How Health Care Reform Reduces the Deficit in 5 Not-So-Easy Steps

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**ShumaGorath**

http://www.newsweek.com/id/235246/page/2

How Health Care Reform Reduces the Deficit in 5 Not-So-Easy Steps
Americans think the bill is too expensive because they don't understand its cost controls.

It's hard to overstate how important the Congressional Budget Office (CBO)—which makes the official judgments on how much bills cost and save—is in Washington. "I consider CBO God around here," Sen. Chuck Grassley, ranking Republican on the Finance Committee, recently said.

But that's a faith peculiar to Washington, D.C. The rest of the country doesn't know what the CBO is, and it doesn't care. "Washington may live and die by the pronouncements of the Congressional Budget Office," wrote the pollsters Doug Schoen and Scott Rasmussen in the Wall Street Journal, "but 81 percent of voters say it's likely [health care reform] will end up costing more than projected."

That's left Democrats in a worst-of-both-worlds situation: They've built a bill that Washington's toughest scorekeeper says will cut the deficit by more than a trillion dollars over 20 years. They're getting attacked for the taxes and Medicare reforms that save all that money. But the country doesn't believe the savings are real.

One of the problems Democrats have had is that it's very easy to understand the one thing the bill does to spend money—purchase insurance for people who can't afford it—and considerably harder to explain the many things it does to save money. Another is that a lot of the savings have to do with changing how medicine is practiced, which people are less familiar with than how insurance is purchased.

But the fact that the cost controls are complicated and numerous doesn't mean they're absent, or that they won't work. Here's a guide to a few of the bill's best ideas, and how they work:

Create a competitive insurance market:
This is the bill's first, and most important, step. Right now, the insurance market's version of competition is pretty brutal. Companies compete to avoid the sickest people and sign up the healthiest people. Offering the best coverage for the lowest cost isn't much of a priority, because most consumers don't know whose coverage is best, and the ones who really do know are probably sick customers who spend their days researching this stuff.

Outlawing the bad kind of competition while enabling the good kind, which the bill does, is more than just a humanitarian measure. It's a cost control. The insurance "exchanges" imitate the market in which federal employees (including congressmen) purchase their health care insurance. Participating insurers can't discriminate based on pre-existing conditions, they have to answer to regulators if they attempt to jack up premiums, and consumers will be able to rate their insurers, a rating that everyone else will see when shopping for their insurance.

If all goes well, consumers will be able to log onto the exchange's Website, compare insurance plans, and choose their favorite. That means insurers will have to compete for customers. As any free-market conservative will tell you, that should drive prices down and quality up. If it doesn't, insurers will have some annoyed legislators to answer to: The bill says congressmen and their staff members need to buy their insurance from these exchanges, too.

The Medicare Commission:
The next cost control worth mentioning is an effort by Congress to solve the problem of, well, Congress. Medicare's cost problem is, in many ways, a political problem: Saving money means cutting someone's profits or someone's benefits, and politicians are afraid to do either.

Enter the Independent Medicare Advisory Board. Modeled off of the highly-respected (but totally toothless) Medicare Payment and Advisory Commission, IMAC is a 15-person board of independent experts chosen by the president, confirmed by the Senate, and empowered to cut through congressional gridlock. IMAC will write reforms that bring Medicare into like with certain spending targets. Congress can't modify these proposals, it can't filibuster these proposals, and if it wants to reject them, it needs to find another way to save the same amount of money. Making the process of passing tough reforms easier is the single most important thing you can do to make sure tough reforms actually happen.

A tax on "Cadillac plans":
The least popular, but most direct, cost control is the tax on expensive, employer-provided coverage. Today, the average employer who offers insurance pays more than 70 percent of a worker's premiums, all of it tax-free. This amounts to an annual $250 billion subsidy for private insurance for people with good jobs. But it's not just the size of the subsidy; it's how we use it that matters. People have their employers pay for their health-care insurance, which means individuals don't know how much their insurance really costs and don't have as much incentive to keep those costs down. Imagine the pressure for cost control if the 70 percent that employers pay were coming out of our own pockets, instead of quietly coming out of our wages.

