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Senate Finance Committee Health Reform Bill Is Fiscally Responsible
A fundamental principle of the bill that the Senate Finance Committee approved today is that it is budget neutral — that is, its costs are fully offset. It pays for the costs of expanding health coverage to the uninsured by redirecting spending and tax subsidies from less productive uses elsewhere in the health sector.
Several of the offsets are likely to help slow the rate of growth of health care costs over time. For example, the bill would impose an excise tax on insurance company offerings of high-cost plans, limit tax subsidies provided to flexible spending accounts, eliminate the overpayments that private insurers receive through the Medicare Advantage program, and reduce the cost of prescription drugs in Medicaid.
Policymakers should consider including additional offsets as well, which would enable them to strengthen the subsidies designed to help low- and moderate-income Americans comply with the bill’s mandate that they obtain health coverage. The subsidies in the current bill would likely prove insufficient to make coverage affordable for a number of low- and moderate-income people with incomes modestly above the poverty level. [1] If, on the other hand, policymakers scale back the proposed offsets (some of which are bound to draw criticism from interests that benefit from current health subsidies that are inefficient), that would likely force policymakers also to scale back the assistance for low- and moderate-income people, making coverage still less affordable for them under the new system.
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