House Democrat Bill Nearly Twice Obama’s $900 Billion Spending Cap
Nearly a Half-Trillion in Health “Reform” Budget Gimmicks
“I will not sign [health care legislation] if it adds one dime to the deficit—now or in the future. Period….The plan I’m proposing will cost around $900 billion over ten years.”
— President Obama, address to Joint Session of Congress
While President Obama has promised that health “reform” legislation will cost fewer than $900 billion, Congressional Budget Office (CBO) estimates reveal that House Democrats’ government takeover of health care (H.R. 3200) would cost far more than that. A comparison of the CBO scores of H.R. 3200 and Senate Finance Committee Chairman Baucus’ bill as amended reveals that the House bill spends far more than Obama’s promised threshold, and the Senate bill breaks President Obama’s tax pledge:
- CBO estimates that the House bill would spend nearly $1.3 trillion on new entitlements for health coverage expansions—including $438 billion for the Medicaid expansions, $773 billion for “low-income” subsidies, and $53 billion for small business tax credits. By comparison, the Baucus bill spends $829 billion on all three provisions combined—$345 billion for the Medicaid expansion, $461 for insurance subsidies through the Exchange, and $23 billion for small business tax credits.
- The significantly lower subsidy levels in the Baucus package have caused many to complain that under his plan, families with incomes of approximately $70,000 could be required to spend up to 30 percent of their income—more than many families pay for their mortgage—on government-mandated health insurance premiums and co-payments. Despite the President’s recent insistence that a mandate to purchase health insurance is not a tax increase, the non-partisan Joint Committee on Taxation has confirmed that the penalties for not purchasing “government-approved” coverage do represent higher taxes on middle-class families.
- Although the CBO recently estimated that the Baucus bill as amended would lower the deficit by $81 billion in its first ten years, this “deficit reduction” comes solely from an increase in payroll tax revenues on the middle class. Moreover, most of the new payroll tax revenues will eventually be paid out in the form of additional Social Security benefits, raising further questions about the Baucus bill’s “deficit reduction” potential.
- While the Baucus bill defers a long-term reform for the Sustainable Growth Rate (SGR) mechanism for Medicare physician payments—the total cost of which stands at $285 billion over ten years, according to CBO—H.R. 3200 includes a long-term fix—but makes no attempt to pay for it.
- If Democrats decide not to spend more than one-quarter of the President’s overall $900 billion spending cap on an SGR fix, Members may also question where future funding for a permanent solution to the SGR will come from. Will additional savings be taken out of Medicare over and above the $400-500 billion being contemplated in this round of “reform?” Will taxes be raised to increase Medicare reimbursements to doctors? Or will Democrats choose additional deficit spending in the future even though President Obama has pledged that his plan will not add “one dime” to the nation’s budget deficits?
- H.R. 3200, unlike the Baucus bill, also includes nearly $100 billion in spending CBO would be ordered to ignore. Section 164(d)(1)(C)(ii) of the bill directs that a new $10 billion reinsurance program “shall not be taken into account” for budgetary scoring purposes. Likewise, Section 2002(b)(3) of the bill directs that nearly $90 billion in mandatory spending on a new Public Health Investment Fund should not be counted at all for budgetary purposes.
- Between the $285 billion unpaid-for cost of reforming physician reimbursements, the nearly $100 billion in “phantom” new entitlements created, and the collective debt interest necessary to finance these unfunded obligations, the House Democrat legislation contains approximately a half-trillion dollars in additional deficit spending within the ten-year budget window—and CBO has already admitted that the long-term outlook for federal spending under the bill would be even worse.
Thus President Obama’s parameters could yield deep fissures among Democrats by exposing their chief budgetary dilemma. Will Democrats use the multiple hundred-billion dollar budgetary gimmicks in H.R. 3200 in an attempt to mask the full cost of their government takeover of health care—and break the President’s promises of budget neutrality and “only” $900 billion in new government spending? Or will they follow Chairman Baucus’ framework, and force middle-income families to buy coverage they may not want and cannot afford—thus further breaking the President’s “firm pledge” that no one with an income under $250,000 would face tax increases? Given these equally unpleasant choices, many may call for a long-overdue effort to find a new approach.