Despite Revisions, Baucus Bill Keeps Tax-and-Spend Focus

Published November 6, 2009

The Senate Finance Committee’s version of health care reform as constructed by Sen. Max Baucus (D-MT) is being hailed as a model of bipartisan moderation after it won the vote of Republican Sen. Olympia Snowe of Maine.

The headline news after the 14-9 vote was not that it passed out of committee—that was expected—but that Snowe crossed party lines to support it.

The Baucus legislation is undeniably an improvement over the bill approved by the Senate Health, Education, Labor, and Pensions Committee, or the House version of the health plan. But that’s a low bar.

In reality, the bill still represents a radical government takeover of the U.S. health care system.

Huge Price Tag

Let’s start with the price tag. According to a report just released by the Congressional Budget Office, the bill will cost roughly $829 billion over the next 10 years. And, significantly, it is projected to reduce the federal budget deficit over 10 years by $81 billion. Both those numbers are misleading.

The overall tax increases in the bill are more than double the amount of deficit reduction.

The $829 billion cost is for the next 10 years, 2010-2019, but the most expensive provisions of the bill don’t take effect until July 2013. The cost over the bill’s first 10 years of actual operation is closer to $1.3 trillion.

In addition, the bill assumes Congress will implement a 21 percent reduction in Medicare payments already scheduled under current law. The only problem is that Congress has been supposed to make those reductions since 2003—and never has. There is no reason to believe it will do so this time either.

Deficit Reduction Fantasy

Most importantly, the bill does not achieve its projected deficit reduction by controlling spending or reducing health care costs. In fact, by the end of the 10-year budget window the cost of the program is expected to be growing at 8 percent per year. But revenue from the bill’s new taxes would be growing between 10 percent and 15 percent per year.

In particular, the bill imposes a 40 percent excise tax on health insurance plans that offer benefits in excess of $8,000 for an individual plan and $21,000 for a family plan. Insurers almost certainly would pass this tax on to consumers via higher premiums.

As inflation pushed insurance premiums higher in coming years, more and more middle-income families would find themselves caught up in the tax—providing the government with more tax revenue.


When not raising taxes, the bill simply pushes costs on to others. For example, it would push $35 billion in Medicaid costs off onto already cash-strapped state governments. Other costs would be offloaded onto businesses and individuals.

Nor should it be forgotten that this bill would still give the government the power to force most Americans to purchase insurance, and would allow the government to dictate what benefits insurance companies should offer.

Insurance Costs Will Rise

People who have health insurance today—and like it—would have to switch to a government-approved plan, even if it was more expensive or contained benefits they didn’t want. That insurance will likely be more expensive, because the bill contains a host of new insurance regulations that will drive up premiums, especially for the young and healthy.

Others could lose their current insurance, including the 10 million Americans with health savings accounts (HSAs) and the one in five seniors currently on Medicare Advantage plans. The bill guts both programs.

Numerous other provisions would allow the government to interfere with how doctors practice medicine. For example, it cuts Medicare reimbursements to providers whose utilization is in the 90th percentile or above compared to national averages—that is, doctors who do more procedures than the government thinks they should.

With all this, the bill still leaves 25 million people uninsured.

If that’s moderation, it’s just not good enough.

Michael D. Tanner ([email protected]) is a senior fellow at the Cato Institute and coauthor of Healthy Competition: What’s Holding Back Health Care and How to Free It (Cato Institute, 2005 $11.95). A version of this column appeared at Reprinted with permission.