Senate Majority Leader Harry Reid unveiled his health bill yesterday. As everyone knows by now, the Congressional Budget Office (CBO) estimates that the bill would spend $848 billion to expand coverage over the next ten years, reducing the number of uninsured in 2019 by about 31 million. (The House bill would spend $1.05 trillion over the next ten years, and would reduce the number of uninsured in 2019 by about 36 million.)
As regular readers know, CBO reports two estimates of the cost of expanding coverage: the gross cost, which reflects all new spending and tax incentives to increase insurance coverage, and the net cost, which subtracts any tax revenue increases associated with coverage policies. Leader Reid, Finance Chair Baucus, and their Senate colleagues deserve credit for emphasizing the higher figure in explaining the cost of their bill. In contrast, House leaders tried to focus attention on the lower, net cost of their bill, which led to unnecessary confusion (nb: the net coverage cost of the Senate bill is $599 billion versus $891 billion for the House bill.)
Everyone following this debate should keep in mind, however, that even the gross coverage figures do not capture all the costs of these bills. As I’ve pointed out several times (e.g., here and here), the health bills include many important provisions in addition to those expanding coverage. Many of those non-coverage provisions are intended to save money and thus pay for the coverage expansions. But some of the provisions expand spending on other health programs.
To get a fair read on the total cost of the health bills, we should therefore add together the gross cost of coverage expansions and the cost of the other provisions that increase spending (or decrease revenues). I estimate, for example, the real gross cost of the Senate health bill is $940 billion over ten years:
As noted in the table, the biggest non-coverage items are new discounts for drug purchases in the Medicare Part D program, a new fund to finance efforts in prevention and public health, and a one-year doctor “fix”. Together with other provisions, they add up to a bit more than $90 billion in additional spending, Along with about $1 billion in tax reductions, that means the bill costs $940 billion over ten years, about $92 billion more than for coverage alone. (In contrast, the House bill has a total cost that’s up near $1.3 trillion.)
Caveats: CBO does not calculate a total cost figure for the health bills. The bills include dozens of policy changes, and it would be difficult (perhaps impossible) to allocate all their impacts to specific provisions. Thus, my figures should be considered approximate. I calculated the $90 billion figure for additional spending by adding up all the individual line items in Table 4 of the cost estimate that increased direct spending, with a couple of exceptions. First, I did not include the interaction effects that CBO lists as the end of the estimate because I was not sure how to allocate them; the interactions are large and could have a material effect on my estimate, potentially up or down. Second, there was one policy that led to both spending increases and spending decreases; I included the net spending increase in my figure. I am certainly open to other suggestions about how to add up the other spending in the bill. It’s also worth noting that I have taken as given CBO’s estimate of the gross cost of expanding coverage. There are some nuances in the calculation of that figure (e.g., the treatment of payments in a reinsurance program) that I need to understand better.
[...] November 20, 2009 by Donald Marron The coverage provisions in the Senate health bill have a much lower ten-year cost that do the coverage provisions in the House bill. According to the Congressional Budget Office (CBO), the coverage provisions in the Senate bill will cost $848 billion from 2010 through 2019, while the corresponding costs for the House bill are $1.052 trillion, more than $200 billion higher. (Please keep in mind, though, that the total cost of both bills is higher because of other provisions…) [...]
[...] bill are $1.052 trillion, more than $200 billion higher. (Please keep in mind, though, that the total cost of both bills is higher because of other [...]
[...] no es solo el coste de ampliar la cobertura es mayor, tenemos como resultado –y vuelvo a copiar una entrada del blog de Donald Marron- que el coste total es de 940 mil millones de [...]
There has been far more discussion of cost than of effectiveness. The fear of deficits outweighs the fear of inferior health care.
The historical fact that federal deficits not only benefit the economy, but never will be paid for by taxpayers, seems lost in the noise of misguided debt hawks.
For those who would like to see a fully paid-for universal health care, in addition to improvements in education, the infrastructure, the military, an end to poverty and continuous economic growth, you will find this site interesting: http://rodgermmitchell.wordpress.com/2009/09/07/introduction/
Rodger Malcolm Mitchell
[...] those costs in its official cost projections. The Senate bill’s estimated price tag of $940 billion, for example, includes only the costs that bill would impose on the federal government. By my [...]
[...] — not $875 billion — over the next ten years. As long-term readers know, one of my pet peeves is that the media (and many policymakers) use the phrase “cost of the health care bill” [...]
[...] $971 billion — not $875 billion — over the next ten years. As long-term readers know, one of my pet peeves is that the media (and many policymakers) use the phrase “cost of the health care bill” when [...]
[...] health care bill is roughly $1.45 trillion for spending on health insurance alone. Add in the provisions of the bill that aren't related to health insurance, and you arrive at a figure that is as close to Cannon's figure as to the CBO's. StumbleUpon| [...]
[...] health care bill is roughly $1.45 trillion for spending on health insurance alone. Add in the provisions of the bill that aren’t related to health insurance, and you arrive at a figure that is as close to Cannon’s figure as to the [...]
[...] health care bill is roughly $1.45 trillion for spending on health insurance alone. Add in the provisions of the bill that aren’t related to health insurance, and you arrive at a figure that is as close to Cannon’s figure as to the CBO’s. [...]