The Escalating Costs of the National Health Care Insurance Overhaul

21 May 2010 |

Before the U.S. Congress used parliamentary maneuvers to send the Patient Protection and Affordable Care Act (PPACA) to President Obama for his signature, Representative Jerry Lewis of California asked the Congressional Budget Office, the agency charged with analyzing congressional budgets, for an estimate on the cost of implementing the PPACA. Congressman Lewis did not receive a reply until after the PPACA became law. What the CBO admitted in a letter to Lewis last week is that the cost of the health insurance reform has ballooned by 25 percent since it was passed.

While the bill was still under debate, the Congressional Budget Office (CBO) estimated that the reforms would cost taxpayers $788 billion dollars during the first 10 years of implementation. Many critics of the bill doubted the accuracy of the CBO’s analysis. Some wondered aloud if the officials at the CBO were low-balling the figure to keep it below the politically unsavory price tag of $1 trillion.

A few days after the president signed the health care insurance reforms into law, the CBO confirmed the fears of the bill’s critics. The congressional budgeting analysts revised their estimate of the cost of the health insurance overhaul upward, from $788 billion to a whopping $940 billion.

The March revision still did not include the areas Representative Lewis, a leading Republican on the Appropriations Committee of the House of Representatives, asked about. According to the letter sent to Lewis by CBO Director Douglas W. Elmendorf, the cost of the bill is actually another $115 billion higher than the March estimate. The new price tag for the whole program stands at $1.05 trillion for the first ten years.

Taxpayers will share the cost of the health insurance unevenly, according to the taxation schemes set forth in the bill. But if everyone shared the $1.05 trillion cost equally, that add a tax burden of $3200 to every man, woman, and child in the country—or roughly $13,000 for a family of four. That is the cost in new taxes, in addition to what the family might otherwise owe. Keep in mind, those taxes do not pay for health insurance. You still have to pay your private health care insurance premiums. In fact, the new law mandates that you do.

The tax burden could even go higher, according Director Elmendorf. He wrote to Lewis:

CBO does not have a comprehensive estimate of all of the potential discretionary costs associated with PPACA, but we can provide information on the major components of such costs. Those discretionary costs fall into three general categories:

• The costs that will be incurred by federal agencies to implement the new policies established by PPACA, such as administrative expenses for the Department of Health and Human Services (HHS) and the Internal Revenue Service for carrying out key requirements of the legislation.

• Explicit authorizations for a variety of grant and other program spending for which specified funding levels for one or more years are provided in the act. (Such cases include provisions where a specified funding level is authorized for an initial year along with the authorization of such sums as may be necessary for continued funding in subsequent years.)

• Explicit authorizations for a variety of grant and other program spending for which no specific funding levels are identified in the legislation. That type of provision generally includes legislative language that authorizes the appropriation of “such sums as may be necessary,” often for a particular period of time.

CBO estimates that total authorized costs in the first two categories probably exceed $115 billion over the 2010-2019 period, as detailed below. We do not have an estimate of the potential costs of authorizations in the third category.

[Emphasis mine.]

According to the CBO, Congress has carte blanche to raise whatever sums are necessary to fund special grants and programs related to health insurance reform. One does not have to be a budget analyst to foresee that the health insurance overhaul once described by proponents as costing less than a trillion dollars over ten years will skyrocket beyond its current price of $1.05 trillion.

Imagine if I ran my business like that, furnishing you with a quote for health insurance premiums that you would build into your family budget, but adding that I reserved the right to increase premiums “as necessary” for whatever reasons I wanted. I can assure you that one hundred percent of my clients would take their business elsewhere.

Unfortunately, we taxpayers do not have that option.

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Health Insurance Reform Interview with a Doctor

12 May 2010 |

I interviewed a highly respected doctor and clinical professor of medicine at a major university about health insurance reform. His perspective was interesting.

Q. What is your opinion of the health insurance reform bill signed into law earlier this year?

A. It was a botched effort—a toxic brew of costly mandates and weak measures to control costs.

Q. Should it be repealed?

A. No, it should be changed, not discarded. Health care insurance reform is critical to the health of the nation, to its survival.

Q. What do you mean?

A. The current healthcare system—even with the new reforms—is unsustainable. We must bend the cost curve, or the country will go bankrupt. The total amount spent on health care in the United States, the National Health Expenditure (NHE) was just 7.2% of the gross domestic product (GDP) in 1970. By 2005, the NHE represented 16%. Unless more is done, the NHE will be up to 19.5% of GDP by just 2016. The trajectory is unsustainable. Healthcare is bankrupting American families. Health-related bankruptcies made up just 8% of the total bankruptcies in 1981, according to a study by Himmelstein and colleagues. By 2001, the number had climbed to 46.2% of all bankruptcies. In 2007, medical-related bankruptcies made up almost two thirds—62.1%—of all bankruptcies.

Q. Where did health insurance reform fall short?

A. It emphasized coverage rather than the original goal of cost containment. For example, it did nothing to reform medical malpractice lawsuits, therefore medical malpractice insurance will remain high. Independent estimates show that tort reform alone would reduce the NHE by 20 to 25%. Yet, when the president spoke to the American Medical Association in June 2009, he declared that tort reform would not be part of the reforms.

Q. Did Republicans do the right thing in opposing reform law?

A. No. They should have worked with the Democrats to make the changes needed for a sustainable system. Instead, they talked about the rationing of healthcare and death panels that would decide who lived and who died at the end of life. They should have admitted that we already have “soft” rationing of health care. They helped perpetuate the myth that everyone can receive every kind of care at every stage of life. That simply is not feasible.

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