In 2018, the proposed excise tax on so-called "Cadillac plans" slaps a 40 percent tax on every dollar spent on an insurance plan above $27,500 annually. So if your plan costs $27,600, the final $100 bucks would be taxed (technically, the insurer pays the tax, but it'll pass that onto your employer). But the idea isn't that people will pay this tax. It's that they, or their employers, evade it by choosing insurance that holds its costs down more aggressively. That gives insurers who hold costs down a competitive advantage against insurers who don't. because those who don't are not only more expensive, but also paying a hefty tax on their excess spending.

Medicare "bundling" programs:
The most obviously illogical part of our current health care system is that we pay doctors the way we pay car dealers: They get more money for every item they sell. But while we aren't afraid to ignore a car dealer's recommendations, we are afraid to disagree with our doctors. As you'd expect, this pushes costs higher.

The health-care bill seeds Medicare with many experiments to change this status quo, the most immediately promising of which are the "bundling" programs. Instead of getting paid for everything they do to help a diabetic, hospitals will get paid once for treating that person's diabetes and all related conditions over a certain period of time. If this leads to lower costs and doesn't harm patients, it will be expanded. That would be the beginning of the end of paying for quantity of treatment, and the beginning of paying for quality of treatment.

Changing the politics of reform:
Republicans and Democrats both agree that we need more cost control in the health-care system. But politicians don't like to actually cut costs, because those votes reduce benefits and make people angry. So we've played a game in the past: We passively control costs by letting people become and stay uninsured, or by letting their insurance deteriorate and cover less, because those things don't require a vote in Congress.

But because the individual mandate in the bill brings everyone into the insurance market and the subsidies for those who can't afford insurance on their own put Washington on the hook for costs, Congress will have to get serious about holding costs down in the system. The alternatives, for lawmakers, are high costs infuriating constituents who're being forced to buy something they can't afford, or yawning deficits forcing them to vote to take subsidies -- and thus health-care coverage -- away from people who currently have it. The days of letting inertia win the day and watching the system fall apart on its own are over.

There's more, of course. Five is just a good round number. The bill's basic theory is to try pretty much everything in the hopes that some of it works out. The net effect is to make reform a continuous, rather than occasional, process, with different cost cops patrolling different beats. Insurers will have to work hard to stay a step ahead of the excise tax because employers won't want to buy plans that trigger it. The industries that provide medical care and technologies will have to hold their costs down because they don't want to become a target for the Medicare Commission. Hospitals will need to make sure they don't spend more than their competitors because they'll lose money under bundling.

Until now, our health care system has had few internal cost controls and the comforting knowledge that Congress doesn't have the gumption to pass any. No longer. If the bill passes, it's change the health-care industry will have no choice but to believe in.

© 2010

**Frazzled**

I for one praise our new Medical Overlords, and despite their inability to do common math, am sure they are 100% correct in that this will reduce the deficit. I am sure that if we just believe hard enough in Dear Leader, it will all come to pass.

**ShumaGorath**

Whelp, now that fraz is done trolling a thread (How is he a mod?) we can get back to the topic at hand.

It's just too bad he had to use a giant image to further show his ample intelligence. I mean, he must be a genius he's clearly smarter than the CBO, whose job it is to count how much this thing would cost. Fraz managed to do it in his spare time by gleaning facts from sean hannities radio show.

**Frazzled**

Its not trolling if the initial post is trolling.

Of course I'll let the personal attacks slide 'cause we all know, deep down you know I'm right, and it wakes you up screaming.

One easy real point. The CBO only scores based on the assumptions given to it. It HAS to use those assumptions. Even when, in this case, those assumptions or not sane.

**ShumaGorath**

Frazzled wrote:Its not trolling if the initial post is trolling.

Of course I'll let the personal attacks slide 'cause we all know, deep down you know I'm right, and it wakes you up screaming.

Exactly how was a simple article an attempt at trolling? Seriously, how are you a mod? Like, what do the other mods think of how you act? I mean if this is a "Trolling thread" what the hell is "Its a dark day for America"?

