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Grassley: CBO Score Being Wrongly Played

The Democrats pushing for comprehensive health care reform this year got a boost yesterday when the non-partisan Congressional Budget Office estimated that the Senate Finance Committee’s $829 billion proposal would save the government $81 billion over 10 years. But don’t tell Sen. Charles Grassley (R-Iowa) that’s good news. The finance panel’s senior Republican said yesterday that the focus on the deficit-reduction figure is misplaced, considering how the money will be generated.

“A celebration of the deficit effects masks who pays the bills,” Grassley said in a statement.

This package includes hundreds of billions of dollars in new taxes and fees. … Premiums would increase as early as 2010, before most of the health reforms, including tax credits to help people pay for health insurance, take effect. Uninsured individuals would pay a tax for not obtaining government-approved health insurance. Employers who already offer health insurance would face a penalty if their workers choose subsidy-eligible insurance.

“With all of this,” he added, “the bill spends nearly $1 trillion and still leaves 25 million people without health insurance. That’s not much bang for the buck.”

The argument that new costs pushed on businesses will simply be passed along to consumers is hardly a new one. Indeed, it’s been a central criticism of the Finance bill all along. “Businesses do not pay taxes,” Sen. John Ensign (R-Nev.) said last week during the Finance debate. “People do.”

They’re not wrong. Take, for example, the experience in San Francisco, where a 2007 law required that employers with more than 20 employees provide health insurance to those workers. William Dow, economics professor as the University of California, Berkeley, told The New York Times this week that those costs are, indeed, being passed to workers and consumers.

Some businesses will pass on costs to their employees, who will take home less in wages and more in health benefits. Local service industries like restaurants can try to pass the cost on to customers. It’s not like there’s a competing restaurant industry overseas that will undercut them. What we’re seeing is that about a quarter of restaurants are adding an average 4 percent surcharge to prices. Some are hiking prices on menus. Others add the surcharge to the bill at the end.

Importantly, though, the trend hasn’t had any considerable effect on employment, Dow said.

Opponents like the Golden Gate Restaurant Association said that employers would lay off workers if it went into effect. We’ve done analyses of employment in San Francisco, and we don’t find any evidence that employment is going down due to Healthy San Francisco. The dire predictions don’t seem to be borne out. That’s consistent with the literature on minimum-wage hikes, which have not had large negative employment effects either.

Both trends are lessons for lawmakers to consider as the health debate moves forward.

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