House Democrats pass health-care bill






Like many Americans, I’m very concerned about the efforts underway to rush through the 2,000 page Pelosi health care bill this weekend. Why the rush? That’s a lot of pages to read. Why not give everyone the chance to read it and debate it?

How much will this bill cost us? It’s unclear because the figures coming out of Washington keep changing – and always in the direction of costing more, not less. The latest numbers show it will cost more than a trillion dollars over the decade, but when has a government program ever come in on or under budget?

How will we pay for it? Taxes, of course – and not just on the “rich” (you know, the people who spur the economy by buying goods and running companies that employ people), but also on just about everyone, especially small businesses – the job-creating engine of our economy. One of the points of health care reform was to help small businesses with the cost, but this bill hurts them – and right at a time when so many Americans are out of work and need the jobs that small businesses produce.

What’s in this bill? The “death panel” provision is in it. Medicare cuts are in it. Coverage of illegal immigrants is in it. And federal funding for abortion is in it. I commend the many Republicans and Blue Dog Democrats who are taking a principled stance to fight this.

I had a message for Speaker Pelosi in a speech I gave last night for the Wisconsin Right to Life – “please, please don’t break the ‘transparency promise’ by prohibiting at least a vote of your colleagues on funding abortion-on-demand.”

Speaker Pelosi has already broken many promises thus far in this “reform” exercise. She promised that this would be a bi-partisan effort, but the bill she’s pushing isn’t bi-partisan. She promised that the final version of the bill would be posted online 72 hours before it comes to a vote so that the American people could clearly see what’s in it and how we will pay for it. But she broke that promise too when she decided to rush the bill to a vote this weekend.

The speaker must be held accountable for her broken promises. Now is the time for Americans who believe in the free market and who believe that we need policies that promote job growth instead of job loss to say once and for all, “Enough!” Stand up and make your voices heard before it’s too late. Call and email your representatives and tell them to vote “no” on Pelosi’s train wreck of a health care bill, or else we will vote “no” to sending them back to Washington when we go to the polls in less than 12 months.

– Sarah Palin



November 6, 2009

Honorable John D. Dingell

U.S. House of Representatives Washington, DC 20515

Dear Congressman:

The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) have updated the estimate of the direct spending and revenue effects of

H.R. 3962, the Affordable Health Care for America Act, as introduced on October 29, 2009, incorporating the manager’s amendment that you proposed on November 3, 2009. The new estimate supersedes the one provided on November 5 and reflects today’s enactment of H.R. 3548, the Worker, Homeownership, and Business Assistance Act of 2009 (which was signed into law by the President this morning).

That new law includes a provision to delay the phase-in of a rule that would allow corporations with worldwide activities to reduce their U.S. income taxes by charging more of their interest expenses against domestic profits; that provision overlaps with a provision in H.R. 3962. As a result, the estimated increase in revenues for H.R. 3962, incorporating your manager’s amendment, is now approximately $20 billion lower than the amount shown in yesterday’s cost estimate for the legislation.

Reflecting the change noted above, CBO and the staff of JCT now estimate that, on balance, the direct spending and revenue effects of enacting H.R. 3962, incorporating the manager’s amendment, would yield a net reduction in federal budget deficits of $109 billion over the 2010-2019 period (see Table 1). CBO has not completed a comprehensive estimate of the legislation’s potential impact on spending that is subject to future appropriation action.

Among other things, H.R. 3962, incorporating the manager’s amendment would establish a mandate for most legal residents of the United States to obtain health insurance; set up insurance “exchanges” through which certain individuals and families could receive federal subsidies to substantially reduce the cost of purchasing that coverage; establish a public plan that would be administered by the Secretary of Health and Human Services (HHS); significantly expand eligibility for Medicaid; substantially reduce the growth of Medicare’s payment rates for most services (relative to the growth rates projected under current law); impose an income tax surcharge on high-income individuals; and make various other changes to the federal tax code, Medicaid, Medicare, and other programs.

