The Senate Finance Committee's amended proposal for the America's Healthy Future Act of 2009 would expand coverage to uninsured individuals, increase spending while also increasing revenues, and ultimately reduce the federal deficit, according to a joint report by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT).
Tax credits and subsidies provided through the exchanges, Medicaid and the Children's Health Insurance Program (CHIP), and small employers will result in a cost to the government of $829 billion during the time period from 2010 to 2019 as a result of the proposals, the CBO and JCT estimated. These costs will be offset by $201 billion in revenues from the excise tax on high-premium insurance plans, and $110 billion in net savings from other sources, including revenues from penalty payments from uninsured individuals, penalty payments by employers whose workers receive subsidies through the insurance exchanges, and other budgetary effects, such as tax revenues associated with the expansion of federally subsidized insurance, resulting in a total cost of $518 billion over the time period to implement the program.
Certain provisions in the amended proposal would change payment rates and payment rules in Medicare, Medicaid, CHIP, and other federal health programs that would reduce direct spending by $404 billion during the same time period. Those savings would result from: (1) permanent reductions in the annual updates to Medicare's payment rates for most services in the fee-for-service sector; (2) setting payment rates in the Medicare Advantage program; and (3) reducing Medicare and Medicaid payments to disproportionate share hospitals.
The report estimates that the proposal would result in a net reduction to the federal budget deficit of roughly $81 billion during the time period. This number is achieved by adding an estimated increase of $196 billion in federal revenues during the time period to the $404 billion in Medicare and Medicaid savings, and subtracting the costs of $518 billion.
A Medicare Commission would be established to recommend changes to the Medicare program to limit the growth rate in spending. The commission's recommendations would be automatically effective, unless subsequent legislation dictated otherwise. From 2015 to 2018, if the Medicare trustees predict that Medicare's spending per beneficiary would grow more rapidly than a measure of inflation, then the commission's recommendations would be required, which would likely focus on reductions in subsidies for non-Medicare benefits offered by Medicare Advantage plans, reductions in subsidies of Part D premiums, and changes to payment rates or methodologies for services in the fee-for-service sector for certain providers.
Beginning in 2012, the Director of the Office of Management and Budget would be required to certify annually whether the legislation provisions are projected to increase the budget deficit in the coming year. If so, then: (1) he or she would be required to notify Congress, and (2) exchange subsidies would be automatically adjusted to avoid the estimated increase in the deficit for that year.
Insurance coverage
The proposal contains several measures to increase the number of legal U.S. residents who have health insurance. The report estimated that, when the program is fully implemented, the number of uninsured nonelderly individuals would be 29 million, increasing from 83 percent to 94 percent the percentage of Americans with health insurance coverage. Among other things, the amended proposal would: (1) require residents to obtain insurance and impose a financial penalty on residents who do not, beginning July 2013; (2) establish new insurance exchanges and subsidize the purchase of health insurance through those exchanges for individuals and families who fall within a certain income bracket; (3) expand Medicaid eligibility to nonelderly people with incomes below 133 percent of the federal poverty level, beginning 2014; (4) require states to maintain current coverage levels for children under Medicaid and CHIP through 2019; (5) penalize firms with more than 50 workers that did not offer coverage for full-time workers who obtained subsidized coverage through the insurance exchanges; (6) provide tax credits for small firms to compensate up to half of their contributions toward health insurance premiums; and (7) impose an excise tax on insurance policies with relatively high premiums, beginning in 2013.
Reaction
Following the release of the report, Committee Chairman Max Baucus (D-Mont.) remarked on the Senate floor that the joint report confirms that the measure is fully paid for and that it reduces the federal budget deficit. He called the bill a smart investment on the federal balance sheet saying, It is an even smarter investment for American families, businesses and the economy.
Finance Committee Ranking Member Charles Grassley (R-Iowa) did not appear to be swayed by the report. He told reporters that the measure would increase costs on Americans by requiring them to have insurance. Senate Minority Leader Mitch McConnell (R-Ky.) called the report's figures showing the measure reducing the deficit by $81 billion irrelevant, and charged that the bill costs too much and contains $500 billion in cuts to Medicare, higher premiums, and higher taxes.
Separately, a group of 157 House Democrats sent a letter to House Speaker Nancy Pelosi (D-Calif.) saying that they object to the tax on high cost insurance plans. The lawmakers, led by Rep. Joe Courtney (D-Conn.), said the excise tax would be passed on to consumers. “This letter should send a clear signal to House leadership that an excise tax on health plans will be an additional and substantial tax burden on working families,” Courtney said.
CCH Chicago Bureau and CCH Washington Bureau, Oct. 8, 2009
For more information on this and related topics, consult the CCH® Medicare and Medicaid Guide.
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