Updated: Cbo's Preliminary Estimates

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THE TREATMENT MAY 15, 2009

Updated: Cbo's Preliminary Estimates

How much will health care reform cost? At this point, it's arguably the single most important question of the debate. And now, for the first time, we're getting some real answers. Or, at least, what counts for real answers in Washington.

They come from the Congressional Budget Office (CBO). As I explain in a new article for the print magazine:  

When Congress writes a bill, the CBO is the agency that determines how
much implementing it will likely cost. And that's no small matter. For
every extra dollar in new expenditures that the CBO projects, Congress
must find a new dollar in revenue--or learn to live with a new dollar
in deficits. Back in 1994, the CBO decided that paying for universal
health insurance under the Clinton plan would cost more than the
administration thought it would. That forced Bill Clinton and his
allies to propose additional regulations on insurance prices, incurring
a political liability that helped seal the plan's fate.

So what does CBO think this time around? Late last month, after weeks of working overtime to keep up with the huge domestic agenda, CBO began delivering some prelimiary estimates on health reform. According to several sources familiar with the estimates, it's something of a good news/bad news story: 

The good news for reformers is the CBO's
determination that expanding health-insurance coverage would cost a
lot less than many outside experts had predicted. Instead of a
politically daunting $1.5 trillion, the CBO figures the price tag will
be closer to $1 trillion, at least under certain parameters. But the
reason for the lower estimate is a bit unsettling. Even with a
requirement that everybody obtain insurance--a so-called individual
mandate--the CBO assumes a that between a quarter and a third of the
uninsured still wouldn't have coverage. That would leave the country
short of universal coverage, the goal Obama and his allies have
repeatedly cited.

To be clear, these figures are not final. They are preliminary projections, based on rough proposals that reformers in the Senate submitted for consideration. We don't even know--well, I don't even know--exactly what the specifics of those proposals were.

Still, it's safe to assume that the proposals sent over by the Senate are in the ballpark of what they'll try to pass this summer--which, it turn, won't be that far from what the House tries to pass. Bottom line: If you're a wonk like me, trying to figure out how much money it will cost to get reform done right, it's safe to assume the number will be north of $1 trillion, but perhaps not as far north as a lot of people thought, albeit with a modest group of people still uninsured.*

The same sources who provided these numbers say that CBO is also tipping its hand about a few other things--like whether information technology, data on the effectiveness of treatments, and other delivery reforms can save money and whether the money people pay for insurance should count as a tax. But, in those cases, the deliberative process isn't as far along. Instead, CBO officials and staff are consulting widely--with congressional staff, outside experts, etc.--about how to make assessments as fairly and accurately as possible.

To read more about these unsettled issues--and CBO's evolving role in the health debate--read the full article here. And to read more about the underlying questions on the cost of reform, particularly this nettlesome issue of how much money reform can save, watch for more posts in The Treatment this week. 

*Update: A source I contacted over the weekend offered an important clarification. The figures I cite do not reflect the full cost of the plan; they take for granted the money employers would pay into the system.

Remember, the schemes Obama and his allies have been pushing would call upon businesses to contribute towards the cost of insurance, either by providing workers with coverage directly or by paying into a fund that would help subsidize coverage for the uninsured.

In general, experts seem to assume such an "employer mandate" would raise somewhere in the neighborhood of $200 or $300 billion over ten years. Add that to the figures I cite, and you get a total cost for coverage that gets closer to $1.5 trillion than $1 trillion, rather than the other way around.

Why did I cite the figures this way? Because that's the way both staff and outside advisers discussed budget figures during the presidential campaign. But plenty of people still oppose an employer mandate--and, without one, we'd have to come up with some other source of financing.

None of this affects the overall interpretation, by the way. The number could have been much higher; many people in the administration and on Capitol Hill were assuming it would be. It's not, for the reasons I explain above and in the article. 

--Jonathan Cohn

 

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