CBO estimate of the Kennedy Health Care bill came out yesterday.
Privately, most Democrats will tell you that the HELP plan is not the plan to watch in the Senate; that’d be the Finance Committee’s draft legislation, due out very soon. So it might not matter what the CBO’s HELP score is, even though elements of the legislation will be very similar.
But you can’t blame the Republican Party for finding a way to exploit the partial release. Given the ease with which the CBO numbers are digested on Capitol Hill, the GOP now has a significant talking point, one that’s reflected in news coverage already: the President says health care will be revenue-neutral, but the Kennedy plan in the Senate would add at least $1.3 trillion to the deficit…and wouldn’t cover half of the uninsured! Sure, the bill’s a work in progress, but it could get worse, right? You can see the ads now: a melifluous voice asking “Can we really afford to spend 1.3 trillion dollars?”
Ambinder links to Jonathan Cohn in TNR:
But wait. The Senate HELP bill is not yet finished. Like the house design without the plumbing, wiring, and roof, the HELP bill is missing several key elements that would dramatically change the final estimate.
The most important of these, by far, is the employer mandate–that is, the requirement that employers either pay for their workers’ coverage or pay the cost of covering them through a new insurance exchange, set up and run by the government. The HELP bill has a big blank in the employer mandate, because it was an area over which the committees Democrats and Repbulicans were still negotiating when the committee submitted its language.
An employer mandate would change the projections in two ways. First, it would raise money, because of the employers who opted to pay into the exchange. Most likely, an employer mandate would raise between $200 and $300 billion, depending on the details.
The second way an employer mandate would affect the projections is more subtle–but, in some ways, more important. If you make insurance available to everybody through an exchange, fewer employees will demand coverage of their employers (and those that do may not demand it quite so strenuously). As a result, fewer employers will offer insurance in the first place. So you’re basically swelling the ranks of the uninsured in one way, even as you’re shrinking it in another.
95% of the spending, $1,279 billion over the next ten years, comes from the new subsidies for individuals. This spending does not begin until year 3 (2012), and it’s not fully effective until year 6 (2015). This is a normal effect of implementing such a huge and complex policy — it takes several years to phase in. While the $1,279 billion represents the actual effect on the federal budget of this bill, we can see that the phase-in reduces the cost quite significantly. The green area is 71% of the area under the blue line, which is my estimate of the hypothetical cost of a bill that were it fully effective on day 1. I am not arguing that the “real” cost is the area under the blue line, but instead that focusing only on the 10-year total disguises the true long-term cost of this new entitlement spending. The Kennedy-Dodd draft creates new health spending entitlements that would grow 6.7% per year, faster than our economy, which CBO projects to grow about 4% per year (nominal) in the long run. This means the new health entitlement spending would eat up a larger share of the economy over time.
A net decrease of 16-17 million would still leave about 30 million uninsured, according to the figures thrown around by ObamaCare advocates. It would simply exchange individuals in the uninsured category, and those most likely to lose their coverage would be those in lower-income jobs, as well as people working in small businesses and startups.
We would spend a trillion dollars to achieve a net result of solving a third of the uninsured problem. We could have exceeded that by simply paying for private insurance. Assuming an annual cost of $5,000 for basic catastrophic and wellness coverage, we could purchase 20 million plans for the ten years, without overhauling the rest of the American health-care system.
Two posts from Ezra Klein, here and here.
You might ask what the HELP Committee was thinking, sending Swiss cheese legislation to CBO. Well, the HELP Committee’s expectation was that the CBO, in crafting its preliminary score, would assume something similar to the outline it had seen months before. The CBO didn’t. In fact, it did the opposite. CBO ran its estimates with no employer mandate and an individual mandate with a laughably small penalty.
Members of HELP were thus shocked by yesterday’s score. The specific provisions of the bill that the CBO examined did not look like the bill HELP intends to write. Which means that the numbers aren’t correct. If HELP is writing a bill with a strong employer and individual mandate, and CBO scores a bill with no employer mandate and a weak individual mandate, that’s not a useful estimate.
By Monday night, members of the HELP Committee were scrambling to give the CBO something closer to the final legislation to examine — this time including rough details of the employer mandate and the individual mandate. They’re hoping to have a new set of estimates by Friday, though that’s probably ambitious. Either way, I wouldn’t put too much stock in these numbers.
UPDATE: Jon Cohn and Ezra Klein are worried about health care passing, notes Marc Ambinder.
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