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Cost of Health Care Bill Soars, Despite President's Pledge

Posted By Kathryn Nix On January 19, 2010 @ 10:53 am In Obamacare | Comments Disabled

President Barack Obama

While House and Senate leaders negotiate over the final version of a health care bill, they seem to have forgotten one thing: many of them, including the President, pledged to deny support to any bill which would add to the federal deficit. Until now, budgetary gimmicks have hidden the true cost of the health care bills, but neither chamber of Congress has succeeded at creating a bill which is deficit neutral and falls under $900 billion—the limit set by President Obama himself [1] . In a recent paper, Heritage expert James Capretta lays bare the truth about the cost of Democrats’ health care bills [2]:

The “Doc Fix.” Every year, Congress must vote to postpone cuts to Medicare physicians’ fees. Suspending these cuts adds to the federal deficit. Both the House and Senate bills were scored by the Congressional Budget Office (CBO) as though these cuts to physicians’ fees will occur, which, on paper, makes the cost of reform cheaper by hundreds of billions of dollars. Acknowledging that these cuts will not take place reveal that both health care bills add about $80 billion to the deficit over ten years.

Non-Coverage Spending. Both the House and Senate bills include numerous spending provisions that go beyond providing coverage. In the House bill, these amount to $230 billion over a decade In the Senate bill, $90 billion over ten years is due to non-coverage provisions These provisions are not included in projections of the cost of the bill. When the entire cost of each bill is considered, in addition to the cost of the “doc fix”, the House bill totals $1.5 trillion over ten years, with the Senate close on its heels at $1.2 trillion.

Double-Counted Medicare Savings. Billions of dollars in cuts to Medicare are included in both bills in order to cover the cost of extending coverage to millions Americans. But advocates of the Democrats’ health care bill have claimed that these cuts to Medicare would increase its solvency. Even CBO’s Director Doug Elmendorf agrees http://cboblog.cbo.gov/?p=448 that they can’t have it both ways—either the savings fund new entitlements or they increase Medicare insolvency. If Medicare savings are applied only to increasing Medicare’s solvency, both bills lose more than $400 billion in offsets to the cost of the coverage expansion provisions.

The CLASS Act. Both bills create a new government entitlement program called the CLASS program to cover long-term care services. This part of the bills accounts for even more double-counting of savings. Participants in the program would pay premiums well in advance of receiving benefits. Premiums would be set aside to ensure future solvency of the program, but again, revenue from the program is also counted as an offset for coverage provisions in other parts of the bill.

A Full 10 Years of Spending. To make the legislation appear less costly, both the House and Senate bills delay expenditures until years after revenue-raising provisions have been enacted. A look at a true 10 year window of savings and spending shows that the Senate bill’s cost would total $2.3 trillion, even without the “doc fix”. The House bill’s true ten year cost is comparable.

Future Entitlement Expansions. Both the House and Senate bills offer generous subsidies to low and middle income Americans to buy health insurance. However, of the millions of Americans which fall into the designated income bracket, only a small portion of them would receive the subsidy based on whether or not they were offered employer-sponsored coverage. This creates a gross inequity between members of the same income bracket which is unlikely to survive the pressure lawmakers will face to expand availability of the subsidy. As more and more Americans become eligible for the subsidy, the cost of reform will grow enormously.

According to Capretta, “the bills that have been developed in the House and Senate fall far short of [the President’s] stated objectives [2]. The spending would far exceed $900 billion through 2019, and the federal budget deficit would increase dramatically, not decrease, when all of the numbers are honestly accounted for.”


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URL to article: http://blog.heritage.org/2010/01/19/cost-of-health-care-bill-soars-despite-presidents-pledge/

URLs in this post:

[1] the limit set by President Obama himself: http://www.whitehouse.gov/the_press_office/Remarks-by-the-President-to-a-Joint-Session-of-Congress-on-Health-Care

[2] Heritage expert James Capretta lays bare the truth about the cost of Democrats’ health care bills: http://www.heritage.org/Research/HealthCare/wm2756.cfm

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