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Medicare Cuts in Baucus Health Plan Would Reduce Deficit Over 20 Years

Thursday, October 15, 2009

 

Over 20 Years, Senate Finance Committee Bill is Deficit-Neutral Without Taxing "Cadillac" Health Insurance Plans Washington, DC – A new analysis from the nonpartisan Tax Foundation has found that over a 20-year period, the health care bill written by Sen. Baucus and passed Tuesday by the Senate Finance Committee includes enough spending cuts in Medicare and other current government health programs to reduce the budget deficit over the long term. The study looked at the next 20 years. CBO projects that cuts in Medicare and other health programs would save $404 billion between fiscal year 2010 and 2019, which when combined with the other provisions in the Baucus plan, including various tax hikes, would reduce the deficit by $81 billion. Assuming the savings from Medicare cuts continue growing at the same rate beyond 2019, savings could reach a total of $1.8 trillion over the next 10-year period, 2020-2029, for a total deficit reduction of up to $988 billion over 20 years, according to the Tax Foundation report. “From 2020 to 2029, the spending cuts in Medicare combined with the proposed tax hikes far exceed the cost of new health benefits for working-age people, improving the deficit dramatically,” said Tax Foundation Senior Economist Gerald Prante, who authored the report. “The savings from cuts to Medicare and other health care spending would be so significant down the road that Chairman Baucus’s proposed excise tax on ‘Cadillac’ health plans would likely not even be necessary to pay for the plan.” Tax Foundation Fiscal Fact No. 195, “If Medicare Cuts Proposed in Baucus Plan Are to Be Believed, Long-Term Deficit Outlook Is Favorable,” is available online at http://www.taxfoundation.org/publications/show/25379.html. Using the CBO’s 2019 growth rate, during which savings from cuts in Medicare and other health programs would grow by nearly 19 percent, instead of a more conservative savings growth rate results in even greater savings: about $2.7 trillion from 2020-2029, for a total deficit reduction of $1.9 trillion over 20 years. The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Tax Foundation Fiscal Fact No. 195, “If Medicare Cuts Proposed in Baucus Plan Are to Be Believed, Long-Term Deficit Outlook Is Favorable” is available online at http://www.taxfoundation.org/publications/show/25379.html. To schedule an interview, please contact Natasha Altamirano, the Tax Foundation’s Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

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