the treatment procedure.

And then they stick you with a fat bill for doing nothing in particular.

This is what happens when profit and interest are at the center of human systems. These two things, and our love of them are the chief cause of the suffering we experience today. We do not love life. We love money. And because we love money we place it in importance above life.

Profit and interest do not belong in health care. They do not belong in education. They do not belong in housing. They do not belong anywhere in human societies in which the human being is of highest value. And if we do not create a society where the human being is of highest value then we are doomed to kill ourselves over stupidity. With each passing generation we have become more efficient at killing each other.

But damned if we can heal each other. This is insanity. Forget the money. Heal the people because it’s right. Not because it’s profitable.

We are not animals and we should not be content to live as such.


@Benny – “Profit and interest do not belong in health care. They do not belong in education. They do not belong in housing. They do not belong anywhere in human societies in which the human being is of highest value.”

Oh, I just don’t know where to start. I’m not voting for unbridled capitalism, but what are you looking for? A utopian socialism? A commune? To each according to their needs? If no profit in health care, education, housing, etc. where can you make a profit? Food? Power/environment? Your argument would suggest a logical extension that no profit should be allowed at all. You probably aren’t going to get much traction with that argument on a business news website.

So many arguments to be made against your oh-so-flawed argument. Who would come up with medical innovations without the profit motive? How about the performance of charter schools v. inner-city public schools (see Washington D.C.). Would society be as productive without the profit motive. Etc., etc., etc.

Posted by John Thomson | Report as abusive

If it is going to be so easy to find savings in Medicare, why don’t we do that anyway? I’d be willing to bet anyone out there large sums of money that the score will not come to pass – I’d even give someone odds. A trillion dollar entitlement program that will reduce the deficit? Hahahaha.

I don’t want to denominate my bet in Dollars though. They’re not going to be worth the paper they are printed on in 10 years. Lost decade, here we come…

It’s been tragic watching the politicians falling over themselves (Republicans too) to prove to seniors that Medicare/Medicaid benefits won’t be cut – $40 trillion structural deficit be damned.

Posted by John Thomson | Report as abusive

You could perhaps argue that my argument is wrong by way of some kind of reasoning that justifies grabbing power at the expense of others.

But all you have to do is look at the headlines to see that I speak the truth.

Profit gets in the way of real progress. Because the work is done for money and not to solve problems. You can argue that I’m wrong. But I can show you the headlines that show our system is doomed to fail unless we change.


When it comes to finance or economics I not an expert and my thoughts are those of a layman after reading the CBO report to Baucus.
A few points by the CBO letter jumped out:
1. They had not determined administrative cost in their assessment – now knowing government with their every growing expansionist agenda’s – we could be talking a couple billion per year
2. Estimate in the taxes from so called Cadillac programs – again this is based on people receiving these programs – what is to say companies decide against providing these programs, due to the taxes both companies and employers will have to pay.
3. After reading the CBO letter twice, there is no doubt that Elmendorf spent as much effort in both trying to sell and cover his butt over the CBO projected budget – that says he truly has no confidence in the projected budget as there are too many unknowns. (Congress, Medicare, Cadillac / Medicare advantage plans etc.)
4. In the year 2019 there will still be 29 million Americans uninsured – 11 million illegal immigrants included in this number, however projected illegal immigrants are expected to be closer to 25 million by 2019
Bottom line this to a layman in finance and economics is a crock of true b.s.
Where are the true financial experts and economists who do not have the courage to see this as a layman does, pure speculative b.s.
As a layman a few thoughts.
I remember my professor during marketing classes emphasizing the following phrase “keep it simple”
Thus why not the following common sense real issues instead of trying to reinvent the wheel for 2% of our population who only want handouts, without having to do anything:
- Tort Reform (it works three states have passed Tort Reform bills and seen the financial savings)
- Health Care Insurance Providers – required to provide insurance in all 50 states
- Health Insurance Providers Incompetence – required to resolve issues immediately and enter data correctly (this is something I have personally experienced having spent close to 80 hours speaking with customer service trying to resolve incorrect data entered by the companies, trying to get the doctors and other medical services paid and still going back to 1/14/09 for a bicycle accident there is still not a final resolution on the payment of the surgeon, who saved my shattered hip so I can still walk and ride a bike. Yes 80 hours at a cost to the insurance company of $50.00 per hour. I am not alone in having to deal with this pure incompetence from the insurance companies. Do the math with 10 million people having to deal with the companies. Just a little caviar, I reported fraudulent claims from one provider. They still continue to pay the bill each month (now going on for 8 months)

Posted by Paul Donen | Report as abusive

And there you have it. Money over human beings. Healing your injuries was nothing more than a means to a payment end. Money is a lifeless construct. It takes different forms but in the end it does nothing for you.

Money needs to be put in its place. And that means using it for its intended purpose which is to facilitate the exchange resources and nothing more. Profit motive and interest distort the purpose of money and elevate it above human beings in importance.


Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/