Just Making It Up- The Baucus Plan

So, backers of ObamaCare are trumpeting a Congressional Budget Office score which shows that the Max Baucus tax plan would actually cut the deficit by $81 billion over ten years. It costs $829 billion, but supposedly raises $910 billion in taxes. Supporters will point to this score as evidence that the Baucus bill somehow "bends the curve" on health care costs in the long-term. They would be wrong. This bill does nothing to control long-term health care costs.

So how did the CBO find savings in a bill sure to increase government spending? Baucus is a wily veteran, and he knows the tricks to get a good, if completely meaningless, number out of the CBO.

1) Don't write it down. The CBO score is based on an outline of the Baucus bill, provided by Baucus's office, including the assumptions that should be used in crafting the score.

The CBO scored the concepts described by the Baucus Committee. There is no legislative text. None. Baucus and his Democratic colleagues refused to reduce their concepts to actual legislation prior to a vote. Here is the CBO's disclaimer:
"CBO and JCT’s analysis is preliminary in large part because the Chairman’s mark, as amended, has not yet been embodied in legislative language."

2) Don't count the costs of private sector mandates.

The biggest gimmick employed by the bill is that its individual mandate pushes
more than half of the legislation's cost off-budget, and onto businesses and
individuals who will have to shoulder that burden. A real-world parallel already
exists in the Massachusetts health care plan, where private-sector mandates
account for 60 percent of the cost.

3) Massive tax increases. The Baucus plan imposes a tax on health insurance it deems too generous. As health insurance premiums rise over the years, these taxes hit more and more policy holders. Rather than assume that people will behave rationally by cutting back on the amount of health insurance they buy, the CBO assumes that people will keep paying these ever higher taxes. Marginal tax rates of 80% are possible. Michael Tanner at Cato argues the tax provision drawfs the rest of the legislation.

In fact, overall, the tax increases in the bill are more than double the amount
of deficit reduction. This isn't a health care efficiency bill or a cost
containment bill. It is a tax and spend bill, pure and simple.

4) Massive cost-shifting-

Voila! The Great Cost-Shifting Scheme: Medicaid spending by states would
increase by about $33 billion over 10 years.

5) Clever assumptions. An old joke asks how the economist would climb out of a deep hole. "First," the economic says, "assume a ladder." The Baucus outline assumes that Congress will suddenly show some fiscal discipline and control Medicare reimbursements.

The second-biggest gimmick is assuming that Congress will let the "Sustainable Growth Rate" cuts in Medicare physician payments to occur. Starting in 2003, Congress has repeatedly blocked those cuts, and there is no reason to think that Congress will behave any differently in the future. So yes, provided that the sun rises in the West, the Baucus bill would reduce the federal deficit.

Michael Taylor and Michael Cannon at Cato put the real cost of the Baucus plan at $2 trillion, just where all the other ObamaCare plans have been.