One easy real point. The CBO only scores based on the assumptions given to it. It HAS to use those assumptions. Even when, in this case, those assumptions or not sane.

Not sane on what grounds.

**Frazzled**

Generally the mods question my sanity when we're sober enough to think about, but then again unless I am posting as a Mod I'm not posting AS A MOD. besides another hit from the pipe and none of the Mods care. Meth. By Americans, For Americans.

EDIT: In the other sections I'm pure Mod generally. in the dungeon of the OT I Mod only when needed. Otherwise I am just a sweet bunny rabbit.

The fact you don't know the grounds is itself a difficulty.

**ShumaGorath**

Frazzled wrote:The fact you don't know the grounds is itself a problem.

Why should I? It's not like you do either. That much is clear from your posts which contain no content, examples, quotations, names, locations, anecdotes, or really much else that could be confused for fact. It's mostly just derogatory rambling and flaming. Then you come in, post a troll post and say that my article is an attempt at trolling.

Again I ask, how are you a mod?

**Frazzled**

http://blogs.investors.com/capitalhill/index.php/home/35-politicsinvesting/1524-five-reasons-the-cbo-figures-are-phony

The Congressional Budget Office’s preliminary “score” says the health care overhaul will cost $940 billion over the first 10 years, saving $138 billion over that time. But the CBO must assess legislation as written, rather than whether it will actually be carried out. Or, as the Economist put it, “The CBO is required to pretend to believe many impossible things before breakfast.”

1. Medicare cuts

The Senate health care bill relied heavily on unprecedented cuts in Medicare spending increases. If implemented, this would have a huge impact on seniors’ care. But Congress has always balked at Medicare cuts. (See No. 3).

2. Delayed start

To make the budget math work, Democrats plan on delaying the start of subsidies and other costly provisions for several years. (The bill spends just $17 billion through 2013). The true 10-year cost is far higher.

3. The “doc fix” is excluded

The Sustainable Growth Rate imposes automatic cuts in Medicare payment rates to doctors.

For several years, fearing a revolt by doctors — and seniors — Congress has suspended those cuts. The original draft of the House health care bill included a permanent “doc fix.” But that ballooned deficits, so Democrats dropped it, even though everyone knows Congress isn’t going to slash doctors’ rates. The CBO has estimated a “doc fix” would cost $247 billion over 10 years.

4. Student loans are included

Doctors’ payments are excluded from the health bill, but major student loan program changes are included? Yep. The reconciliation bill will end student loan subsidies to lenders. The CBO says this will save $19.4 billion over the first decade, accounting for virtually all of the $19.8 billion in deficit reduction from the health care reconciliation bill. Reconciliation bills must cut the deficit by at least $1 billion. So, without the non-health care items, the health care reconciliation bill would not pass muster.

5. It’s a CLASS act

In the Senate health bill, a new, voluntary long-term care insurance program called CLASS accounted for some $72 billion of the deficit reduction. The Community Living Assistance Services and Supports program is supposed to be deficit-neutral long-term. But Democrats are counting the upfront premium surplus in the short term and ignoring the significant operating deficits after 2029. Update: Democrats also are counting on projected additional Social Security revenues from payroll taxes on higher wages in lieu of lower health benefits. Again, those benefits have to be paid out.

But wait, there’s more! Let’s assume that the cost savings materialize as planned. It still makes the long-term fiscal outlook worse. Why? Democrats are using up a lot of tax hikes, spending cuts and upfront payment just to get barely better than deficit-neutral. That leaves future lawmakers less scope to bring the nation’s finances into order.

**Necros**

Frazzled wrote:Of course I'll let the personal attacks slide 'cause we all know, deep down you know I'm right, and it wakes you up screaming.

I think for the first time in my fragile little life, I need to sig something! that one just has so many uses...

**Frazzled**

The honor, is to serve.

**Empchild**

Though I understand both view points frazz is rather correct in that a CBO, much like their counterparts CIO'S, COO'S, and DAA'S generally go off of the paperwork their managers hand to them. This is why they become managers as they are trusted ergo I would say the fault lies more in middle management then the top. If I were to hand work to my DAA and it was horrendous then I would be fired as an IAM since they trust me to know and do my job. Also though what does him being a mod have to do with anything. I know your answer so don't actually respond to that part.

