CBO Says Reform Bill Too Expensive (and 2 places to find funding)

The Congressional Budget Office has posted its analysis of the House democratic health care reform bill. The CBO says the reform bill will increase the federal budget deficit by over $1 trillion over the next 10 years. Interestingly, new revenues will decrease the deficit over the first five years, but the incremental costs of insuring more Americans and incremental payment to providers causes the deficit to balloon from 2014-2019.

The tally:

Deficit Reduction:

$196 billion – decreases in provider (not physician ) payments

$156 billion – decrease in payment to Medicare Advantage health plans

$30 billion – more rebates from pharmaceutical companies

Deficit Increase:

$245 billion – increased physician fees

The CBO document, which is brief, does not specify the other elements that will increase the budget deficit. There are substantial subsidies to allow low and moderate income Americans to purchase health insurance – and I expect that’s a large cause of the increased costs in the “out” years. Massachusetts’ legislature recently voted to deny subsidies to legal immigrants. The move is on hold due to a gubernatorial veto – but a strong indication that the cost of providing increased coverage is steep.

On another note, the New York Times had an insightful article on the front page today reminding us that not all screening tests are a good idea, and the 40 year “war on cancer” has let us down the path of increasing screening which in many instances (including prostate cancer) increases cost without a huge benefit to patients. There really are opportunities to decrease cost without sacrificing benefit.

John Iglehart had an article in the New England Journal this week about fraud and abuse. He points out that this represents at least $60 billion annually (3% of spending) – and notes that in the past Congress has been unwilling to fund efforts to root out fraud from the health care system.

(click on image to enlarge)