On October 29, 2009, CBO transmitted a preliminary analysis of H.R. 3962 as introduced. This estimate differs from that preliminary analysis for several reasons:

• First, this analysis incorporates the effects on spending and revenues of the manager’s amendment and recent Congressional action.2 The manager’s amendment adds a tax provision regarding credits for producers of biofuel, which would increase net revenues by about $24 billion over the 2010-2019 period, according to JCT. Other changes included in the manager’s amendment have a relatively small effect on direct spending and revenues.

• Second, the updated analysis reflects Medicare’s payment rates for calendar year 2010 and other changes announced in final rules that were posted on the Federal Register’s Web site on October 30, 2009. Those final rules involve home health services, hospital outpatient services, the physician fee schedule, and other Medicare Part B services.

• Finally, this analysis incorporates several technical revisions that had a small impact on the estimated budgetary effects of the legislation.

CBO and JCT have determined that the bill contains several private-sector and intergovernmental mandates as defined in the Unfunded Mandates Reform Act (UMRA). The total cost to the private sector of those mandates, as estimated by CBO and JCT, would greatly exceed the threshold established in that act for private entities ($139 million in 2009, adjusted annually for inflation). CBO estimates that the total cost of intergovernmental mandates would be small and would not exceed the annual threshold established for state, local, and tribal entities ($69 million in 2009, adjusted annually for inflation).

CBO and JCT’s assessment of the bill’s impact on the federal budget deficit is summarized in Table 1. Table 2 shows federal budgetary cash flows for direct spending and revenues associated with the legislation.

Tables 3 and 4 provide estimates of the changes in the number of nonelderly people in the United States who would have health insurance, present the primary budgetary effects of the bill’s provisions directly related to insurance coverage, and display detailed estimates of the costs or savings from other proposed changes (primarily to the Medicare program) that would affect the federal government’s direct spending and some aspects of federal revenues. Detailed estimates of the budgetary impact of the bill’s tax provisions are provided by JCT in JCX-48-09, and an explanation of those provisions is provided in JCX-47-09 (see http://www.jct.gov).3

Over the 2010–2019 period, the net cost of the coverage expansions would be more than offset by the combination of other spending changes, which CBO estimates would save $427 billion, and receipts resulting from the income tax surcharge on high-income individuals and other provisions, which JCT and CBO estimate would increase federal revenues by $574 billion over that period.5

By 2019, CBO and JCT estimate, the number of nonelderly people who are uninsured would be reduced by about 36 million, leaving about 18 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants). Under the bill, the share of legal nonelderly residents with insurance coverage would rise from about 83 percent currently to about 96 percent.

The legislation would increase outlays by $672 billion and would increase revenues by $781 billion between 2010 and 2019 (see Table 2). 6 Certain cash flows were not separately identified in the CBO estimate for the introduced version of H.R. 3962. For example, risk adjustment payments to health insurance plans are reflected in the top portion of Table 2 as outlays of $65 billion. Those amounts are offset by risk adjustment collections of about $69 billion, shown in the revenue portion of that table.

Risk adjustment funds are collected from all insurers in the market for individual plans and then distributed to insurers based on how the characteristics of their enrollees compare to the average enrollee. Although risk adjustment collections and payments would be equal over time, CBO expects payments for risk adjustment to lag slightly behind collections, resulting in a net deficit reduction of about $4 billion between 2013 and 2019.

The legislation would require that the premiums for the public plan be set to fully fund expenditures for medical claims, administrative costs, and a contingency reserve. The legislation would provide for start-up funding of $2 billion for the administrative costs associated with establishing the public plan and require that those funds be paid back in amortized amounts over 10 years.

The legislation also would provide start-up funding for a contingency reserve in an amount sufficient to cover 90 days of claims. On an annual basis, collections of premiums would exceed benefit payments and administrative costs by the amount needed to cover the start-up costs and to maintain the contingency reserve.

Estimated Budgetary and Insurance Coverage Effects of H.R. 3962, Incorporating the Manager’s Amendment

According to CBO and JCT’s assessment, enacting H.R. 3962 would result in a net reduction in federal budget deficits of $109 billion over the 2010–2019 period (see Table 1). In the subsequent decade, the collective effect of its provisions would probably be slight reductions in federal budget deficits.4 Those estimates are all subject to substantial uncertainty.

