House Passes Health Care Bill

Last night, the House passed the Senate health care reform bill by a vote of 219 to 212. In the next couple days, the President will sign the bill, after which a "reconciliation bill" will likely be passed to make changes to the current legislation.

According to CBO's most recent score, the combined effect of these bills will be to expand coverage by 32 million people at a gross cost of $938 billion over ten years, and $214 billion in 2019 alone.

When combining non-coverage spending, tax increases, and spending cuts, the net effect of the bill will be to reduce the deficit by $143 billion -- although this number will drop to about $54 billion if we exclude the effects of the CLASS Act and the student loan reform.

Over the next decade, the bill's costs are funded mainly through a combination of reduced Medicare Advantage subsidies, slower provider payment increases, health care industry fees, and an increase (and broadening) of the Medicare payroll tax on income (including investment income) above $250,000.

Toward the end of the decade, two other important pay-fors begin to kick in -- an excise tax on high cost insurance, and an Independent Payment Advisory Board which can make automatic changes to Medicare provider payments.

In part as a result of these provision, the combined effect of the bills is expected to reduce the deficit in the second decade in the broad range of 0.5 percent of GDP.

This is an important accomplishment; but it requires that politicians stick to their guns, rather than undermining or abandoning pieces of the legislation. Otherwise, we could be left with all the costs of the bill, but none of the benefit.

More importantly, it doesn't get us to sustainability -- or even anywhere close. It is a first step, but there is far more work to be done.

See our health reform charts and graphs here.