**MagickalMemories**

So, in other words, it WILL save all of the projected money and do all those great things it promises unless our "benevolent" overlords in Washington do things like NOT follow through, block certain actions, etc.
Right.

So, as long as the Republicans (who, maturely, have promised not to cooperate with Democrats on ANYTHING -regardless what it is- for the rest of the year because they're mad about this) and Democrats who voted against it don't stall or undermine the rest of the process, it WILL save money and be better for everyone in the long run.
Gotcha.
So, now's the time for Republicans to prove the Democrats wrong by trying to purposefully make this thing fail so they can be "right," rather than giving it a chance to help those of us who need it.

Yay, politics.

The idea that Republicans criticize this as Socialism and attack it because of the supposed detrimental effects it will have on Medicare/Medicaid is ridiculous.
"We don't want this Socialist policy to mess up Medicare ( which is just as Socialist)!"

Eric

**Frazzled**

Thats not the argument. You're confusing your talking points.

Medicare is being eviscerated by $500BN. This money is going to help support the uninsureds. Call it what you want but that is happening. They are robbing citizens who worked hard all their lives and rely on Medicare to fund this powergrab. Its an absolute.

**Empchild**

I am not a republican by any means what so ever, but ya it is socialism. In Democracy the government is not to control the banks(to late), The healthcare system(now to late), heck they have now taken over students loans with all publice colleges. If you want to get a loan from now on the Gov't has to approve it. This is the death of our nation and look at all other countries that have health care like this. Their tax rates were no were near as low as our was. Our tax rates made it so people could affoard insurance. Really this bill will bankrupt us even further, and for those who don't think so just wait you will see.

**Vindicator#9**

I agree with Frazz and Empchild on this 100%. Dont forget they own two out of the three "American" automakers!

**reds8n**

Frazzled wrote:Thats not the argument. You're confusing your talking points.

Medicare is being eviscerated by $500BN. This money is going to help support the uninsureds. Call it what you want but that is happening.

Lousy Govt. helping people.

**Fateweaver**

Probably not as bad as China owning 2 out of 3 "American" automakers.

The point people are missing with this 2700 page of shadily/illegally passed documentation is the fact the government is telling me I HAVE to buy coverage by 2014 or pay a fine. That is bs anyway you slice it. I don't want "Uncle Obama" telling me HOW to spend my money. If I want to protect myself by buying healthcare coverage that should be my choice. If I want to risk having a $200k medical bill because I suffer a stroke at 34 years of age with no insurance to cover it that should be on MY shoulders to worry about.
If I want to spend the money on hookers and blow that should be my choice (both illegal but you get my point). The HCR Bill ONLY hurts those who are poor/middle class.

If I was a billionaire I'd be annoyed at this bill. Not pissed but annoyed. Bill Gates does not NEED medical insurance. His son breaks an arm the $5K doctor bill for him would be like us going to a candy store and buying a single $.05 piece of candy. His wife having to undergo surgery at an expense of say $200k would be like us walking out of that same store with $.50 worth of candy. Millionaires and Billionaires just aren't going to care about hospital/cost of medicines or anything else that ails them. All those people worry about are the DOW and NASDAQ.

If buying insurance was still a choice and not a requirement than there would have been a lot less opposition to it. It was shadily, if not illegally passed, because the Administration knew it was never going to pass fairly so they (questionably) broke ethics laws and or the very least bent them, to pass it.

Of course we all know if Bush had done the same thing it would for sure have been illegally passed. His wars he "started" were more legal than this stack of asswipe that Obama passed into law.

**Frazzled**

reds8n wrote:
Frazzled wrote:Thats not the argument. You're confusing your talking points.

Medicare is being eviscerated by $500BN. This money is going to help support the uninsureds. Call it what you want but that is happening.

Lousy Govt. helping people.

What part of TAKING MONEY FROM MEDICARE can be in any way confused with helping people?

**Fateweaver**

Frazzled wrote:
reds8n wrote:
Frazzled wrote:Thats not the argument. You're confusing your talking points.

