Health Care Reform Bill Deficit Neutral: Health Care Reform Is Not

Democrats are citing the recent CBO scoring of the combination of S.3590 (the bill that passed the Senate in December) and H.R. 4872 (the Reconciliation Bill in the House) as proving that health care reform will reduce the national debt – it will not.  In order to get the bill to appear deficit neutral, Democrats had to do some interesting things in the bill such as terminating the entire guaranteed student loan program (which has what to do with health care?), make the fix to Medicare underpayments to doctors a separate bill (wait, isn’t that actually health care reform), push even more people on to Medicaid (which the states can’t afford),  and use investment taxes to pay for Medicare.

Terminating the Federal Family Education Loan program, otherwise known as Guaranteed Student Loans, means that middle-income families will now have to go to the government for college loans.  The government won’t be competing with anyone, have no reason to be more efficient or have better customer service than a competitor.  This is precisely why student loans were privatized decades ago.  It is interesting that how in September Obama said, “My guiding principle is and always has been that consumers do better when there is choice and competition. That’s how the market works.”

What’s more important is why the administration would want this.  Of course, the $85 Billion revenue from this industry is attractive to anyone that can mandate that it belong to them.  Additionally, by sticking this in the health care bill, the income from it can be used to offset the costs of health care reform even though it has nothing to do with health care at all.

I have received a few emails stating that the bill only terminates the guaranteed student loan program, but doesn’t advocate that the Federal government is taking it over.  I was able to find the following information on the Congressional Budget Office website:

Dear Senator Gregg:
As you requested, the Congressional Budget Office (CBO) has prepared two estimates of the budgetary impact of the President’s proposal to eliminate the federal program that provides guarantees for student loans and to replace those loans with direct loans
made by the Department of Education.

The amendment goes on to taking the Medicare reimbursement fix (a.k.a. ‘Doc Fix’) out of the health care bill -$347 Billion in costs disappear out of the reform bill.  This move is intended to buy doctor’s votes by literally paying them more money.  Although Medicare underpays doctors by a serious amount and the doctors have to pay their staff, how will this cut health care costs?  We will finally pay the fair fee for the services provided under Medicare, but this equates to higher costs for those services.  That’s exactly why the Democrats had to get that out of the health care reform bill.

The reconciliation bill also adds additional citizens to state-funded Medicaid with inadequate funds to help pay for them.  State budgets don’t have the option of creating money to pay for programs.  They must balance their budgets annually.  This forces State legislatures to cut other programs so they can pay for the gigantic new health care program.  This doesn’t make health care less expensive, it just makes it less expensive for the Federal government.  The States will be forced to raise taxes to deal with this additional unfunded (or underfunded) mandate.

The final action adds additional Medicare taxes on investment income.  This will impact small and medium-sized business greatly.  Rental income, for instance, will continue to be taxed as income and will now also be hit with a special Medicare tax.

If  just the face value of these omissions is evaluated, the bill is going to save $130+ Billion from the deficit.  It will add over $150 Billion in the first ten years.  The problem is that the costs of more people being shifted Medicaid, providers leaving their practices,  and the fact that under-payment of Medicare procedures will dramatically raise non-Medicare premiums .. this bill will not health care costs, and will not lower premiums.

*Update 3-19*  From Associated Press:

Congressional budget scorekeepers say a Medicare fix that Democrats included in earlier versions of their health care bill would push it into the red.

The Congressional Budget Office said Friday that rolling back a programmed cut in Medicare fees to doctors would cost $208 billion over 10 years. If added back to the health care overhaul bill, it would wipe out all the deficit reduction, leaving the legislation $59 billion in the red.

-and-

From an article Bloomberg.com:

Shelley Berkley said, “Every one of my hospitals is operating in the red” and the legislation as written “is not going to turn that around,” she said.

Meh, I don’t feel better for being right.