CBO score: everyone covered, except 37 million
Letter to Sen. Edward Kennedy, Chairman, Committee on Health, Education, Labor, and Pensions
From CBO Director Douglas Elmendorf
Congressional Budget Office
June 15, 2009
The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) have completed a preliminary analysis of the major provisions related to health insurance coverage that are contained in title I of draft legislation called the Affordable Health Choices Act, which was released by the Senate Committee on Health, Education, Labor, and Pensions (HELP) on June 9, 2009. Among other things, that draft legislation would establish insurance exchanges (called “gateways”) through which individuals and families could purchase coverage and would provide federal subsidies to substantially reduce the cost of that coverage for some enrollees.
Effects on Insurance Coverage.
According to the preliminary analysis, once the proposal was fully implemented, the number of people who are uninsured would decline to about 36 million or 37 million, representing about 13 percent of the nonelderly population.
Budgetary Impact of Insurance Coverage Provisions.
On a preliminary basis, CBO and the JCT staff estimate that the major provisions in title I of the Affordable Health Choices Act affecting health insurance coverage would result in a net increase in federal deficits of about $1.0 trillion for fiscal years 2010 through 2019. That estimate primarily reflects the subsidies that would be provided to purchase coverage through the new insurance exchanges, which would amount to nearly $1.3 trillion in that period.
Those costs would be partly offset by receipts or savings from three sources: increases in tax revenues stemming from the decline in employment-based coverage; payments of penalties by uninsured individuals; and reductions in outlays for Medicaid and CHIP (relative to current-law projections).
It is important to note, however, that those figures do not represent a formal or complete cost estimate for the draft legislation, for reasons outlined (in the letter). Moreover, because expanded eligibility for the Medicaid program may be added at a later date, those figures are not likely to represent the impact that more comprehensive proposals — which might include a significant expansion of Medicaid or other options for subsidizing coverage for those with income below 150 percent of the federal poverty level — would have both on the federal budget and on the extent of insurance coverage.
http://www.cbo.gov/ftpdocs/103xx/doc10310/06-15-HealthChoicesAct.pdf
Comment:
By Don McCanne, MD
Since the Affordable Health Choices Act and the CBO analysis of it are works in progress, the estimates of the net numbers who will gain insurance coverage and the net cost to the government are only preliminary and will likely change with refinements in the legislation and the analysis. What will not change are the fundamental implications of financing health care through government subsidized private health plans plus public programs.
The primary reform goals that most of us support include providing health insurance for everyone that is effective in preventing financial hardship, and controlling the rate of increase in our health care costs. What does the CBO response tell us about the potential of this legislation to meet these two goals?
Regarding the impact on our national health expenditures (NHE), the analysis tells us almost nothing. As with most reports of this nature, they looked primarily at government spending rather than total health care spending. Individuals, employers and the government are all concerned about health care costs. Tax and budget policies that satisfy fiscally conservative legislators by effectively capping government spending while shifting cost increases to individuals and employers do not help us, as a nation, to meet the challenges of run-away health care costs that are harming so many of us. Looking at government spending while ignoring private spending is of little value to us when we are trying to figure out how we are going to pay for health care.
CBO needs to provide us with an estimate of changes in our NHE since we are all paying that. Providing us, in addition, with estimates of government spending can be helpful in establishing tax policies that would help bring equity to health care financing. But let’s have transparency on our full health care spending, public and private.
Regarding the impact on the numbers who will become insured, analyses such as this can provide a ballpark figure. The fact that the policies outlined in the current draft of the legislation would leave 37 million people without coverage likely has Senate HELP Committee members scurrying to patch the holes in the legislation and to look for other refinements that would expand coverage to more individuals.
There is an inverse relationship between government subsidies and the numbers of individuals who are left uninsured. Increasing the number of individuals eligible for the subsidies and increasing the amounts of the subsidies reduce the numbers of individuals left out, but that number will never be zero. A policy of using government subsidies to purchase private plans will always fall short of universality. The only way to cover absolutely everyone is to make enrollment automatic, and to separate the financing by changing from premiums linked to individual plans to a global system financed through equitable tax policies.
Looking only at the numbers of individuals left without insurance skirts another crucial issue. The rate of underinsurance is exploding. Offering multiple tiers of different priced plans in an insurance exchange automatically results in an expansion of underinsurance. Even with subsidies, healthy individuals will select inadequate plans with the lowest premiums, sincerely believing that this is all they can afford. But what good is insurance if you can still be left bankrupt with medical bills?
This proposal leaves too many without health insurance, fails to control our escalating health care costs, and expands the market of underinsurance products. The staff members at CBO, JCT, the HELP Committee, the Finance Committee, and the House Committees will get busy introducing policy refinements for the legislative proposals. Then they will finally bring us a product that leaves too many without health insurance, fails to control our escalating health care costs, and expands the market of underinsurance products.