Yesterday, the CBO estimated that the current Democratic Senate health care bill would increase the defict by $1 trillion over 10 years while leaving 30 million uninsured, forcing the White House to distance itself from the legislation. While liberals have tried to emphasize that the CBO provided only a partial analysis of the draft legislation from Ted Kennedy's Health, Education, Labor and Pensions Committee, a more comprehensive analysis of the legislation will only serve to drive the bill's ultimate cost higher. For instance, because it was only working with a draft of the bill that had holes in it, the CBO did not estimate the costs associated with increasing Medicaid elgibility to 150 percent of the poverty level, or the full cost of providing subsidies to individuals with incomes at up to 500 percent of the poverty level to purchase insurance through state-run exchanges. Once this is taken into account, liberals are right that the final CBO estimate will reflect more people being insured, but the cost of the legislation will go up as well.
Health Systems Innovations Network, a consulting group, went ahead and estimated the full cost of a bill that included the subsidies and Medicaid expansion, and reduced the number of uninsured by 99 percent. With these assumptions, they estimated (pdf) the cost at a staggering $4 trillion over 10 years, resulting in the shift of 79 million Americans to government-run health care. The report does not include possible tax increases or spending offsets, but notes that, "this would be a challenging proposal to finance with budget neutrality."
President Obama, in a speech to the American Medical Association on Monday, declared of the price tag of health care legislation: "it is a cost that will not – I repeat, not – add to our deficits."
UPDATE: I just spoke with Steve Parente, principal at HSI, who explained that the main reason why the group's estimate is so much higher than the CBO is that it assumes more people will buy coverage with government help. "We see a lot of people taking advantage of that subsidy, because it goes so far up the income threshold," Parente said. To be clear, 500 percent of the poverty level translates into income of $110,000 for a family of four. He also said HSI would revise the estimate if a new version of the legislation proposed new cost savings. However, he said it's difficult to estimate savings from the adoption of information technology and increased prevention. IT, for instance, could turn into an "unfunded mandate" on doctors and hospitals, while not all forms of prevention are created equal. Flu shots, for instance, are relatively cheap, but providing mammograms to some age groups can be quite costly.