The Budgetary Impact Of Healthcare Reform Is Uncertain

With the Congressional Budget Office stating that the likelihood of its recent preliminary cost estimates being accurate are “50/50,” there are growing concerns about whether or not the …

With the Congressional Budget Office stating that the likelihood of its recent preliminary cost estimates being accurate are “50/50,” there are growing concerns about whether or not the recently passed healthcare legislation will reduce the deficit. Congress’ poor record on cost control, and uncertainty surrounding the outcome of the still unpassed “reconciliation bill,” will likely fuel concerns that the healthcare reform bill will further add to the US debt burden. See the following article from Money Morning for more on this.

When the comprehensive healthcare reform bill won approval from the House on Sunday, some of the swing lawmakers were won over by a new Congressional Budget Office (CBO) analysis showing the bill will slash the deficit by over $1.3 trillion over the next 20 years.

But at a time when the U.S. budget is already saddled with hefty doses of red ink, there’s a growing debate about whether the new bill will reduce the deficit or evolve into another entitlement program that will expand the country’s debt beyond already record levels.

Even though the bill – which President Barack Obama has hailed as the “most significant effort to reduce the deficit since the Balanced Budget Act” of the 1990s – will cost the federal government $940 billion over a ten-year period, the CBO said it will increase revenue and cut other costs by an even greater amount.

The U.S. budget deficit widened to a record $221 billion in February, up 14% from the $194 billion shortfall in February 2009, the Treasury Department said on March 10. The figures indicate the deficit this year will probably surpass the record $1.4 trillion in the fiscal year that ended in September.

In fact, no one really knows how the future will play out with the true cost of healthcare. The legislation is so complicated, with so many moving parts, that it’s virtually impossible to foresee how all its facets will interact and how this will change current estimates of revenues and costs.

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Even the CBO itself is hedging its bets, saying the chances its estimates are accurate are about 50/50.

“The budgetary impact of broad changes in the nation’s health care and health insurance systems is very uncertain…as a result, we believe that CBO’s estimates of the net savings that would result from the legislation have a roughly equal chance of turning out to be too high or too low,” CBO chief Doug Elmendorf wrote in a blog titled “Uncertainty in Estimates for Health Care Legislation.”

The Director’s blog goes on to note that the estimate is preliminary and based on “projections of direct spending and revenue effects that would result…without any further legislation (and) does not encompass discretionary spending, which would be subject to future action in appropriation bills.”

“Whether any of the provisions-and if so, which ones-might be changed in the future is not for CBO to judge.”

That will feed critics who are skeptical Congress can change its poor record on matters of cost control.

And there are still uncertainties about what final form the bill will take, as the reconciliation process will undoubtedly fuel more horse-trading on some unresolved details.

Senator Judd Gregg, R-NH, who will help coordinate the Republicans’ efforts, said his party will try to saddle the bill with “massive amounts” of amendments on unrelated issues from gun control to immigration.

If Republicans can get the Senate parliamentarian to agree with them even once, whatever ultimately passes the Senate will force the House to vote on the reconciliation bill, further complicating the effort.

“We’re ready to tackle that if that’s what they want to do,” Senator Richard Durbin, D-IL, said on CBS’s “Face the Nation” program. “We’re ready to deal with honest amendments. There will come a time when the American people say enough, this is about politics.”

This article has been republished from Money Morning. You can also view this article at
Money Morning, an investment news and analysis site.


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