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View Diary: BREAKING: Dems offer largest deficit-reduction bill since '93 (248 comments)

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  •  You missed hundreds of billions in savings. (4+ / 0-)

    Here's an interesting tidbit.  According to the CBO report, the number of people on Medicaid and CHIP drop from 40 to 35 million, despite wider program eligibilty.  In effect by making it possible for people to afford private insurance, we are privatizing 12.5% of the head count.

    But it gets better.

    According to Table 2 of the CBO report, the Federal spending on these programs goes up by 434 billion even though the net effect of the bill is to decrease the Federal deficit by 138 billion and even though the head count of program users drops.   There's seven billion dollars of additional direct spending, largely bringing physician reimbursements up to market rate, but that hardly accounts for the entire 434 billion increase when we should see a net decrease, all things being equal.

    Here's where the money is going.  Medicaid and CHIP are jointly funded by states and the Federal Government.  Under the president's plan, the Federal share of CHIP program costs goes from 70% to 93%, and of Medicaid from 57% to 90%.  Let's do some simple math. The 2008 cost of the Medicaid program was 204 billion per year.  An increase of the Federal share of that program from roughly 60% to 90% amounts to roughly 60 billion dollars a year in savings to the states.  This kicks in gradually, so the net effect for states over the first decade is "only" a bit more than four hundred billion.

    Of course the Republicans are talking about challenging these reforms on a state by state basis. If you have a Republican governor and legislator and they're successful at blocking reform in your state you'll probably have to offset your higher insurance costs with greater tax subsidies to continue attracting business. You might not see much effect on your state budgets.

    So to recap: If we account for both Federal and State outlays in Medicaid and CHIP, the net deficit reduction for all levels is more like half a trillion dollars than 138 billion.

    I've lost my faith in nihilism

    by grumpynerd on Fri Mar 19, 2010 at 08:51:02 AM PDT

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