Below The Beltway

The Congressional Budget Office is out with it’s analysis of the health care reform plan being put forward by Senator Max Baucus:

Congressional budget analysts gave an important political boost Wednesday to a Senate panel’s health-care overhaul, projecting that the $829 billion measure would dramatically shrink the ranks of the uninsured and keep President Obama’s pledge that doing so would not add “one dime” to federal budget deficits.

With the report from the nonpartisan Congressional Budget Office, the measure crafted by the Senate Finance Committee has emerged as the only one of five bills by various panels that achieves every important goal Obama has set for his top domestic initiative.

(…)

According to the CBO, Congress’s official arbiter of the cost of legislation, the Finance Committee measure would expand coverage to an additional 29 million Americans by 2019 by dramatically expanding Medicaid coverage for the poor and by subsidizing private insurance for low- and middle-income Americans.

The $829 billion cost would be more than offset by reducing spending on Medicare and other federal health programs by about $400 billion over the next decade, and by imposing a series of fees on insurance companies, drugmakers, medical device manufacturers and other sectors of the health industry that stand to gain millions of new customers under the legislation.

In addition, the package would raise $200 billion more by levying a 40 percent excise tax on high-cost insurance policies — the “Cadillac” plans that cost more than $8,000 for individuals or $21,000 for a family.

All told, the package would reduce federal budget deficits by $81 billion over the next decade, the CBO forecast, adding that the savings probably would continue to accumulate well into the future.

There are, of course, several caveats.

First of all, the deficit reduction, which will no doubt be touted by the bill’s proponents are far from meaningful. The CBO has projected that the budget deficit over the next ten years will total $ 9 trillion. That $ 81 billion in deficit reduction constitutes a mere .91% of the total projected deficits. The Concord Coalition has projected that the deficits will total $ 14 trillion over ten years. In that case, $ 81 billion in savings would constitute a mere .59% of the projected deficit. In other words, less than nothing.

Meanwhile, we’re spending another $ 800 billion that we don’t have.

Second, as Peter Suderman notes at Reason, there’s reason to be skeptical:

This is a big win for Baucus and other reform supporters, but, as with the last score, it comes with some caveats. The CBO cautions that its projections are uncertain and subject to change if legislation isn’t followed to the letter — which, in the case of the Medicare cuts designed to pay for much of the bill’s tab and produce the bulk of its savings, is highly likely. Greg Mankiw’s translation of the previous score’s concluding cautions still applies: “In other words, the plan would reduce the deficit if it were carried out as written, but there is good reason based on historical experience to be skeptical that it would be.” On the other hand, there’s also good reason to believe that, regardless of precedent, what the CBO says goes. So when the CBO says a bill will bring down the deficit, everyone in Congress ends up acting as if that’s true.

So, while the CBO has done Baucus a big favor here, there’s no reason to believe that their long-term projections will turn out to be true.