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If Medicare Cuts Proposed in Baucus Plan Are
To Be Believed, Long-Term Deficit Outlook Is
Over Twenty Years, Baucus Plan Is Deficit-Neutral Even Without Excise
Tax on “Cadillac” Health Insurance Plans
By Gerald Prante
Passage by the Finance Committee yesterday of Chairman Max Baucus’s health care proposal
came after receiving a boost from the Congressional Budget Office, which analyzed the plan and
reported that it would be deficit-neutral over ten years with $81 billion to spare.
One feature of the CBO report is its estimate of “savings,” i.e., cuts in current health spending,
mostly Medicare. The cuts are far more substantial than some may have expected, and they
might constitute a hurdle in themselves to future bills.
Cuts in Medicare and other health programs ratchet up quickly in the CBO score, reaching $93
billion in 2019 alone and totaling $404 billion between FY 2010 and 2019. Assuming those
Medicare cuts continue growing at the same rate after 2019, they could reach a total of $1.8
trillion over the next ten-year period, 2020–2029.
In other words, if Congress were considering a 20-year budget window instead of ten years,
Chairman Baucus’s proposed excise tax on Cadillac health plans would not be necessary to pay
for the plan. Even without those revenues, the spending cuts would probably be sufficient to cut
the deficit. (The other smaller tax hikes and revenue raisers would remain.)
Some critics question the validity of the deficit-neutral finding over the ten-year budget window.
Their doubts center around the timing of Chairman Baucus’s various provisions. His new taxes
and spending cuts are scheduled to kick in years earlier than the new health benefits. And indeed,
over the ten-year budget window that the CBO is obliged to use (FY 2009–2019), the three-year
disparity between the onset of tax collections and spending cuts (immediate) and new health
benefits (three-year delay) is a bit of an apples