Our friends at the Tax Foundation have produced a report to make everyone mad. Gerald Prante runs the numbers and finds that the Baucus plan would cut the deficit between 2020 and 2029 even without the excise tax on “Cadillac” plans.
Cuts in Medicare and other health programs ratchet up quickly in the CBO score, reaching $93 billion in 2019 alone and totaling $404 billion between FY 2010 and 2019. Assuming those Medicare cuts continue growing at the same rate after 2019, they could reach a total of $1.8 trillion over the next ten-year period, 2020-2029.
Either the excise tax is in the plan to help with scoring over the ten-year period, it is in the plan because the cuts are not likely to occur, or both. The former is a strong possibility based on the CBO cost estimates. The latter, however, seems more likely to judge from Prante’s and the CBO’s skepticism. Prante questions whether the cuts are “politically sustainable” and posits that “they might constitute a hurdle in themselves.” CBO gave a more detailed answer on page 12 of its letter to Max Baucus — an answer that can be summarized as “When pigs fly.”
These projections assume that the proposals are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation. For example, the sustainable growth rate (SGR) mechanism governing Medicare?s payments to physicians has frequently been modified (either through legislation or administrative action) to avoid reductions in those payments. The projected savings for the proposal reflect the cumulative impact of a number of specifications that would constrain
payment rates for providers of Medicare services. In particular, the proposal would increase payment rates for physicians? services for 2010, but those rates would be reduced by about 25 percent for 2011 and then remain at current-law levels (that is, as specified under the SGR) for subsequent years. Under the proposal, increases in payment rates for many other providers would be held below the rate of inflation (in expectation of ongoing productivity improvements in the delivery of health care). The projected longer-term savings for the proposal also assume that the Medicare Commission is relatively effective in reducing costs?beyond the reductions that would be achieved by other aspects of the proposal?to meet the targets specified in the legislation. The long-term budgetary impact could be quite different if those provisions were ultimately changed or not fully implemented. (If those changes arose from future legislation, CBO would estimate their costs when that legislation was being considered by the Congress.)
