The Revenue Impact of the Baucus Plan

October 7, 2009

Joseph Bishop-Henchman

The Congressional Budget Office/Joint Tax Committee score of the Baucus health care plan is out. (CBO’s site is getting hefty traffic, so we’ve uploaded it here as well.)

SPENDING INCREASES & TAX CREDITS (over 10 years)

Additional outlays for Medicare and CHIP	$345 billion
Federal Subsidies for Insurance Purchases	$461 billion
Tax Credit for Employers Offering Health Insurance	$23 billion
TOTAL	$829 billion

REVENUE INCREASES (over 10 years)

Excise Tax on High-Premium Insurance Plans	$201 billion
Penalty Payments by Uninsured Individuals	$4 billion
Penalty Payments by Employers whose workers receive subsidies	$23 billion
Other	$83 billion
TOTAL	$311 billion

SPENDING REDUCTIONS (over 10 years)

Reductions in Medicare Payment Rates	$162 billion
Medicare Advantage Payments Set at Average Bid	$117 billion
Reductions in Medicare and Medicaid Hospital Payments	$45 billion
Other Program Savings	$80 billion
TOTAL	$404 billion

REVENUE INCREASES ELSEWHERE (over 10 years)

Other

$196 billion

NET CHANGE TO 10-YEAR DEFICIT: -$81 billion

As the non-economist, I should note that when Medicare was passed in 1965, it was estimated to to cost $3 billion in 1990, the equivalent of $12 billion after adjusting for inflation. The actual cost in 1990 was $98 billion. And my earlier blog post on the argument that entitlement programs paying for themselves is worth relinking to.

I’d also like to know what that “other” $196 billion in increased revenues are, since that’s the difference between this thing increasing the deficit or not.

Note: Corrected after posting to note that the plan is projected to reduce the deficit, not increase it.

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