The New Health Dialogue

We know that preliminary —and we're about to explain just how preliminary—cost estimates of Democratic-authored health reform legislation immediately become grist for the health reform political mill. But instead of looking at how the Congressional Budget Office's preliminary cost estimate gets spun, let's look at what it actually says.

Congress Daily (subscription required) has just reported that preliminary version of the Senate Finance Committee's bill would cost $1.5 billion over 10 years. No details yet, but remember, as committee chairman Sen. Max Baucus cautioned these are early numbes from not-yet-complete legislation.

Yesterday the CBO found that under the Senate Health, Education, Labor and Pensions Committee's health reform bill —or more specifically, the coverage expansion portion of the bill (Title 1 of 6) —a net of 16 million fewer Americans would be uninsured by 2019. The cost would be just over $1 trillion over that 10 year period.

These results may strike you as underwhelming—a fairly high cost for a fairly small reduction in the number of uninsured. ("Not much bang for a Trillion Bucks," is how one Republican press release read). Read the fine print. The CBO's letter to HELP committee chairman Senator Edward Kennedy emphasizes the fact that these are only preliminary findings. It does not include any of the cost-saving, delivery-system reform measures and is missing a couple of key coverage-expansion components.

Specifically, the estimate doesn't address the HELP bill's provision allowing coverage of dependents until age 27 or, more significantly, a yet-to-be-determined expansion in Medicaid eligibility. It also only includes a fairly weak individual mandate (a $100 penalty for not taking-up health insurance) which underestimates the impact of such a policy. The main reason for these oversights in coverage expansions is that these portions of the bill have not been decided yet. They will be debated during the committee markup (which as of now is expected to starte Wednesday and last through next week).

In terms of the cost of the HELP bill, here's a run down of what the CBO included. All numbers represent the 10 year costs/offsets.

• There would be a net increase in deficit of $1.0 trillion over 10 years
• Costs:
  • Subsidies: the average subsidy per enrollee would be $6,000 in 2019 (average includes those who receive zero subsidy)
  • Tax credit for small employers: $60 billion
• Offsets:
  • Increased tax revenue
  • Payment of penalties for not having health insurance: $2 billion if penalty was roughly $100
  • Reductions in Medicaid/SCHIP outlays: $38 billion

While we might have hoped for a more optimistic cost-assessment by the CBO (and we're awaiting the details on the Finance bill), it is important to remember that this is just a first draft. This first stab has merely whet our appetite for a more robust score of a final, bipartisan bill for health reform.