House Health Reform Bill Produces a $6 Billion Surplus

The Congressional Budget Office (CBO) has released its score [1] of the House health care reform bill and the headlines are painting a distorted picture of the findings. For example, Congressional Quarterly’s article on the subject is titled “CBO: Health Bill Would Hike Deficit by $239 Billion [2],” and claims:

“The CBO estimate released late Friday pegs the gross cost of the bill (HR 3200) at $1.04 trillion, with the price tag partially offset by a surtax on the wealthy and other revenue raisers that would raise $583 billion and anticipated efficiencies that would squeeze $219 billion out of Medicare and Medicaid...The big deficit number — larger than the one run by the government for all of fiscal 2007 — is likely to add weight to the burden of Democratic leaders, who have said they plan to pass the bill on the House floor before Congress leaves town for its annual August recess.”

Surprisingly, The Wall Street Journal framed the story more accurately in its article, “Doctors' Payments Snag Health Bill [3]”:

“A plan to end a program that would cut government payments to doctors is emerging as the flash point in the debate over whether President Barack Obama's effort to overhaul the health system would increase the federal budget deficit.

“The proposal was crucial to winning support from the politically powerful American Medical Association — but it has also made it tougher to argue that the health overhaul would pay for itself.”

The problem with Medicare’s physician payment rates has been in place since a Republican controlled Congress [4] added the sustainable growth rate (SGR) formula for setting physician fees in Medicare Part B to the Balanced Budget Act of 1997. There is pretty universal consensus that the SGR formula is arbitrary and should be modified. So much so that year after year Congress has overridden the rate cuts [5] necessary under SGR.

In the past, Congress has tried to avoid actually fixing the formula because higher Medicare physician rates means higher Medicare costs. Instead, Congress has fixed the problem year to year to prevent long-term cost projections from coming out of the CBO to make headlines.

The House health care reform bill has tackled the problem head on and those who want to kill health care reform are using the House’s courage against it. The bottom line is without the Medicare physician payment fix, the House health reform bill is budget neutral and even produces a surplus, as the House Energy and Commerce Committee explained in its statement, “CBO Scores Confirms Deficit Neutrality of Health Reform Bill [6]”:

“The Congressional Budget Office (CBO) released estimates this evening confirming for the first time that H.R. 3200, America's Affordable Health Choices Act, is deficit neutral over the 10-year budget window — and even produces a $6 billion surplus. CBO estimated more than $550 billion in gross Medicare and Medicaid savings. More importantly, the bill includes a comprehensive array of delivery reforms to set the stage for lowering the future growth in health care costs.

“Net Medicare and Medicaid savings of $465 billion, coupled with the $583 billion revenue package reported today by the House Committee on Ways and Means, fully finance the previously estimated $1.042 trillion cost of reform, which will provide affordable health care coverage for 97% of Americans...

“The bill's long-term reform of Medicare's physician fee schedule to eliminate the potential 21 percent cut in fees, and put payments on a sustainable basis for the future, will cost about $245 billion. Those costs, however, are not included in the net calculations above, as they will be absorbed under the upcoming statutory ‘pay go’ legislation that is pending in the House.”

We should be applauding the House for tackling this long-term problem, not punishing it by falsely claiming its health care reform initiatives will lead to a higher federal deficit.