CBO on the New HELP Bill

On Thursday evening, the Congressional Budget Office (CBO) released a preliminary analysis of the latest version of Title I of the Affordable Health Choices Act, commonly known as the HELP bill or the Kennedy bill (since it’s the product of the Senate Committee on Health, Education, Labor, and Pensions which Senator Kennedy chairs).

Based on a quick review, here are the top six things I think you should know about the cost estimate:

1.  The analysis is preliminary. CBO and the Joint Committee on Taxation have not yet had time to analyze every provision in the bill, some provisions remain in flux, and new provisions may be added. Health policy continues to be a moving target.

2. The headline cost of the bill — about $600 billion over ten years — is significantly lower than the $1 trillion net cost of the previous version of the bill. The net costs declined because (i) the subsidies for coverage through health insurance exchanges are now smaller, (ii) employers would have to pay a penalty if they do not offer insurance to their workers, and (iii) it would be much harder for employees to get subsidies in the exchange if their employer offers health insurance.

Note: The new CBO tables cover Title I of the bill, which has a net budget cost of $597 billion.  CBO had earlier scored other portions of the bill as costing $14 billion. As a result, you will hear some commentators using the $597 billion figure and others using $611 billion.

3. As usual, it’s important to unpack the headline cost into its constituent parts: the 10-year cost of expanding health insurance coverage in Title I is about $743 billion and a separate provision adds an additional $10 billion. That $753 billion cost is then partially offset by penalties on employers who don’t offer coverage to their workers ($52 billion), penalties on uninsured individuals ($36 billion), higher income and payroll taxes ($10 billion), and the net premiums generated by a program (CLASS) to provide long-term care insurance ($58 billion). The income and payroll tax offset is much smaller than in the previous version of the bill because the current draft would have a much smaller impact on employer-provided health insurance.

4. The bill includes provisions for a public plan, but CBO concludes that these provisions would “not have a substantial effect on the cost or enrollment projections.” CBO reaches that conclusion because “the public plan would pay providers of health care at rates comparable to privately negotiated rates–and thus was not projected to have premiums lower than those charged by private insurance plans in the exchanges.” In short, the reduced cost of the bill is due to the factors outlined in the previous paragraph, not to the public plan.

5. The bill would reduce the number of uninsured by about 37% by 2019; in that year, the estimated number of uninsured would fall from 54 million to 34 million. That reduction is a bit larger than CBO estimated for the previous version of the bill. Senators Kennedy and Dodd have expressed the desire to reduce the number of uninsured much more dramatically, but that would presumably require Medicaid expansions that are not included in this cost estimate. (As CBO notes, the uninsured includes some who are eligible for Medicaid, but haven’t enrolled, as well as some unauthorized immigrants.)

6. By 2019, about 27 million people (10% of the non-elderly population) would get health insurance through exchanges. That figure includes about 20 million who would have been uninsured, 6 million who would have had other types of non-employer health insurance, and 1 million who would have been enrolled in Medicaid or CHIP. CBO estimates that there would be very little reduction in employer-provided health insurance; that’s a big change from the previous version of the bill, which CBO estimated would result in 15 million fewer people getting employer coverage in 2019.

5 thoughts on “CBO on the New HELP Bill”

  1. Donald,

    This is a great summary of the CBO analysis. I am really enjoying your blog. It covers so many important topics from economics to markets to stock analysis. Keep up the fantastic work.

    1. Good summary, Donald!

      To the “curmudgeonly” poster, I would have to agree. CBO explicitly said in a letter to Sen. Kay Hagan (available on CBO’s website) that the CLASS Act would likely produce a net deficit in years beyond 2019 and that the premiums as written were unlikely to be sound.

      Howard Gleckman of the Urban Institute cites another CBO report saying the monthly premiums should be $100-110 (with mandatory participation; CLASS as written is opt-out). I think the CLASS Act is good policy but I doubt it will pass. That said, advocates interested in getting it passed might recommend that they enact only the first benefit tier ($50). I think that could get premiums down into the $70-ish range.

      http://www.urban.org/publications/1001290.html

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