Medicare is being eviscerated by $500BN. This money is going to help support the uninsureds. Call it what you want but that is happening.

Lousy Govt. helping people.

What part of TAKING MONEY FROM MEDICARE can be in any way confused with helping people?

It's the Robin Hood philosophy. Robin Hood HELPED the poor by screwing over the rich. Taking from one person and giving to another is okay in some peoples books.

**Frazzled**

Except people on Medicare generally are the poor.

**Vindicator#9**

I see what you did there Fateweaver and a very good point too.

**Fateweaver**

Oh I know it Frazz. Pointing out that some people might see the Medicare coffers too full so want to empty them.

In the liberal mind, taking from the poor to help someone else who is poor is a good thing.

**Empchild**

You know it is rather stupid all around because people need to realize...if you go to the ER they cannot refuse treatment of you and trust me somone will pick up your bill. That said insurance if you know how to shop around can be as low as 60 bucks a month with a $10.00 copay. Here in mass we have mandatory insurance and it is no were as bad as what the gov't is proposing. Now my taxes will hike up for me to pay for some illegal on the otherside of the country. The gov't is slowly taking more control and damn it people I WORK FOR THEM!!! This is a horrible idea instead of IDK helping create civil service jobs our illustrious leader is going to go down in history as sinking us further in debt then that idiot Goerge Bush(I'm sorry frazz I know you Texans love him).

**reds8n**

Frazzled wrote:
reds8n wrote:
Frazzled wrote:Thats not the argument. You're confusing your talking points.

Medicare is being eviscerated by $500BN. This money is going to help support the uninsureds. Call it what you want but that is happening.

Lousy Govt. helping people.

What part of TAKING MONEY FROM MEDICARE can be in any way confused with helping people?

Well how else are they going to fund the Death Panels ? And all the compulsory abortions. And all the other lies people keep saying that this will do or lead to...

..but, from what I've read and heard this side of the pond : the medicare system as was, was going to wind up totally insoluable and more broken than the old IW list by 2017. With this current bill and changes this prevents for the best part of anotehr decade or so. NOt ideal I'll grant you, but, given the general hoo ha and catfighting even getting people to the table in the first place to talk about the problems that's not bad going IMO.

More pertinently, no one was offering up or doing anything better. Sure, especially given the nearly unimaginable sums involved, it s big risk/gamble... but so's any long term commitment or spending plan.

**Frazzled**

George Bush Sr. you're on point Empy. The Shrub? not so much...

If only more people had voted for Nader...

**ShumaGorath**

Frazzled wrote:Thats not the argument. You're confusing your talking points.

Medicare is being eviscerated by $500BN. This money is going to help support the uninsureds. Call it what you want but that is happening. They are robbing citizens who worked hard all their lives and rely on Medicare to fund this powergrab. Its an absolute.

So it's moving money away from people with chronic problems, that give nothing to the nation and economy and into a younger workforce that does. I don't see the huge moralistic issue here. One group had it's cake and was eating it, the other group had no cake. The concept of gains and losses aren't moralistic. The cake is just split between both now. Amusingly you seem to love defending people on medicare for paying for it all their lives, despite acknowledging in the past that the program was unsustainable and that people currently paying into it would likely never be able to benefit from what they pay.

**Major Malfunction**

Frazzled wrote:
reds8n wrote:
Frazzled wrote:Thats not the argument. You're confusing your talking points.

Medicare is being eviscerated by $500BN. This money is going to help support the uninsureds. Call it what you want but that is happening.

Lousy Govt. helping people.

What part of TAKING MONEY FROM MEDICARE can be in any way confused with helping people?

The part where it is The Anointed One™ doing the taking. Since The Anointed One™ has deemed it necessary, it is Holy, Good and Just.

And if you disagree with The Anointed One™ you are a racist homophobic redneck hater. And worse than Hitler.

**Fateweaver**

Sweet. I earned a new title.

I've not agreed with anything the AO has done.

Shuma, it's my understanding you are still in HS. What school do you go to where you can spend all day on dakka because I got robbed when I was in HS? I had to actually LEARN.

