How Much Does Health Reform Cost?

It figures that CBO would release its much-awaited score just as I was boarding a plane to go to a conference. So apologies for being slow to the party.

The headlines are reporting that CBO scored the health reform effort as costing $940 billion over the next ten years. Readers of this blog know that isn’t correct. The $940 billion figure refers only to the coverage expansions in the legislative package. There are also many other health reform initiatives–e.g., filling the “doughnut hole” in Medicare’s prescription drug benefit and increasing funding for community health centers and prevention efforts–in the legislation. Add it all up and the ten-year cost of health reform is about $1,072 billion.

Bonus question: How much does health reform reduce the budget deficit?

The headline claim is that CBO says the health reform package will reduce the deficit by $138 billion over the next ten years. That’s not right either. First of all, the health reform has now been stapled together with student loan reform in order to deal with some of the specifics of reconciliation. The student loan package accounts for $19 billion of the ten-year savings. So at best health reform should get credit for $119 billion in deficit reduction. But then there’s the CLASS Act gimmick. Lop that off and health reform really should be credited with $49 billion in deficit reduction. And even then it isn’t really health reform that’s creating those reductions. The health policy changes are actually expanding the deficit over the next ten years; other, non-health tax increases offset those increases and provide some deficit reduction.

Lest I be viewed as relentlessly beating on the package, let me offer a second bonus question:

Does the package generate budget savings only because it’s using ten years of taxes to pay for six years of benefits?

This appears to be a common refrain among opponents of the package. But it doesn’t hold up either. It is true that the new health benefits don’t start in earnest until 2014; that helps keep the ten-year sticker price down. But those six years of costs are offset by a combination of spending cuts and tax increases during those years, even if you strip out the CLASS Act gimmick. And in the second decade, CBO tells us that the bill reduces the deficit significantly more if–and this is a huge if–it executes as written.

22 thoughts on “How Much Does Health Reform Cost?”

  1. Please ponder the following questions:
    What does it cost an employer to provide family health care coverage to an employee? [My estimate is $15k; but use your own]
    What can that employee buy family health care coverage for on the exchange if the employer doesn’t provide it (assume income is less than 4 times the poverty level)? [My estimate is $5k on average]

    If you were an employer, would you continue to pay to provide such healthcare if the employee could buy it much less expensively himself? [No]

    What is the average family exchange subsidy per year? [$10k]

    How many working families make less than 4 times the poverty level? [30 million]

    If all of these families buy exchange subsidized coverage, what will the annual subsidy cost be? [$300 billion]

    How much such subsidy cost has the CBO estimated? [$5 billion]

    How far off is the CBO estimate? [more than $1 trillion over the last six years of ten]

  2. Somehow we can spare hundreds of billions of dollars to send our young men and women to die in Iraq and Afghanistan. On the other hand, spending money to make sure that our fellow citizens have health insurance is too costly. Money to kill but not to heal. Are these Christian values? They certainly are not my values.

    1. What does one have to do with the other?

      The problem is that we have no money to “spare.” Congress needs to concentrate on encouraging an environment that promotes a healthy economy and job growth and stop spending money they don’t have.

      But wait, I guess I’m wrong. There should be plenty of new jobs in the health insurance industry with the explosive boom in revenue they are about to receive between forced insurance payments and taxpayer-paid payments. The health insurers are laughing all the way to the bank.

  3. Didn’t the American tax payers just spend 28 Trillion to bail out wall street and the banks ? WOW! Isn’t that amazing that spending OUR TAX dollars to bail out the rich is such a quick and easy effort BUT when it comes to using the money for the greater good of health care it’s the end of the dam world…. Help me understand this because it makes NO SENSE! I for one would rather have single payer and eliminate the insurance companies all together BUT right now it’s better to pass something that will at least help people with pre-existing conditions get health coverage and at the very least stop the evil practices of the insurance companies….. SADLY the our government should have given us a public option so Americans at least could have a choice!!!!!! Eventually it will happen… BUT we cannot wait another 20 years while Americans suffer … SOMETHING has to be done now ….

    1. Stu, you and Geoffrey sound like you’re already in Congress. You justify new bad legislation with old bad legislation.

      Our elected representatives are ignoring HUGE looming deficits with the entitlement programs that are already in place. Instead they are proposing new entitlement programs, bailing out entities that should be allowed to fail and pursuing dubious foreign policy.

      The bottom line IS the bottom line. We’ve got to quit spending money we don’t have. If not, being uninsured will be the least of our childrems’ worries.

