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Seven Important Facts in the Baucus Bill’s CBO Report

Today, Senator Max Baucus (D-MT) released the Chairman’s mark of his health care reform bill along with a CBO report on the legislation. I’ve found seven interesting and important issues in the report.

1. It looked like Baucus purposely left himself a small possible giveaway to liberals. His bill in fact saves $49 billion, which could be used to increase subsidies by that amount while still keeping it budget neutral. A little "look, liberals won something":

According to CBO and JCT’s assessment, enacting the Chairman’s proposal would result in a net reduction in federal budget deficits of $49 billion over the 2010–2019 period

2. It appears that the CBO agrees with almost every health care reform expert and also concluded that Conrad’s small state-based co-ops are worthless.

The proposed co-ops had very little effect on the estimates of total enrollment in the exchanges or federal costs because, as they are described in the specifications, they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments.

3. Baucus made sure adding a robust public option would not make his bill much cheaper. This is very technical, but please follow. His plan would base tax credits on the "reference plan," which is the second lowest-cost plan at the "silver" level. The House and HELP bills uses a "reference premium" which is the average of the three lowest-cost plans in an area at a level. Adding a robust public option brings down the average and the cost of the tax credits. Adding a robust public option would be the cheapest plan and therefore would probably not substantially change the "reference plan", since it is the second lowest-cost plan. This means adding a robust public option to this bill would not score as saving as much money and make it even harder to add one using reconciliation in the future. Very clever, Senator Baucus:

The amount of the tax credits for exchange plans in each area of the country would be tied to the premium of the second-lowest-cost plan in the “silver” tier (the “reference plan”), which would have an actuarial value of 70 percent.

4. The individual mandate will be costly to people and hit a lot of Americans, raising $20 billion.

Penalty payments by uninsured individuals, which would amount to $20 billion.

5. It would only reduce the number of uninsured by 29 million. That leaves about 17 million Americans/legal residents uninsured (and around 8 million illegal immigrants uninsured). That means 37% of currently uninsured Americans/legal residents will still be uninsured. Baucus’s bill will only reduce the number of uninsured Americans/legal residents by 63%. Lots of money, no universal coverage, and almost half the uninsured still uninsured.

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.

6. The individual mandate does not apply to Native Americans. Not surprisingly the three Democrats which are part of the “gang of six” come from states (Montana, North Dakota, New Mexico) with disproportionately large Native American populations.

Exemptions from the mandate would also be granted to Native Americans

7. The excise tax on high-end insurance plans is indexed to overall inflation, so over time the tax will hit more and more employer-provided insurance plans.

Except as described below, the threshold would be set (beginning in 2013) at $8,000 for single policies and $21,000 for family policies. After 2013, those amounts would be indexed to overall inflation.

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Jon Walker

Jon Walker

Jonathan Walker grew up in New Jersey. He graduated from Wesleyan University in 2006. He is an expert on politics, health care and drug policy. He is also the author of After Legalization and Cobalt Slave, and a Futurist writer at http://pendinghorizon.com

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