Former Acting Director of CBO Says House Health Care Bill Costs Near $1.3 Trillion

Donald Marron, visiting professor at the Georgetown Public Policy Institute and former acting director of the Congressional Budget Office, pegs the actual cost of the House Democrats’ health care plan at nearly $1.3 trillion.

The $1.055 trillion number that I’ve been reporting represents the gross cost of the coverage provisions alone, which account for a bulk of the proposed spending. But there are all sorts of other costs associated with the bill, even though they’re balanced by various tax increases or proposed spending cuts elsewhere. When Marron added up all of the other spending of the bill, he came up with $1.273 trillion.

You can read his explanation, and check out his math, here.

More on Why the Actual Cost of House Health Care Bill Tops $1 Trillion

As I previously noted, the Congressional Budget Office actually said the House health care bill would cost $1.055 trillion from 2010 to 2019, even though most news accounts focused on the $894 billion figure. The difference is that the lower figure includes the offsetting taxes collected from individuals who do not purchase insurance and on businesses that do not provide insurance.

The most basic test of media fairness is that they should at least use comparable numbers when reporting the costs of various bills. Unfortunately, the media mostly failed on this account.

Remember how when the CBO score of the Senate Finance Committee bill came out it was widely reported to cost $829 billion? Well here’s where that number came from, quoting from the CBO: “the “net cost itself reflects a gross total of $829 billion in credits and subsidies provided through the exchanges, increased net outlays for Medicaid and the Children’s Health Insurance Program (CHIP), and tax credits for small employers…”

Well here’s what yesterday’s CBO estimate of the House bill had to say: the “net cost itself reflects a gross total of $1,055 billion in subsidies provided through the exchanges  (and related spending), increased net outlays for Medicaid and the  Children’s Health Insurance Program (CHIP), and tax credits for small employers…”

So clearly, the correct number to report regarding the House bill was the $1.055 trillion figure. The New York Times’s Prescriptions blog, to its credit, concluded that: “a closer look at the budget office report suggests that the number everyone should have reported was $1.055 trillion, which is the gross cost of the insurance coverage provisions in the bill before taking account of certain new revenues, including penalties by individuals and employers who fail to meet new insurance requirements in the bill.”

But instead, most of the media assisted Democrats by reporting the lower figure, which helps them claim that they met President Obama’s pledge that the overall cost of health care legislation would be less than $900 billion.

How Democrats’ Health Care Bill Will Punish Businesses, Trigger Unemployment

One of the most onerous aspects of the House Democrats’ health care legislation is the employer mandate, which would tax employers who do not offer health insurance to their workers. Not only does the proposal impose new costs on employers, but a whole new layer of red tape, both of which would undoubtedly lead to job losses and lower wages. But I thought it would be worth taking the time to walk everybody through just how onerous the requirements are in this particular provision, which starts being described on page 268 of the 1,990 page bill, under the heading: “Subtitle B — Employer Responsibility.”

Under the provision, employers would have to offer every employee “qualified” health insurance coverage. The type of insurance that is considered “qualified” will be determined by the Health Choices Commissioner, a new post that will be filled by the President and confirmed by the Senate. The Health Choice Commissioner, given many responsibilities throughout the legislation, would head up the newly-created Health Choices Administration. If a worker declines coverage but otherwise obtains insurance through the government-run insurance exchange, the employer will owe money to the government.

In order to prove that they’re complying with the new mandate, employers must submit whatever information that the Health Choices Commissioner requests, and the information must also be provided to the Secretary of Labor, the Secretary of the Treasury, and the Secretary of Health and Human Services.

For full-time workers, business will have to contribute at least 72.5 percent toward individual health insurance policies, and 65 percent for family policies. For part-time workers, the required percentage would be based on a proportion of how many hours they worked relative to the hours worked by a full-time employee. The exact proportion would be determined, once again, by the Health Choices Commissioner, in conjunction with the Secretary of Labor, the Secretary of the Treasury, and the Secretary of Health and Human Services.

Any employer with a total annual payroll of over $500,000 that does not meet these requirements will be subject to a new tax, which reaches as high as 8 percent once payroll reaches over $750,000.

The National Federation of Independent Business has estimated that an employer mandate would cost 1.6 million jobs over the first five years, and cut GDP by $200 billion. Whether or not you choose to believe that estimate, it’s clear that taken together, the provision would make it far more costly for businesses to hire new workers and maintain current staffing levels, by raising the price of labor as well as the regulatory burden. Basic economics tells us that if you raise the price of a good or service, then people will purchase less of it. In this case, rising prices for labor will mean lost jobs and lower wages. While the bill itself specifies that businesses cannot cut wages to comply with the mandate, this doesn’t take into account that businesses could simply offer lower raises to their workers over time. The legislation will particularly hit businesses hard that are highly dependent on part-time or seasonal workers. All I know is that if this bill passes, I’d hate to be the owner of a restaurant business.