(Not taking a stab at your learning comprehension but if I'm right you are too young to have a world view of anything going on outside your school walls).

**MagickalMemories**

Fateweaver wrote:Probably not as bad as China owning 2 out of 3 "American" automakers.

The point people are missing with this 2700 page of shadily/illegally passed documentation is the fact the government is telling me I HAVE to buy coverage by 2014 or pay a fine. That is bs anyway you slice it. I don't want "Uncle Obama" telling me HOW to spend my money. If I want to protect myself by buying healthcare coverage that should be my choice. If I want to risk having a $200k medical bill because I suffer a stroke at 34 years of age with no insurance to cover it that should be on MY shoulders to worry about.
If I want to spend the money on hookers and blow that should be my choice (both illegal but you get my point). The HCR Bill ONLY hurts those who are poor/middle class.

I'm going to take "you" out of the equation and make it "someone," so it doesn't seem personal.
So, someone decides they want to risk going without health insurance and has that stroke -or whatever- and a $200,000 bill.
Awesome. Good for them.
That would be fine, if that was where it stopped.
What's this, though? That person also didn't have any money, and they're filing for bankruptcy so they don't have to pay the bills?
Awesome. Now, not only do the uninsured get to worry about their own impending uninsured health issues, but they get to pay for Joe Bankruptcy's unpaid bill, due to the inflated charges next year because so many people filed bankruptcy to avoid medical bills. I'm tired of paying for slackers.

Fateweaver wrote:If I was a billionaire I'd be annoyed at this bill. Not pissed but annoyed. Bill Gates does not NEED medical insurance. His son breaks an arm the $5K doctor bill for him would be like us going to a candy store and buying a single $.05 piece of candy. His wife having to undergo surgery at an expense of say $200k would be like us walking out of that same store with $.50 worth of candy. Millionaires and Billionaires just aren't going to care about hospital/cost of medicines or anything else that ails them. All those people worry about are the DOW and NASDAQ.

If buying insurance was still a choice and not a requirement than there would have been a lot less opposition to it. It was shadily, if not illegally passed, because the Administration knew it was never going to pass fairly so they (questionably) broke ethics laws and or the very least bent them, to pass it.

Billionaire's have other worries. Your assessment about the cists are about right -until someone they love comes up with a chronic disease, costing hundreds of thousands of dollars a year... every year... because, that much money is painful for even them. if you think millionaires don't care about that stuff, I know some people you should have a talk with. Trust me. They care.
The only thing that's unfair about this bill (IMO) is the cost to our nation's richest. They're footing the majority of the bill for this. I don't believe in that. I believe that taxes should be universal. it should be a standard percentage, totally independent of how much you make a year.

Your argument re: opposition isn't correct, either, IMO. Anything Democrats want to do is going to be opposed by Republicans. The reverse is true, as well. The only time you're going to see cooperation is in extreme circumstances, like war (occasionally) or if one party introduces a bill that is in favor of something that is a favored topic of the other party (not that it would happen, though). I'm not talking about small numbers, like a dozen or less, I'm talking about true bipartisan actions.

**Frazzled**

ShumaGorath wrote:
Frazzled wrote:Thats not the argument. You're confusing your talking points.

Medicare is being eviscerated by $500BN. This money is going to help support the uninsureds. Call it what you want but that is happening. They are robbing citizens who worked hard all their lives and rely on Medicare to fund this powergrab. Its an absolute.

So it's moving money away from people with chronic problems, that give nothing to the nation and economy and into a younger workforce that does. I don't see the huge moralistic issue here. One group had it's cake and was eating it, the other group had no cake. The concept of gains and losses aren't moralistic. The cake is just split between both now. Amusingly you seem to love defending people on medicare for paying for it all their lives, despite acknowledging in the past that the program was unsustainable and that people currently paying into it would likely never be able to benefit from what they pay.

1. Medicare was a contract. The people on it are of moderate means. If you think this group "had its cake and was eating it" I won't say you don't have a brain cell in your head, but will say you need further education in this area.

2. they were productive. You have no proff the other group is. More importantly group #1 votes. A lot. For Fun.