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How the Health Care Bill Is Financed

1 min readBy: Gerald Prante

Today, we posted a graph showing how the $938 health care bill that was passed by Congress and signed into law by Pres. Obama is set to be financed over its first 10 years.

Because we did it in the form of a pie chart, we aggregated many of the smaller categories into larger categories that were similar to one another. This was especially true for the “Cuts to Medicare” and “Other Revenue Provisions” category.

In this blog post, I provide a more detailed look at the major components of these two categories, using CBO and JCT numbers.

Most of the cuts to Medicare are reductions in payments to providers of Medicare. The proponents of such cuts essentially argue that the providers are currently earning large rents from their services (i.e. getting paid far in excess of what they would be willing to actually accept). Critics of these cuts contend that many of these providers are “on the margin,” and will thereby stop treating Medicare patients as a result of these cuts.

Main Components in Net Cuts to Medicare ($416.5 billion)

Reductions in annual updates to Medicare FFS payment rates = $196 billion cut
Medicare Advantage rates based upon fee-for-service rates = $136 billion cut
Medicare Part D “donut hole” fix = $42.6 billion increase
Payment Adjustments for Home Health Care = $39.7 billion cut
Medicare Disproportionate Share Hospital (DSH) Payments = $22.1 billion cut
Revision to the Medicare Improvement Fund = $20.7 billion cut
Reducing Part D Premium Subsidy for High-Income Beneficiaries = $10.7 billion cut
Interactions between Medicare programs = $29.1 billion cut

Main Components in Other Provisions ($149 billion)

Associated effects of coverage provisions on revenues = $46 billion
Exclusion of unprocessed fuels from the cellulosic biofuel producer credit = $23.6 billion
Require information reporting on payments to corporations = $17.1 billion
Raise 7.5% AGI floor on medical expenses deduction to 10% = $15.2 billion
Limitations to the use of HSAs, MSAs, FSAs, etc. = $19.4 billion