    2. Stu!
      The CBO, by law, scores with tainted numbers from our congress. We have $105+ TRILLION in unfunded liabilities for MediCare, MediCaid and Social Security.
      A bail out for wall street was wrong. We have bankrupcy laws to sell off assets and restucture debt. These laws were ignored as was the regulation of over 400 regulators overseeing AIG. Idiots.
      Capitalism did not fail. Our government is failing.
      ObamaCare is a tax on me. I must pay for this? NOT!
      How can you equate the bailout -paid back BTW, to an tax driven entitlement that will never end until it eats you, entirely.

  4. One’s right to free speech does not cost me money, forced from my pocket at the point of a gun as does this new helthcare ‘right’. This is wrong as is so many of our government’s policies, by ‘the consent of the ‘ ruled.

    I have ben betryed. I don’t need to feel betrayed – it is very real.

    If I give to others freely, this has been diminished by the Current congress and POTUS.

  5. I don’t think anyone would argue that it is unfair that insurance companies drop you when your sick and refuse coverage for even the slightest pre-existing condition. I have a pre-existing condition and was unable to obtain insurance when my husband lost his job BUT, I strongly believe my freedom ends where your nose begins. I wouldn’t be comfortable having my benefit devastate your family and neither should any of you. The government now mandates that families pay for their own insurance (unless making under fed. pov. level which is $30000 a year for a family of four.) The average health plan for a family costs more than a mortgage and the “subsidies” will be in the form of tax credits at the end of the year. further, mandates will make coverage rise even more because companies can’t risk assess. The Central Valley, where I live, has a 20% unemployment rate and $30000 a year is NOTHING to live on here. What right does anyone have to take food away from anyone else’s kids so that an insurance company no longer has the right to deny them. I want insurance reform too but this was not the way to go about it.

    Some light reading . . .

    http://content.healthaffairs.org/cgi/rep
    rint/19/1/72.pdf

    http://www.usatoday.com/money/industries
    /health/2009-08-30-health-insurance-pr
    emiums-debate_N.htm

    http://www.usatoday.com/money/industries
    /health/2009-08-30-health-insurance-pr
    emiums-debate_N.htm

    Potential cost to you: If you’re an individual making over $280,000 or a family with income over $350,000, you could eventually be looking at a tax surcharge of from 1.0 to 5.4 percent on your income above that amount.

    The current bill would impose an income tax surcharge starting at 1.0 percent on the top 1.2 percent of earners in the country, or individuals with adjusted gross incomes over $280,000 and families that earn more than $350,000 (some legislators are calling for a higher threshold, however). The Joint Committee on Taxation estimates that the surcharge would have no impact on 96 percent of small businesses, but “imposing taxes on anybody in a recession is not going to promote economic growth,” says Joseph Antos, a health policy expert at the right-leaning American Enterprise Institute. Negotiators on the Senate Finance Committee reportedly prefer to raise revenues to pay for health reform from within the health care system itself, by taxing the value of health insurance benefits, for example, or penalizing employers who don’t offer health insurance.

    “Now the CBO, the new one on the new reconciliation bill that’s out says the number of people who will lose their current insurance coverage by 2016 stands at 8 million. This is according to the Congressional Budget Office. That’s because employers give up — they wouldn’t provide health insurance anymore, they would pay the penalty, the payroll tax increase. But he keeps on saying that ahead of the weekend.”

    In short, new taxes and less employer sponsored health plans.

  6. The American Gov. is killin’ us. Can’t the whole population notice that this absolutely will drive up taxes for us all and even create brand new ones for everybody?

  7. I am outraged that some people think health care to be an unalienable right. Speech does not infringe upon my wallet. You, Denise may say whatever you wish. It costs me nothing. But to send the money I work my ass off to those who simply ‘can’t ‘ afford health care is bogus. especially since the FeEDs new plan won’t cover all. AND it will most likely be 60 X what the CBO figured based on their STATIC evaluation with numbers supplied by Harry Reid and Nancy Pelosi.
    If you are concerned about the money spent to go to war that is entirely different

  8. Americans have been screwed over by the Republicans not unlike the Conservatives in Canada putting the goose to Canadians!

    Canadian Health care (not socialism!) covers 100% of our our population and several boatloads of immigrants, some from the US. The cost of the Canadian Health Care System is 6.4% of the GDP (Gross Domestic Product)

    American Health care, long ago forced on the way of corporate glory presently leaves 60 million Americans without any health care at all and cost the Americans 16% of their GDP.

    The Canadian Conservatives are trying to force us into a US type system and it will probably cost them their office.

  9. Hey there just wanted to give you a quick heads up.
    The text in your post seem to be running off the screen in Firefox.
    I’m not sure if this is a formatting issue or something to do with browser compatibility but I thought I’d post to let you know.
    The design look great though! Hope you get the problem resolved soon.
    Cheers

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