Baucus Bill Gets An "F" (For Funding)

After "months" of work, Senate Finance Committee Chairman Max Baucus rolled out his $856 billion dollar health care bill.

Whatever the benefits and drawbacks are to the bill itself, the glaring issue is that little matter of the $856 billion dollar price tag.   Specifically, how that money will be raised.

Baucus estimates that $93 billion will come from fees & taxes on pharmaceutical companies, insurers and medical device companies.   The bigger slice will come from the bill's 35% tax on premium insurance plans (more than $21,000 per year), which is estimated to bring in more than $200 billion dollars.    The remainder is expected to be generated from slower growth in Medicare as well as finding cuts to that program.

Let's break those three funding sources down, shall we?

The fees on health-related industries is the most simple and the only one likely to do what's promised.    It may hurt job growth and research on new drugs, but at least the money will be there.

Hard to say the same for the next two.

The tax on so-called "premium" plans is expected to raise about $215 billion dollars.    So just for kicks, let's presume that the companies who offer these plans and the people who receive them decide its not worth the extra 35% tax and reduce the value of these plans.   What then?   Where will that gap in funds come from?   The ending of these high-dollar plans is not a tough assumption to make, given that you can still get a heck of a health insurance plan for under $21,000 per year.    I predict we will begin to see many $20,999 annual plans sprouting up from the tax wreckage and the government won't get anywhere near that $215 billion mark.

Some employers are likely to raise incomes as they cut the plans to keep workers happy and there is some hope among the Baucus crowd that additional revenues may come from higher taxes.    "Hope" though is not a good income source.

The 'trim the fat' at Medicare fantasy is the greatest mystery in this big dollar plan.   Baucus wants to slow the growth rates of Medicare and cut some benefits.   Cutting benefits will save money, but won't sit well with older voters.   Baucus may also want to take a peek at America's demographics.    We are getting older, not younger, and millions of baby boomers are retiring every year.   That means millions more looking to access the program, and yet still Baucus believes the government can slow growth in the program?    We will be lucky to just keep the numbers as they are now.

Worse is Medicare's own history.    It's a program that has grown in size every year and takes up bigger and bigger portions of our federal budget.    The President himself wants to cut hundreds of billions in fraud and waste from the program.    A good idea, but a tacit acknowledgment that Medicare is rife with bad spending.   The fact that there are hundreds of billions worth of fraudulent or bad claims says all we need to know about how it is run.   To expect - or worse, to count on - the government to find ways to trim an oversized and overspending program to help fund a nearly trillion dollar health plan is silly.

It is easier to come up with ways to spend money, much harder to find ways to raise money to pay the bills.    As with most government ideas, the $856 billion is probably just a start anyway.

If history is a guide, we'll be well in for more than a trillion within the decade.    And that bill - unlike the unlikely revenue streams to pay for it - will come due.   The money to pay for it probably won't.  At least, not until Congress decides to raise everyone's taxes, rich, middle class or otherwise.   It will have to come.    Someone has to pay the pediatrician.

Update: After I posted this last night Democrat Senator Jay Rockefeller warned of a "big, big tax" on the middle class from this bill.     You can read that story here.