Getting down to the nitty gritty


Health care reform of any kind is a complex issue and there are very few people in or out of government who understand what is happening, the probable unintended consequences, the impact on various groups and the long-term consequences for the winners and losers, and there are losers, in all of what is being proposed.  To give you some insight into what is being assumed, and the possible implications, I have copied key sections from the CBO report on the Senate Finance Committee legislation.  I have added the bold text to emphasize those areas I believe of special interest and significant consequence. 

Note especially the last sentence of this excerpt.

 Excerpts from the letter to Sen. Baucus from the Director of the CBO: 

Starting in 2014, nonelderly people with income below 133 percent of the FPL would generally be made eligible for Medicaid; the federal government would pay a share of the costs of covering newly eligible enrollees that varies somewhat from year to year but ultimately would average about 90 percent. (Under current rules, the federal government usually pays about 57 percent, on average, of the costs of Medicaid benefits.) In addition, states would be required to maintain current coverage levels for children under Medicaid and CHIP through 2019. Beginning in 2014, states would receive higher federal reimbursement for CHIP beneficiaries, increasing from an average of 70 percent to 93 percent. CBO estimates that state spending on Medicaid would increase by about $33 billion over the 2010–2019 period as a result of the specifications affecting coverage. That estimate reflects states’ flexibility to make programmatic and other budgetary changes to Medicaid and CHIP. 

The other main element of the coverage provisions that would increase federal deficits is the tax credit for small employers who offer health insurance, which is estimated to reduce revenues by $23 billion over 10 years. Those costs would be partly offset by receipts or savings, totaling $311 billion over the 10-year budget window, from four sources: 

net revenues from the excise tax on high premium insurance plans, totaling $201 billion; 

penalty payments by uninsured individuals, which would amount to $4 billion; 

penalty payments by employers whose workers received subsidies via the exchanges, which would total $23 billion; 

and other budgetary effects, mostly on tax revenues, associated with the expansion of federally subsidized insurance, which would reduce deficits by $83 billion. 

The provisions that would result in the largest budget savings include these: 

Permanent reductions in the annual updates to Medicare’s payment rates for most services in the fee-for-service sector (other than physicians’ services), yielding budgetary savings of $162 billion over 10 years. (That calculation excludes interactions between those provisions and others—namely, the effects of those changes on payments to Medicare Advantage plans and collections of Part B premiums.

Under the proposal, certain employers could allow all of their workers to choose among the plans available in the exchanges, but those enrollees would not be eligible to receive subsidies via the exchanges (and thus are shown in the enclosed table as enrollees in employment-based coverage rather than as exchange enrollees). CBO and JCT estimate that approximately 4 million people would obtain coverage in that way in 2019, bringing the total number of people enrolled in exchange plans to about 27 million in that year. In addition, the Medicare and Medicaid provisions would increase federal revenues by approximately $16 billion over the 2010–2019 period. 

Setting payment rates in the Medicare Advantage program on the basis of the average of the bids submitted by Medicare Advantage plans in each market, yielding savings of an estimated $117 billion (before interactions) over the 2010–2019 period. 

Reducing Medicare and Medicaid payments to hospitals that serve a large number of low-income patients, known as disproportionate share (DSH) hospitals, by almost $45 billion—composed of roughly $22 billion each from Medicaid and Medicare DSH payments. 

The proposal also would establish a Medicare Commission, which would be required, under certain circumstances, to recommend changes to the Medicare program to limit the rate of growth in that program’s spending 

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