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Thursday, November 05, 2009

CBO On GOP's Healthcare Reform Plan

The CBO has issued it's report on the Republicans Healthcare reform plan, via the CBO Director's Blog.

The letter that the CBO sent to Republican Leader John A. Boehner, discusses some of the provisions in the bill as well as the preliminary analysis of H.R. 3962.

According to CBO and JCT’s assessment, enacting the amendment would result in a net reduction in federal budget deficits of $68 billion over the 2010–2019 period.
That estimate reflects a projected net cost of $8 billion over 10 years for the provisions directly related to insurance coverage; that net cost reflects a gross cost of $61 billion that is partly offset by about $52 billion in additional revenues associated with the coverage provisions. Over the same period, the other provisions of the amendment would reduce direct spending by $49 billion and increase tax revenues by $27 billion.

Some of those specific provisions, include but are not limited to;

Effects of the Insurance Coverage Provisions

The amendment contains several provisions that are intended to increase rates of insurance coverage by reducing its costs or subsidizing its purchase, including:

***Regulatory reforms in the small group and nongroup markets, including establishing AHPs and individual membership associations, and allowing states to establish interstate compacts with a unified regulatory structure;

***A State Innovations grant program to provide federal payments to states that achieve specified reductions in the number of uninsured individuals or in the premiums for small group or individually purchased policies;

***Federal funding for states to use for high-risk pools in the individual
insurance market and reinsurance programs in the small group market;

***and Changes to health savings accounts (HSAs) to allow funds in them to be used to pay premiums under certain circumstances, to make net contributions to HSAs eligible for the saver’s credit, and to provide a 60-day grace period for medical expenses incurred prior to the establishment of an HSA.

Effects of Other Provisions

Other provisions of the amendment would alter federal spending and revenues in
significant ways as well. The key provisions include these:

***Limits on costs related to medical malpractice (“tort reform”), including capping noneconomic and punitive damages and making changes in the allocation of liability. CBO expects that those limits would reduce health care costs directly—by reducing premiums for medical liability insurance and associated costs—and indirectly by slightly reducing the utilization of health care services. Over the 2010–2019 period, those changes would reduce spending on mandatory programs by about $41 billion and would increase revenues by $13 billion as an indirect effect of reducing the costs of private health insurance plans (which would result in a shift of some workers’ compensation from nontaxable health insurance benefits to taxable wages)

Requirements that the Secretary of Health and Human Services (HHS) adopt and regularly update standards for electronic administrative transactions that enable electronic funds transfers, claims management processes, and verification of eligibility, among other administrative tasks. Those provisions would result in about $6 billion in federal savings in Medicaid. In addition, those standards would result in an increase in revenues of about $13 billion as an indirect effect of reducing the costs of private health insurance plans.

***Establishment of an abbreviated approval pathway for follow-on biologics (biological products that are highly similar to or interchangeable with their brand-name counterparts), which would reduce direct spending by an estimated $5 billion and increase revenues by about $1 billion over the 2010-2019 period.

***An increase in funding for HHS’s investigations into fraud and abuse, which would increase direct spending by an estimated $3 billion during the next 10 years.

In total, CBO estimates, the provisions of the amendment not directly related to insurance coverage would reduce direct spending by $49 billion, on net, over the 2010–2019 period and would increase revenues by $27 billion.

All in all, the plan is not as over reaching as the Democrats, it is not Government run, it does not contain any "public option" and it proves to be less expensive and more fiscally responsible than the Government run plan the Democrats are considering now.

Read the whole letter from the CBO to Boehner. (12 page PDF)