CBO: House Bill Costs $1.055 Trillion

The Congressional Budget Office is out with its analysis of the House Democrats’ health care bill. The headline number — likely to be widely cited in media accounts — is that the bill costs $894 billion over 10 years. But in reality, the CBO says that the gross cost of the bill will be $1.055 trillion. The $894 billion number reflects the taxes being paid by individuals who don’t have insurance and employers who don’t provide insurance.

In addition, the bill relies on some of the same budgetary gimmicks as the Senate Finance Committee’s bill. Once again, we see that the Democrats backload the spending provisions into the final six years of the CBO’s 10 year budget window to make it appear cheaper. Specifically, the CBO says the bill’s gross spending will be $60 billion in the first four years, and $995 billion in the next six years (or 94 percent of the total).

Also, while the CBO says that the bill will reduce deficits by $104 billion over 10 years and keep reducing the deficit (albiet slightly) beyond that, it cautions that these estimates assume that proposed budget cuts will actually get enacted by future members of Congress. “These longer-term projections assume that the provisions of H.R. 3962 are enacted and remain unchanged throughout the next two decades, which is  often not the case for major legislation,” the CBO director Douglas Elmendorf wrote. “The long-term budgetary impact of H.R. 3962 could be quite different if those provisions generating savings were ultimately changed or not fully implemented.”

The CBO estimate doesn’t include the more than $200 billion it will cost to prevent scheduled cuts to doctors’ payments under Medicare, which Democrats intend to pass through separate legislation.

The bill would also add 15 million people to the Medicaid rolls, costing states an additional $34 billion over 10 years.

Another thing to keep in mind is that the CBO report doesn’t say anything about whether the bill actually bends the health care cost curve. To be clear, while it estimates — with caveats — that the bill will reduce deficits, that isn’t the same thing as reducing national health care expenditures, which is how people derive all those statistics about how high of a percentage of GDP we spend on health care compared with other countries. If you hike taxes high enough, you can get the CBO to say it reduces deficits on paper, but that’s a lot different from bringing down the actual costs of health care to our nation.

Health Care Bill Forces Insurers To Justify Rate Increases to Government

I’ve been reading through the 1,990 page health care bill, and thought I’d pass along this part, which jumped out at me:

The Secretary of Health and Human Services, in conjunction with States, shall establish a process for the annual review of increases in premiums for health insurance coverage. Such process shall require health insurance issuers to submit a justification for any premium increases prior to implementation of the increase.

Pelosi Drops 1,990 Page Health Care Bill

Speaker Nancy Pelosi just unveiled the House Democrats’ health care bill, which is 1,990 pages (PDF here). You’ll forgive me if I haven’t yet read all of it, but the clear takeaway is that as expected, the bill is to the left of the Senate version. It includes a mandate that forces individuals to purchase insurance or pay a tax, as well as a requirement that employers provide insurance or pay a tax. It also creates government-run insurance exchanges on which a government-run plan would be offered alongside privately-administered plans that would be subject to heavier government regulation.

Pelosi said that the bill would cost less than $900 billion over 10 years, wouldn’t add to the deficit, and would expand coverage to 36 million who do not have health insurance. The problem with the $900 billion estimate is that it doesn’t include over $200 billion in costs for a so called “doc fix” which was included in the initial bill that was priced at over $1 trillion. Instead, as the Senate tried to do, the House will move separate legislation to prevent scheduled cuts to doctors’ payments under Medicare.

Scanning through the bill, I noticed that the bill would add a new section to the federal tax code: “PART VIII:HEALTH CARE RELATED TAXES.” Among the new taxes are penalties for individuals who don’t purchase insurance and employers who don’t provide insurance, income tax surcharges of up to 5.6% to those earning more than $1 million, and a 2.5% excise tax on medical devices.

Will provide updates as I read through the bill.

The “Public Option” Trap

Yesterday, I wrote that if Sen. Harry Reid proceeds to the floor with a health care bill that includes a government plan, he risks derailing the whole health care effort. And I thought that was worth fleshing out a bit more.

The key thing to keep in mind about yesterday’s Joe Lieberman news is that there are actually several filibuster threats that Reid will have to overcome. The first major one will be on whether he can bring the health care bill to the floor for debate, and the last major hurdle will be on whether he can cut off debate and bring a final bill to a vote. Lieberman has said that he’s inclined to vote with Reid on the first one, and thus allow the bill to be debated and amended, but that at the end of the process, if the bill still includes a government plan, he would join with Republicans to block a vote.

