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Hidden Costs In The Healthcare Reform Bills: How To Fake Budget Neutrality

President Obama said he will not sign a healthcare reform bill that was not budget neutral. You can view this statement at 3.50 minutes into this video clip.

The only way that can happen is if the healthcare expenses in both bills are hidden, unrealistic expense estimates are or expenses deflected to other areas in the budget. The Senate and House bill do both.

“ As history has proven, government health care programs end up costing much more than first promised.”

The most obvious gimmick is to delay healthcare benefits while collecting increased taxes. The Senate bill is designed to collect revenue from increased taxes and fees over 10 years but it delays paying any benefits and subsidies until year 5.

“So, the 2010-2019 estimate is not a full cost estimate of all provisions fully implemented and will certainly add significantly to the true cost of the bill.”

President Obama made a deal with the AMA to get its support for his healthcare reform bill. The deal was to eliminate the Medicare reductions for physician reimbursement that were due and deferred each year during the past 5 years. These deferred reimbursements reductions amounted to $200 billion dollars. The $200 billion in deferred fee Medicare reimbursement reductions was going to take place January 1, 2010

Harry Reid claims the elimination of reimbursement reductions to physicians would reduce the deficit. His claim makes no sense to me or the CBO.

However, in a letter released today, CBO estimates that combining the House bill (H.R. 3961) with the “Dr. Fix” bill (H.R. 3962) would actually “add $89 billion to budget deficits over the 2010–2019 period.”

Mr. Reid thinks he can get away with this claim. The claim of a deficit reduction reveals a profound disrespect for the electorate’s intelligence. It will backfire on the Democratic Party.

The deal with the AMA does not eliminate deep cuts in Medicare that have been proposed for next year. Each year congress has backed off and deferred the cuts to physicians. There is little reason to believe that Congress will not defer reductions next year or in the future.

Reasons for deferring the Medicare cuts in the past were sound. It is unwise to pay your primary vendors (physicians) less than the vendors’ expenses. They might be unwilling to provide services.

The healthcare reform bill should be attacking the abuses of all stakeholders. It should not focus on punishing the most vulnerable stakeholder (physicians).

The House and Senate bill’s budget includes a Medicare inflation rate of 2% per year for 20 years. This is unrealistic.

The calculations include a reduction in Medicare payment of 21%.

“The bill would put into effect (or leave in effect) a number of procedures that might be difficult to maintain over a long period of time. It would leave in place the 21 percent reduction in the payment rates for physicians currently scheduled for 2010.”

Historically these estimates have not been valid. It is especially invalid now when the economy is being primed by monetary infusions. America seems to be heading for a strong inflationary period. The CBO stated that the estimates are not meaningful

“However, a detailed year-by-year projection, like those that CBO prepares for the 10-year budget window, would not be meaningful because the uncertainties involved are simply too great. Among other factors, a wide range of changes could occur—in people’s health, in the sources and extent of their insurance coverage, and in the delivery of medical care (such as advances in medical research, technological developments, and changes in physicians’ practice patterns)—that are likely to be significant but are very difficult to predict, both under current law and under any proposal.”

In fact, the CBO’s estimates includes the additional taxes and fees proposed to make up a projected 900 billion dollar deficit. The deficit prediction appears to be a gross underestimation. The estimates of spending reductions are projected at $426 billion dollars. Receipts would be increased by the tax surcharge on high-income individuals plus other provisions by $572 billion dollars making the bill budget neutral. The other provisions are the rub. These other provisions are fees and hidden tax increases on the middle class.

“Over the 2010–2019 period, the net cost of the coverage expansions would be more than offset by the combination of other spending changes, which CBO estimates would save $426 billion, and receipts resulting from the income tax surcharge on high-income individuals and other provisions, which Joint Tax Committee (JCT) and CBO estimate would increase federal revenues by $572 billion over that period.”

The real cost of the House and Senate bills are likely to be more than the estimated $900 billion dollars. Both the CBO and JCT have admitted it is a low estimate. Some have guessed the real costs will be in the $3 trillion dollars range. The purpose of the healthcare reform bill was to provide universal coverage, provide affordable insurance and increase the quality of care. There are serious doubts that it will accomplish any of these goals.

Americans must demand the true facts.

Enough is Enough!!

*This blog post was originally published at Repairing the Healthcare System*

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