Obama's health care reform bill allegedly cuts the deficit by $1.3 trillion over 20 years while ensuring coverage to 95% of Americans. Sound too good to be true? That's because it is. Here's why:
- The report assumes that the "Cadillac" health care tax will actually be implemented in 2018 as is, and indexed to CPI. Given the rate of health care inflation, more and more Americans' plans (especially family health care plans) will run up against this tax in the second decade. CBO scores this as providing huge new revenue (this is one of the reasons cost savings are allegedly so huge in the second decade).
This sets up an AMT waiver situation, where future Congresses will be forced to choose between waiving this tax, or attempting to collect 40% taxes against millions of Americans' health care plans. Does anyone really believe future Congresses won't raise and/or eliminate the "health tax" altogether?
- The bill provides for full federal funding for new Medicaid beneficiaries for the first few years, and then cuts aid to the states by 10% in the out years. Does anyone think a future Congress will allow a sudden, huge tax increase on the states? Does anyone imagine that governors won't be shouting down epithets on their congressional delegation to pay for the new entitlement program they created (and are collecting revenue for)?
- The bill limits the growth in future tax subsidies to buy insurance to CPI. Does anyone really believe health care inflation will suddenly fall from 3x CPI to CPI? Does anyone really believe Congress won't be tempted to increase the tax credits and/or reduce the penalty for going uninsured?
- The new reconciliation bill raises the penalty on the uninsured so that most will pay 2.5% of income for failure to obtain insurance (while at the same time lowering the flat payment that only the poorest will pay). Does anyone believe this will provide a significant source of revenue to the government and that future Congresses won't be pressured to lower/eliminate this penalty?
I know the fog of war has descended across the progressive political community, with everyone saying we need a "win" on HCR. I know privately a lot of progressives think they'll "fix" the bill later on - and they'll have to. The current bill is completely unrealistic and unsustainable.
It's a mistake to pretend that this bill really does what it says it does. By avoiding real reform, this bill does nothing more than put off the hard choices for a future (likely a more conservative) Congress.
EDIT: In response to some of the comments below, I'm not sure how this will play out. I'm 100% positive this bill will cost way more than expected and will increase future deficits. Some feel that it doesn't matter, because no future Congress will be able to repeal an entitlement, even when Washington is drowning in countless trillions of red ink.
But what's to stop them from blaming that red ink on HCR (as opposed to the real culprit: health costs)? Or even easier, the bill doesn't provide sufficient subsidies in the out years to buy health insurance: a future conservative Congress could just avoid raising those subsidies while at the same time eliminating the penalty for not having insurance. Bundle the whole thing up and call it "tax relief" for the American people.
Now, progressives feel they can pass it now and fix it later with a public option to help cost containment, increased subsidies and killing the health care tax. I'm not so confident that's how this is going to play out down the line, though. I just can't see future Congresses making all these liberal fixes to the bill vs. unraveling after it doesn't achieve these projected cost savings.
By avoiding real reform, this bill threatens its own survival down the line as costs keep piling up.