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Wyden's Health Care Bill Would Be 'Budget Neutral,' Analysis Says

By Alex Wayne, CQ Staff

May 1, 2008 -- An expansive health care overhaul backed by more than a dozen senators from both parties got a major lift on Thursday, when congressional auditors said that the plan would eventually produce budget surpluses if it became law.

In a joint analysis, the Congressional Budget Office and Joint Tax Committee said that the plan—devised by Sen. Ron Wyden, D-Ore.—would be "budget-neutral" when it was fully implemented and would begin to produce surpluses in future years, thanks to changes the plan would make in the tax code. While the analysis was not a formal budget score for Wyden's bill (HR 334), it suggests that cost issues could be less of a problem for Wyden's plan than for other health overhaul proposals.

"Today, the government's 'go-to' offices for budgeting and taxes have thrown decades of conventional wisdom in the trash can," Wyden said at a news conference. "They have told us that all Americans can have quality, affordable health care without breaking the bank."

An overhaul of the health care system is expected to be a major priority for both the 111th Congress and the next president. The two Democratic candidates, Sens. Barack Obama of Illinois and Hillary Rodham Clinton of New York, have each offered health care plans focused on extending government and private insurance to cover all, or nearly all, of the estimated 47 million Americans that lack health insurance.

Obama's plan would cost an estimated $50–65 billion per year, according to his campaign. Clinton's plan would cost about $110 billion per year, spokesman Phil Singer said. Both Obama and Clinton propose financing their plans in part by allowing tax cuts for people making more than $250,000 to expire.

The presumptive Republican nominee, Sen. John McCain of Arizona, on Wednesday detailed a plan that focuses on reducing health care costs and expanding tax incentives so that more Americans can afford health insurance.

But Wyden's plan, thanks to its broad and growing bipartisan support and now, its potential financial benefits, could eventually have considerable influence on any overhaul that emerges from Congress.

The plan would replace the current employer-based health insurance system, as well as Medicaid and the State Children's Health Insurance Program, with a system in which people would buy coverage directly from insurers through new state-run "purchasing pools." Premiums would be paid through the tax system, with a fixed deduction for the costs of insurance. The government would further subsidize premiums for low-income people.

Wyden, said one of his measure's cosponsors, Sen. Bob Corker, R-Tenn., has "laid up health care on a silver platter for the next president." Sen. Thomas R. Carper, D-Del., another cosponsor, called Wyden's bill a "roadmap" for the next president to follow in pursuit of a health care overhaul.

Cosponsors for Wyden's plan range from conservatives such as Corker and Robert F. Bennett of Utah—the first Republican to sign on—to liberals such as Democrat Debbie Stabenow of Michigan. He has won some support from businesses, which would be relieved of the responsibility to provide health insurance to their employees, but would have to either increase their employees' pay or make cash contributions to the new system.

The CBO and JTC analysis found that when Wyden's plan was fully implemented—not before 2014, they estimated—the government would be paying $1.3 trillion to $1.4 trillion in health insurance premiums each year. But that cost would be "approximately offset" by new revenues and savings, premiums from taxpayers, tax changes, savings from eliminating Medicaid and SCHIP, and state payments to the new system.

After 2014, the analysis found, the plan would begin producing a budget surplus because of two tax changes. First, the new health insurance deduction would increase in value more slowly than the current system, in which health insurance premiums are not taxed. Second, the minimum value of insurance benefits under the plan would grow at the pace of gross domestic product, rather than at the pace of health care costs. Health care costs have grown much faster than GDP in recent years.

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