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CBO: House Reconciliation Bill Raises Long-Term Deficits

The reconciliation bill repealing key parts of health reform, which the House is scheduled to consider this week, isn’t only ill-advised on policy grounds, as we’ve explained, but would raise long-term deficits, according to the Congressional Budget Office (CBO).  Congress has typically used the fast-track reconciliation process to reduce deficits. 

While the bill would cut deficits in the first ten years (2016 through 2025), the annual savings begin shrinking in the middle of the decade and eventually disappear, CBO found.  Over the long run, CBO concluded that the bill would raise deficits.

That’s because the bill permanently repeals health reform’s medical device tax, excise tax on high-cost health plans (the “Cadillac tax”), and Independent Payment Advisory Board (IPAB), and the costs of ending these provisions are back-loaded — that is, they mostly occur in the second half of the decade and grow rapidly thereafter. 

For instance, the cost of terminating IPAB only begins in 2022, while the cost of repealing the Cadillac tax more than doubles between 2021 and 2025, according to CBO.  Each provision was designed to slow health care cost growth, with an expanding effect over time.  The Cadillac tax will raise more than $500 billion in the decade after 2025, the Council of Economic Advisers estimates.

The bill also repeals various other parts of health reform, which would cut federal spending but at the cost of reducing health coverage.  All told, if the legislation becomes law, about 16 million fewer people will have health insurance in most years — and health insurance premiums in the individual market (both inside and outside health reform’s marketplaces) will be roughly 20 percent higher — than under current law, according to CBO.  The bill also prohibits federal funding for Planned Parenthood health clinics for one year.

Over time, repealing the medical device tax, Cadillac tax, and IPAB costs more than repealing the other health reform provisions saves.