September 18, 2014

Are We There Yet? (Reaction to CBO and the Upcoming Vote on Health Care Reform)

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It looks like we might be entering the final week(s) of (at least) this year's legislative push on health care reform.

Thursday brought us legislative text of the amendments to the Senate bill that the House will take up through the reconciliation process as well as an updated CBO score of the whole package. It is likely the House will vote on the bill package Sunday. If they do so, the Senate bill will become the law of the land, and the reconciliation amendments will then have to make it though the Senate before those become law.

The main fiscal takeaway from this week is that there really has not been any substantial change in what heath care reform is attempting to accomplish and whether it will ultimately be fiscally responsible legislation. Today we released a series of video discussions (see above) between Bob Bixby and I explaining the big picture and how the reconciliation tweaks effect that. One of the issues discussed is that clearly the most consequential fiscal change through reconciliation is the delay in implementation of the excise tax on cost insurance plans.

For a more complete view, our December Issue Brief, created as the Senate bill neared passage, is still a good encapsulation of the fiscal benefits and risks from the legislation.

As we explained then, the biggest fiscal concern with the health care legislation is that most of the risks are on the downside. History shows that once large spending programs are enacted, they tend to become popular and entrenched. When they are tied to health care inflation, as the subsidies for health insurance in this bill are, they are virtually certain to increase in costs over time. So, there is very little question that the coverage expansion will be at least as expensive as CBO projects.

On the other hand, the offsets and cost savings are not nearly as certain -- leaving the nation exposed to broad fiscal risk. This uncertainty is primarily political and not due to poor policy choices. Most of the ideas experts currently have about how to reduce health care costs are in the bill -- especially the ideas about transforming the delivery system to reward quality instead of quantity and limiting the tax free provision of health insurance through employers. 

Unfortunately, full implementation of these ideas involves hard choices for politicians, and they have already delayed or weakened the provisions (especially the excise tax on high-cost insurance plans) that have the most certain chance to lower costs in the future. It is worth noting that they did save the Medicare Commission (IPAB) in an attempt to insulate the implementation of good cost control ideas. But for the most part, any fiscal success from the current legislation entirely depends on future politicians swallowing the hard choices imposed upon them.

While that is a better prospect than not having enacted any hard choices now, (and President Obama and Congress should get credit in that regard,) it is not enough to get fiscal hawks to celebrate just yet. Furthermore, even if the bill works according to plan, we need to take dramatic action to get our fiscal house in order.

For some similar perspectives on this see Ruth Marcus in the Washington Post and Diane at Economistmom.com. Bob also discussed this on NBC Nightly News Thursday night. For a good rundown of details on costs and the reconciliation bill's changes see this CNN Money story by Jeanne Sahadi.