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CBO Sets Finance Health Bill's Cost at $829 Billion

By Drew Armstrong, CQ Staff

October 7, 2009 -- A new Congressional Budget Office (CBO) estimate puts the cost of the Senate Finance Committee's health care overhaul at $829 billion over a decade, well under the $900 billion goal the committee had set.

The legislation also would reduce the federal budget by $81 billion over that period, CBO said.

The proposal would cover 94 percent of legal residents by 2015, reducing the number of uninsured in the United States by 29 million, from 46.3 million. Roughly a third of the 25 million people who would remain without coverage would be illegal immigrants.

Minutes after getting the analysis, Finance Committee Chairman Max Baucus, D-Mont., took to the Senate floor to tout it.

"The report is good news," he said, calling the legislation "fully paid for" and highlighting sections of the CBO estimate that said his draft proposal would reduce the federal budget deficit in the second 10 years, too, should it become law.

But it is not Baucus's reaction that will count, but rather the views of panel Republican Olympia J. Snowe of Maine and fiscally conservative Democrats both on and off the Finance Committee.

How they view the CBO's assessment will be crucial when Finance votes on the legislation.

And CBO will be called upon for yet another assessment once Majority Leader Harry Reid, D-Nev., melds the Finance bill with a far different version (S 1679) approved this summer by the Health, Education, Labor and Pensions Committee.

"This legislation is a smart investment on the federal balance sheet, and it's an even smarter investment for American families, businesses and our economy," Baucus said.

The latest estimate is a change from CBO's estimate of Baucus's original proposal, which the agency said would cost $774 billion over a decade, but with only $49 billion in deficit reductions.

The largest cost in the bill, by far, is the expansion of insurance coverage to those now lacking it. The bill would expand Medicaid eligibility to people with incomes up to 133 percent of the poverty level, provide refundable tax credits to help people buy insurance, and more tax credits to help small businesses help their employees get coverage. The net cost of those provisions would be $518 billion over a decade.

Part of the $89 billion budget surplus comes from a revised estimate by the Joint Committee on Taxation, which had previously made an error estimating how much revenue would be raised from fees levied on health insurance companies, drug makers and medical device manufacturers. The fees would raise $29 billion more over a decade than originally been estimated. But because of how the fees are structured, they would not actually cost the affected industries more.

One proposal that Baucus has embraced—using consumer-owned "co-ops" to compete with private insurance plans instead of a government-run "public option"—would not have a significant impact on the insurance market or the bill's costs, according to CBO. Insurance policies offered by co-ops would be sold through an “exchange” marketplace set up and monitored by the government.

"The proposed co-ops had very little effect on the estimates of total enrollment in the exchanges or federal costs because...they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments," the CBO said.

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