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Senate Health Bill Released

Morgen on November 18, 2009 at 9:47 pm

All 2,074 pages of it are available here for your reading pleasure. The initial CBO scoring summary is available here. No major surprises that I’ve seen or heard about yet. The bill includes a public option with a state “opt-out” provision. The total cost of the legislation is being touted as $848 billion over the initial 10-year budget window. With a net deficit reduction of $130 billion over this same period. Like with every other version of the bill so far, the credibility of these numbers rests entirely on whether you believe that Congress is likely to sustain the substantial ($436B) cuts in Medicare and Medicaid programs included in the bill. (Put me in the skeptical category.) 

The one interesting data point from my initial review of the CBO’s analysis is that a substantial portion of the net deficit reduction seems to stem from the inclusion of a brand new, federally-sponsored assisted living insurance plan.

Community Living Assistance Services and Supports (CLASS) provisions, which would establish a voluntary federal program for long-term care insurance. Active workers could purchase coverage, usually through their employer. Premiums would be set to cover the full cost of the program as measured on an actuarial basis. However, the program’s cash flows would show net receipts for a number of years, followed by net outlays in subsequent decades. In particular, the program would pay out far less in benefits than it would receive in premiums over the 10-year budget window, reducing deficits by about $72 billion over that period, including about $2 billion in savings to Medicaid.

Unless I have misunderstood the CBO’s analysis, this means that a full $72B of the $130B in deficit reduction (55%) is due to a temporary revenue spike based on the fact that the CLASS program would initially receive more in premiums than it would pay out in benefits. But as the CBO report makes clear, this situation would begin to reverse in subsequent decades as program beneficiaries reach the golden years where assisted living services will be required. Similar to how the Social Security and Medicare surpluses of decades past are now quickly turning into massive deficits. So in other words, a brand new entitlement program (which has barely even been mentioned up until this point) is actually being used to tout the deficit REDUCING effects of this bill.

Watch for the White House and Senate leadership to tout the misleading $130B figure, and we’ll see if anyone in the media reports on the impact of the CLASS program. And of course this is only just the beginning of what is likely to be an extended debate and amendment process in the Senate that will only add to the cost of the final bill.

But let’s not kid ourselves. This bill will be finessed and touted as “deficit neutral” whether it costs $850B or $900B – or more. Justifiably or not, the only thing that can sink this bill at this stage, short of some sort of external shock or calamity, is the politics over abortion and/or the public option. Barring that, this monstrosity of government spending and public entitlement is going through. Whether we like it or not.

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Category: Health & Education, Politics |

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