The new bill -- which would mandate coverage, but drop the public option -- is expected to reduce the federal deficit by about $49 billion over the next 10 years. This seems like great news. However, CBO Director Doug Elmendorf notes:
These projections assume that the proposals are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation. For example, the sustainable growth rate (SGR) mechanism governing Medicare’s payments to physicians has frequently been modified (either through legislation or administrative action) to avoid reductions in those payments. The projected savings for the Chairman’s proposal reflect the cumulative impact of a number of specifications that would constrain payment rates for providers of Medicare services. The long-term budgetary impact could be quite different if those provisions were ultimately changed or not fully implemented. (If those changes arose from future legislation, CBO would estimate their costs when that legislation was being considered by the Congress.)
This is, of course, the same objection that Megan McArdle has made. Greg Mankiw tries to put it into layman's terms:
[T]he plan would reduce the deficit if it were carried out as written, but there is good reason based on historical experience to be skeptical that it would be.
Let me try to put CBO's point in a more familiar setting: Your friend Joe, who says he want to lose weight, asks you for an extra slice of pie after dinner. Naturally, you are doubtful about the wisdom of the request. "Ahem, Joe," you whisper, "Aren't there a lot of calories in that?"
"Yes," he says, "but the pie is part of a larger plan. I am committed not only to eating that slice of pie but also to going to the gym every day for the next week and spending at least half a hour on the treadmill. That exercise will more than work off those extra calories."
"But that's what you said last week, when you asked for piece of cake. And you didn't end up going to the gym."
"Yes, I know" he replies ruefully, "but this time I really mean it . . . . Can you please pass the pie?"
I think this is pretty on-target. Heart-wrenching stories like this not only prevent lawmakers from following through with proposed cost-cutting plans, but often force them to expand benefits and increase funding to health care entitlement programs.
Update: Time Magazine offers this primer on the Baucus health bill.