Healthy Americans Act Could Be Budget-Neutral by 2014 When Fully Implemented, According to CBO Report

Legislation (S 334) proposed by Sens. Ron Wyden (D-Ore.) and Robert Bennett (R-Utah) that would establish a universal health care system in the U.S. could be budget-neutral by 2014 and generate budget surpluses in future years, according to a Congressional Budget Office and Joint Committee on Taxation analysis released on Thursday, the AP/Minneapolis Star Tribune reports.

The legislation, called the Healthy Americans Act, would effectively eliminate the employer-sponsored health care system and replace it with a system in which individuals would purchase private health coverage through state-run purchasing pools (Daly, AP/Minneapolis Star Tribune, 5/1). All residents would be required to obtain coverage (Canham, Salt Lake Tribune, 5/2). The federal government would subsidize coverage for residents with incomes up to 400% of the federal poverty level (AP/Minneapolis Star Tribune, 5/1). Employers initially would shift funds currently used to pay for coverage to employee wages, and, over time, employers would have to pay the federal government a health insurance contribution (Kaiser Daily Health Policy Report, 3/6).

According to the analysis, after 2014 when the plan is fully implemented, changes to the tax code related to health insurance and other provisions would generate surpluses. For example, the new deduction for health insurance would grow at the rate of general price inflation, more slowly than the current tax exclusion for employer-sponsored insurance. In addition, the minimum value of insurance benefits would be tied to the increase of the gross domestic product. According to the analysis, the government would spend $1.3 trillion to $1.4 trillion in health insurance premiums annually, but the cost would be "approximately offset" by new revenues and savings, premiums from taxpayers, employer payments, tax changes, savings from folding Medicaid and SCHIP into the new system, and state payments to the new system (Wayne, CQ Today, 5/1).

Prospects
In a letter to Wyden and Bennett, CBO Director Peter Orszag and JCT Chief of Staff Edward Kleinbard wrote, "This collaboration reflects both the novelty of the undertaking and the intimate connection between the revenue and expenditure components of your proposal" (Johnson, CongressDaily, 5/1). According to CQ Today, "While the analysis was not a formal budget score for [the bill], it suggests that cost issues could be less of a problem for Wyden's plan than for other health overhaul proposals." In addition, because of the "broad and growing bipartisan" support the bill has received, "and now, its potential financial benefits," the measure "could eventually have considerable influence on any overhaul that emerges from Congress," according to CQ Today.

Reaction
Wyden said, "Today, the government's 'go-to' offices for budgeting and taxes have thrown decades of conventional wisdom in the trash can," adding, "They have told us that all Americans can have quality, affordable health care without breaking the bank" (CQ Today, 5/1). Wyden said the report was evidence that universal health care is possible without large tax increases.

Bennett said the report showed that the proposal would reduce health care costs and save money in the long term. He said, "I am convinced we can reach our goal to improve coverage and provide affordable, private health insurance to every American."

Presidential Election
According to Wyden and Bennett, the plan could be the basis for a health care proposal by any of the three leading presidential candidates (AP/Minneapolis Star Tribune, 5/1). According to the Salt Lake Tribune, although the Wyden and Bennett "meshed Republican and Democratic ideas into one proposal" in the hopes of bipartisan support, the bill's seven Democratic and seven Republican co-sponsors "may have an easier time convincing" a President Hillary Rodham Clinton (D-N.Y.), rather than a President Barack Obama (D-Ill.) or President John McCain (R-Ariz.), to adopt the plan because it includes an individual mandate, which is part of Clinton's health care proposal. Obama has proposed an individual mandate for children, and McCain has rejected any mandate. McCain, however, might be inclined to accept parts of the Wyden/Bennett proposal, including "breaking the link between employers and health insurance, new competition in the individual market and a boosted individual tax credit," according to the Tribune (Salt Lake Tribune, 5/2).

The CBO/JCT analysis is available online (.pdf).