The estimate includes a projected net cost of $891 billion over 10 years for the proposed expansions in insurance coverage. That net cost itself reflects a gross total of $1,052 billion in subsidies provided through the exchanges (and related spending), increased net outlays for Medicaid and the Children’s Health Insurance Program (CHIP), and tax credits for small employers; those costs are partly offset by $167 billion in collections of penalties paid by individuals and employers. On balance, other effects on revenues and outlays associated with the coverage provisions add $6 billion to their total cost.

Effects of H.R. 3962 on Discretionary Costs

CBO has not completed a comprehensive estimate of the discretionary costs that would be associated with H.R. 3962, incorporating the manager’s amendment. Total costs would include those arising from the effects of H.R. 3962 on a variety of federal programs and agencies, as well as from a number of new and existing programs subject to future appropriations.

The federal agencies that would be responsible for implementing the provisions of H.R. 3962 are funded through the appropriation process; sufficient appropriations would be essential for them to implement this legislation in the time frame it specifies. Major costs for programs subject to future appropriations would include these:

Costs to the Internal Revenue Service of implementing the eligibility determination, documentation, and verification processes for subsidies. Those costs would probably be between $5 billion and $10 billion over 10 years.

Costs to HHS (and especially the Centers for Medicare and Medicaid Services) of implementing the changes in Medicare, Medicaid, and CHIP as well as certain reforms to the private insurance market. Those costs would probably be at least $5 billion to $10 billion over 10 years. (The administrative costs of establishing and operating the exchanges, which are direct spending, are included in Tables 1 and 2.)

• Costs of a number of grant programs and other changes in Divisions C and D of the legislation. CBO has not completed a review of those provisions.

Because those costs depend on future appropriations, they are not counted for enforcement of Congressional “pay-as-you-go” procedures and are not included in Tables 1 and 2.

Funding for the proposed Public Health Investment Fund and Prevention and Wellness Trust would also be subject to future appropriation action. The bill would authorize appropriations totaling about $34 billion for those purposes (of which approximately $33 billion would be spent over the next 10 years). The Committee on the Budget has directed CBO to count such spending as direct spending for purposes of budget scorekeeping in the House of Representatives.

Private-Sector and Intergovernmental Impact

CBO and JCT have determined that the bill contains several private-sector and intergovernmental mandates as defined in the Unfunded Mandates Reform Act.

The total cost of mandates to the private sector, as estimated by CBO and JCT, would greatly exceed the threshold established by that act for private entities ($139 million in 2009, adjusted annually for inflation). The most costly mandates would be the new requirements regarding health insurance coverage that apply to the private sector.

The bill would require individuals to obtain acceptable health insurance coverage, as defined in the bill, and would require employers to either offer health insurance to their employees or pay an excise tax to the federal government.

The bill also would impose other mandates, including requirements on issuers of health insurance, new standards governing health information, nutrition labeling requirements, and limits on certain agreements between drug manufacturers for settling patent infringement claims.

CBO estimates that the total cost of intergovernmental mandates would be small and would not exceed the annual threshold established in UMRA for state, local, and tribal entities ($69 million in 2009, adjusted annually for inflation).

The new standards governing health information and nutrition labeling that apply to private-sector entities would also apply to governmental entities. In addition, the bill would preempt state and local laws that conflict with or are in addition to new federal standards established by the bill. Those preemptions would limit the application of state and local laws, but CBO estimates that they would not impose significant costs.

As conditions of federal assistance (and thus not mandates as defined in UMRA), the bill also would require state and local governments to offer health insurance to their employees and would require “maintenance of effort” payments associated with high-risk pools. New requirements in the Medicaid program also would result in an increase in state spending.

However, because states have significant flexibility to make programmatic adjustments in their Medicaid programs to accommodate changes, the new requirements would not be intergovernmental mandates as defined in UMRA.

I hope this information is helpful. If you have any questions, please contact me or CBO staff. The primary staff contacts for this analysis are Philip Ellis and Holly Harvey.

CBO Analysis Report (PDF)


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