Sunday, December 20, 2009

CBO revises estimate

of the degree of deficit reduction in the second decade (2020-29) of the Senate bill as amended by the manager's amendment. The say it will reduce deficit by between one quarter and one half a percent of GDP in the bills second decade; yesterday they estimated it would reduce estimate by one half percent of GDP. Revision due to fact that from 2020-29, Independent Payment Advisory Commission for Medicare would make recommendations only when Medicare growth rate was 1percentage point above overall inflation. Under revised estimate, CBO saying Medicare will grow by around 6 percent per year 2020-29. It has been growing by 8 percent or more the last few years.

The deficit impact of the first 10 years was unchanged. Typically CBO doesn't project out further than 10 years, but they have done so with health reform, in part because the Senate bill is much better than the House bill in terms of deficit in second 10 years. This is primarily due to the House using increased income tax rates to finance reform expansions, a very bad idea since health care costs are growing faster than wages.

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