Advocates of a “public option”, meaning a government medical plan, haven’t given up. There’s a highly debatable $27 billion assumption in the CBO estimate, relating to increased federal revenues from reduced employer spending on medical premiums. I phoned the CBO to clarify.
Congressman Stark requested an analysis from the Congressional Budget Office. (Full pdf here.)
The CBO estimate says,
that the proposal would reduce federal budget deficits through 2019 by about $53 billion. That estimate includes a $37 billion reduction in exchange subsidies and a $27 billion increase in tax revenues that would result because a greater share of employees’ compensation would take the form of taxable wages and salaries (rather than nontaxable health benefits) partly offset by an $11 billion increase in costs for providing tax credits to small employers.
My responsible contact at the CBO prefers to remain off the record, steering me to the public analysis upon which the letter to Rep. Stark relies. He believes the basis for credence is adequate.
The document to which he steered me, which I hadn’t read in a year or so, is the December 2008 CBO report Key Issues In Analyzing Major Health Insurance Proposals, pdf page 30 fwd. It is far from adequate.
The report states, “That relationship can be difficult to observe and may not hold perfectly for every worker at every instant.” Further on the report states, after discussing the difficulties and lags, “ For purposes of estimating the impact of proposed legislation, however, CBO makes the simplifying assumption that total compensation is fixed and that changes in the costs of health insurance translate immediately into offsetting changes in wages and other forms of compensation…”
Many eminent economists and, more importantly, many of those with practical business experience refute that CBO assumption. The employers will either retain the saved costs, for profits – which may or not be taxed, depending on tax planning – or for investment and operating expenses.
Yes, ultimately, some of that redirection of medical premium expenses may wind up taxable, which my contact at the CBO suggests, but the connections and results are even more difficult to analyze and tenuous. The “simplifying assumption” by the CBO oversimplifies. Further, in the hands of “public option” advocates is subject to abuse.
I asked the CBO whether the letter to Rep Stark should have contained a proviso of uncertainty, as many letters from the CBO often do. He replied, not necessary as there’s confidence in the assumption.
Exaggerated confidence, I say. And, I’d add, little enough reason and empirical evidence to support that exaggerated confidence. The 2008 CBO report had more proper modesty and caveats than under the current administration.
Ring a bell regarding other promoted assumptions and promises for ObamaCare?
