Claim: The cost estimate for the Democrats' insurance reform may be off by more than $200 billion.
The Congressional Budget Office uses three measures to estimate the cost of insurance legislation. One is gross cost, which means the amount of a bill's new spending and new tax breaks. The second measure is net cost, gross cost minus the revenues that will come in from penalties paid by individuals and employers for not having insurance coverage. Finally, the CBO figures the bill's effect on deficits. To do the deficit estimate, the CBO calculates the amount of spending that the bill will cut and the revenue the Treasury will get from the bill's tax increases. It then subtracts those two numbers from the bill's net cost. The CBO said the House bill will have a gross cost of $1 trillion and a net cost of $894 billion. The bill will cut deficits by $104 billion from 2010 to 2019. But did the House bill omit something important?
Fact or fiction?
Fact. In the analyzing the House bill, the CBO specifically noted that the legislation doesn't make changes in the Sustainable Growth Rate (SGR), a mechanism Congress enacted in 1997 to cut payments to doctors serving Medicare patients when such spending exceeds the inflation rate. Since 2003, Congress has kept postponing the politically painful SGR cuts. As a result of those deferred cuts, Medicare payments for doctors must be reduced by 21 percent next year and by about 6 percent annually for several years after that — unless Congress once again postpones them. Senate Democrats have introduced a bill to scrap the SGR entirely, but doing so would add $247 billion to the cost of health care reform. An earlier House bill also abolished the SGR, but that isn't part of the current House bill. Sooner or later, Congress will have to deal with the SGR — and it'll be costly.
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