The CBO has just released the latest cost estimate on HR 3962. It begins as follows:
"That new law includes a provision to delay the phase-in of a rule that would allow corporations with worldwide activities to reduce their U.S. income taxes by charging more of their interest expenses against domestic profits; that provision overlaps with a provision in H.R. 3962. As a result, the estimated increase in revenues for H.R. 3962, incorporating your manager’s amendment, is now approximately $20 billion lower than the amount shown in yesterday’s cost estimate for the legislation. Reflecting the change noted above, CBO and the staff of JCT now estimate that, on balance, the direct spending and revenue effects of enacting H.R. 3962, incorporating the manager’s amendment, would yield a net reduction in federal budget deficits of $109 billion over the 2010-2019 period (see Table 1). CBO has not completed a comprehensive estimate of the legislation’s potential impact on spending that is subject to future appropriation action."
In other words this is a large taxation bill. They continue:
" The estimate includes a projected net cost of $891 billion over 10 years for the proposed expansions in insurance coverage. That net cost itself reflects a gross total of $1,052 billion in subsidies provided through the exchanges (and related spending), increased net outlays for Medicaid and the Children’s Health Insurance Program (CHIP), and tax credits for small employers; those costs are partly offset by $167 billion in collections of penalties paid by individuals and employers. On balance, other effects on revenues and outlays associated with the coverage provisions add $6 billion to their total cost."
Yes this is a Trillion plus Bill. Yet the following is a problem:
" The legislation would require that the premiums for the public plan be set to fully fund expenditures for medical claims, administrative costs, and a contingency reserve. The legislation would provide for start-up funding of $2 billion for the administrative costs associated with establishing the public plan and require that those funds be paid back in amortized amounts over 10 years. The legislation also would provide start-up funding for a contingency reserve in an amount sufficient to cover 90 days of claims. On an annual basis, collections of premiums would exceed benefit payments and administrative costs by the amount needed to cover the start-up costs and to maintain the contingency reserve."
This is the crux of the problem. Most likely the sickest will seek the Government plan because of its costs. This the statistics of the plan will make it difficult to attain the overall mix to be able to predict the costs. Thus it will always run a deficit and one knows where that will come from.
"That new law includes a provision to delay the phase-in of a rule that would allow corporations with worldwide activities to reduce their U.S. income taxes by charging more of their interest expenses against domestic profits; that provision overlaps with a provision in H.R. 3962. As a result, the estimated increase in revenues for H.R. 3962, incorporating your manager’s amendment, is now approximately $20 billion lower than the amount shown in yesterday’s cost estimate for the legislation. Reflecting the change noted above, CBO and the staff of JCT now estimate that, on balance, the direct spending and revenue effects of enacting H.R. 3962, incorporating the manager’s amendment, would yield a net reduction in federal budget deficits of $109 billion over the 2010-2019 period (see Table 1). CBO has not completed a comprehensive estimate of the legislation’s potential impact on spending that is subject to future appropriation action."
In other words this is a large taxation bill. They continue:
" The estimate includes a projected net cost of $891 billion over 10 years for the proposed expansions in insurance coverage. That net cost itself reflects a gross total of $1,052 billion in subsidies provided through the exchanges (and related spending), increased net outlays for Medicaid and the Children’s Health Insurance Program (CHIP), and tax credits for small employers; those costs are partly offset by $167 billion in collections of penalties paid by individuals and employers. On balance, other effects on revenues and outlays associated with the coverage provisions add $6 billion to their total cost."
Yes this is a Trillion plus Bill. Yet the following is a problem:
" The legislation would require that the premiums for the public plan be set to fully fund expenditures for medical claims, administrative costs, and a contingency reserve. The legislation would provide for start-up funding of $2 billion for the administrative costs associated with establishing the public plan and require that those funds be paid back in amortized amounts over 10 years. The legislation also would provide start-up funding for a contingency reserve in an amount sufficient to cover 90 days of claims. On an annual basis, collections of premiums would exceed benefit payments and administrative costs by the amount needed to cover the start-up costs and to maintain the contingency reserve."
This is the crux of the problem. Most likely the sickest will seek the Government plan because of its costs. This the statistics of the plan will make it difficult to attain the overall mix to be able to predict the costs. Thus it will always run a deficit and one knows where that will come from.
Posts