The reason why this is so tricky for Reid is that once a bill gets to the floor, it’s very difficult to change it. For instance, if the bill includes a government plan, it would require 60 votes to strip that measure from the bill. So if Lieberman is serious about his threat to filibuster a government-run plan, what that means is there’s a risk a bill could get trapped on the Senate floor. In other words, liberals won’t provide Reid with the 60 votes needed to ditch the government plan, but if the government plan isn’t ditched, Reid won’t have the votes to cut off debate and proceed to a simple majority vote on the final bill.

With that said, a Senate GOP source cautions that once Reid gets the bill to the floor, he has the ability to spread around all sorts of goodies to bribe reluctant moderate Democrats into at least supporting the vote to cut off debate and proceed with a vote, even if they ultimately vote against the final bill. That’s why Republicans argue that it’s important to make sure that the bill doesn’t even get to the floor in the first place. Senate Minority Leader Mitch McConnell has emphasized that moderate Democrats shouldn’t be allowed to get away with drawing a  distinction between a vote to consider the bill and a final vote on the bill itself.

On that point, McConnell seems to have agreement from Indiana Democratic Sen. Evan Bayh. As Politico reported:

Sen. Evan Bayh (D-Ind.): Democratic leaders should be able to tell where Bayh is headed based on his vote on whether to move to a debate. The Indiana Democrat said Tuesday that he doesn’t see “much difference between process and policy at this particular juncture,” and that he’ll be “looking at those two things as one and the same.”

The bottom line, says the Senate GOP source, is: “If people oppose the bill, they have to let Democrats know they consider that first cloture vote as the vote on the bill.”

Babbling Burris

Via Liz Mair, I see this video of Sen. Roland Burris making absolutely no sense at a Senate hearing. A flavor:

So, Mr. President, I really don’t have many questions, I just – I got more questions than I have answers, Mr. Chairman, in reference to this, because I – I just sit here and listen to the experts talk, and every time there was a statement made, there’s a – there’s a new question come to my mind, well, what about this? What ifs – What if? What if? And – and so, I find this so fascinating…

Watch the fascinating video:

Obama WH Gives Perks to Big Donors

Being a major Obama donor has its benefits, the Washington Times reports:

During his first nine months in office, President Obama has quietly rewarded scores of top Democratic donors with VIP access to the White House, private briefings with administration advisers and invitations to important speeches and town-hall meetings.

High-dollar fundraisers have been promised access to senior White House officials in exchange for pledges to donate $30,400 personally or to bundle $300,000 in contributions ahead of the 2010 midterm elections, according to internal Democratic National Committee documents obtained by The Washington Times.

One top donor described in an interview with The Times being given a birthday visit to the Oval Office. Another was allowed use of a White House-complex bowling alley for his family. Bundlers closest to the president were invited to watch a movie in the red-walled theater in the basement of the presidential mansion.

The whole thing is worth a read. These are the stories, that once they accumulate, really hurt a president because they are objectionable in completely non-ideological way. In Obama’s case they have special significance, because one of the major themes of his campaign was that he was going to do away with the relationship between politics and big money, specifically how money is traded for access. The more of these stories Americans read, the more it will reinforce the idea that Obama is just like any other politician, just “more of the same,” as opposed to something different.

Mitt Moves Goal Posts on RomneyCare

Appearing on CNN last night, Mitt Romney conceded that the Massachusetts health care plan he signed into law did nothing to control costs. But, he now says, it was never intended to. 

“We were unable to deal with — and didn’t have any pretense we would somehow be able to change — health care costs in Massachusetts,” Romney said. “That’s a whole different topic, which is how do we get the cost of health care down in America.”

The problem with Romney’s account is that at the time he signed the bill, he was saying it would bring down health care costs. Specifically, in a triumphant April 2006 Wall Street Journal op-ed titled “Health Care for Everyone? We Found a Way,” Romney boasted: “Every uninsured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced.” (Emphasis mine.)

Romney, for the most part, was able to avoid criticism for his Massachusetts health care plan in the 2008 Republican primaries. At the time, it was still too soon to evaluate the program with hard data and Republican primary voters weren’t really paying attention to the issue of health care. But now both things have changed — the legislation has proved disastrous for state finances, the cost of premiums, and doctors’ wait times. In addition, Republican voters have become more aware of health care policy issues. And Romney’s plan is basically the Baucus bill at the state level: a government mandate forcing individuals to purchase health insurance or pay a tax, and government subsidies to help individuals purchase government-designed insurance policies on a government-run exchange.

It’s not surprising to see that as he lays the groundwork for a likely presidential run, Tim Pawlenty has made health care a major focus. One of the biggest obstacles Pawlenty will face in seeking the Republican nomination is the sense that he’s a big government “Sam’s Club” Republican. Clearly, he sees health care as one issue on which he can credibly position himself to the right of Romney.