CBO: Baucus Proposal Would Save $49 Billion Over Ten Years

While liberals, insurance companies, Republicans, unions, governors, and universal coverage fans have all come out opposed to Senate Finance Committee Chairman Max Baucus's health reform bill, it does have one thing going for it: the Congressional Budget Office and Congress's Joint Committee on Taxation estimate that it will save $49 billion over the first ten years of implementation, if it were to go into effect in 2010.


The CBO and JCT released their preliminary analysis of Baucus's proposal this afternoon (based on Baucus's specifications but a full review of the document he released today). From their analysis (full document here):

Estimated Budgetary Impact of the Chairman's Proposal

According to CBO and JCT's assessment, enacting the Chairman's proposal would result in a net reduction in federal budget deficits of $49 billion over the 2010-2019 period (see Table 1). The estimate includes a projected net cost of $500 billion over 10 years for the proposed expansions in insurance coverage. That net cost itself reflects a gross total of $774 billion in credits and subsidies provided through the exchanges, increased net outlays for Medicaid and the Children's Health Insurance Program (CHIP), and tax credits for small employers; those costs are partly offset by $215 billion in revenues from the excise tax on high-premium insurance plans and $59 billion in revenues from other sources.1 The net cost of the coverage expansions would be more than offset by the combination of other spending changes that CBO estimates would save $409 billion over the 10 years and other tax provisions that JCT and CBO estimate would increase federal revenues by $139 billion over the same period.2 In subsequent years, the collective effect of those provisions would probably be continued reductions in federal budget deficits.

Some of the ways it saves that much money are points of contention for Democrats as well as Republicans (like taxing expensive insurance plans), and many liberals would rather have a bill that spends more to bring more people into the system, but this is something that Baucus is hanging his hat on--especially the fact that $409 billion of its net $539 billion savings come from spending reductions, rather than new taxes.

As health reform moves to the Senate floor for the amendment process, the $49 billion savings will likely frame the discussion of cost, at least initially, as various proposals affect the Senate package's budgetary impact.