Summary of the Reconciliation Act of 2010
Spending: According to the CBO’s preliminary score of H.R. 3590 and the reconciliation amendment, the legislation would spend nearly $1 trillion over its first ten years. More specifically, CBO estimates that the bill would spend $940 billion to finance coverage expansions—$434 billion for the Medicaid expansions, $466 billion for “low-income” subsidies, and $40 billion for small business tax credits. The spending on coverage expansions does not even consider additional federal spending included in the legislation—including $60 to $70 billion in discretionary spending which CBO recently estimated—and other spending which may fall outside the coverage subsidies. When combined with the cost of the coverage expansions, total spending under the bill almost certainly exceeds $1 trillion.
Budgetary Gimmicks: While the CBO score claims H.R. 3590 and the Reconciliation Act of 2010 would reduce the deficit by $138 billion in its first ten years, Democrats achieved that “deficit-neutral” in part by excluding the cost of reforming the Sustainable Growth Rate (SGR) mechanism for Medicare physician payments—the total cost of which stands at well over $250 billion over ten years, according to CBO—from this bill, and including it instead in separate legislation (H.R. 3961; S. 1776) that is not paid for. While Members may support reform of the SGR mechanism paid for in a fiscally responsible manner, many may view any legislation that presumes a more than 21 percent cut in Medicare payments to physicians in the applicable budget window as an inherent gimmick designed solely to hide the apparent cost of health “reform.”
Out-Year Effects: According to CBO’s estimate, the legislation would reduce deficits relative to the current baseline between FY 2020 and FY 2029 by a broad range, roughly between zero and one-half percent of GDP over the ten year span, depending on what legislation were to be enacted—not by any dollar amount, such as $1.2 trillion, as Democrats have asserted. However, CBO admits that these long term estimates are “rough” and that, “The imprecision of that calculation reflects the even greater degree of uncertainty that attends to it, compared with CBO’s 10-year budget estimates.”
Taxes: Offsetting taxes include $17 billion in taxes on individuals not complying with the mandate to purchase coverage, $32 billion from the “Cadillac tax” on high-premium insurance plans, $52 billion in payments by businesses associated with the employer “free rider” penalty, and $44 billion in associated other revenue interactions. In total, provisions in the reconciliation bill increase taxes by $155.8 billion over the next ten years, above and beyond the tax increases contained in the Senate-passed bill.
Student Loan Provisions: The legislation includes a reconciliation provision to alter federal student loan programs by eliminating the Federal Family Education Loan program and shifting all student loans to a government-run and taxpayer financed system under the Direct Loan program. While this legislation has nothing to do with the government takeover of health care, the provision is scored as a deficit reduction of $19.4 billion which is used as an offset against the $1 trillion cost of the legislation. However, CBO has also noted that current budget scoring rules do not include the cost to the government stemming from the risk that the cash flows may be less than the amount projected (that is, that defaults could be higher than projected).
Higher Premiums: The reconciliation bill nearly doubles the tax on health insurers beginning in 2014, and also raises taxes and fees on drug makers and medical devices. The CBO has specifically stated that these taxes will be passed on to all Americans in the form of higher health costs and rising insurance premiums.
Phony Deficit Reduction: The reconciliation bill and the Senate-passed measure combined do not reduce the deficit after excluding the more than $120 billion in revenue generated by the Social Security program and the CLASS Act long-term care entitlement. Since this revenue will eventually be used to pay out benefits to these two programs, the bill does NOT reduce the deficit in the near-term—or the long term.
Sweetheart Deals: The reconciliation bill retains unpopular provisions in the Senate-passed measure—the “Louisiana Purchase,” Medicare coverage for individuals in Libby, Montana, and $100 million for a Connecticut hospital—while adding another backroom deal: A special provision permitting the Bank of North Dakota to continue to offer student loans.
Federal Funding of Abortion: Not only does the reconciliation bill not prohibit federal funds from flowing to plans that cover elective abortion, it increases funding for community health centers by $2.5 billion—and neither the reconciliation bill nor the Senate-passed measure include ANY prohibition on community health centers using these federal funds to offer elective abortion.
Massive Expansion of IRS’s Power: