CBO cost estimates for health care – read the fine print

You are probably reading about the CBO estimates for the Senate health care bill including a net positive effect on the deficit. What you don’t here are things like the increased cost being imposed on the private sector, the costs for the IRS and HHS to run the new bureaucracy that are not part of these calculations, the fact that only 4-5 million Americans will join the public option and that the option’s premiums may be higher than the private sector in part because the government plan will not manage claims (just like Medicare). You probably won’t hear that the new Long Term Care insurance that is added to this bill will generate over $72 billion of the assumed revenue because claims cannot be paid for five years after premiums begin to be paid by Americans.

And you probably won’t here much about what the CBO blog says in the last sentence in this paragraph (I added emphasis):

“Based on the extrapolation described above, CBO expects that Medicare spending under the bill would increase at an average annual rate of roughly 6 percent during the next two decades—well below the roughly 8 percent annual growth rate of the past two decades (excluding the effect of establishing the Medicare prescription drug benefit). Adjusting for inflation, Medicare spending per beneficiary under the bill would increase at an average annual rate of roughly 2 percent during the next two decades—much less than the roughly 4 percent annual growth rate of the past two decades. Whether such a reduction in the growth rate could be achieved through greater efficiencies in the delivery of health care or would reduce access to care or diminish the quality of care is unclear.”

And what about costs imposed on the private sector, here is what the CBO says:  

“The total cost of mandates imposed on the private sector, as estimated by CBO and JCT, would greatly exceed the threshold established in UMRA for private entities ($139 million in 2009, adjusted annually for inflation). The most costly mandates would be the new requirements regarding health insurance coverage that apply to the private sector. The legislation would require individuals to obtain acceptable health insurance coverage, as defined in the legislation. The legislation also would penalize medium-sized and large employers that did not offer health insurance to their employees if any of their workers obtained subsidized coverage through the insurance exchanges. The legislation would impose a number of mandates, including requirements on issuers of health insurance, new standards governing health information, and nutrition labeling requirements. CBO estimates that the total cost of intergovernmental mandates would greatly exceed the annual threshold established in UMRA for state, local, and tribal entities ($69 million in 2009, adjusted annually for inflation). The provisions of the legislation that would penalize those entities—if they did not offer health insurance to their employees and any of their workers obtained subsidized coverage through the insurance exchanges—account for most of the mandate costs.”