Congressional Budget Office on the House Health Bill

On Tuesday, the Congressional Budget Office (CBO) released a preliminary analysis of the House health bill, aka the Tri-Committee bill. Among the key findings:

1. The bill uses five levers to increase health insurance coverage:

» Expanding Medicaid
» Subsidies for purchasing insurance through new exchanges
» An individual mandate (enforced by a penalty if you lack coverage)
» Play or pay (requiring employers to offer qualifying insurance or pay a tax)
» A public plan (whose rates would be lower than those of many private plans)

2. These provisions would sharply reduce the number of uninsured. In 2019, for example, CBO estimates that the number of uninsured would fall from 54 million to 17 million, a decline of 37 million. Many of those who would remain uninsured are particularly difficult to reach (e.g., individuals who qualify for Medicaid but don’t enroll) or are unauthorized immigrants (who aren’t a focus of the legislation). Put another way, the bill would result in 97% of the non-elderly (excluding unauthorized immigrants) having health insurance by 2015.

3. The bill would increase spending by almost $1.3 trillion over the next 10 years. The penalties and fees would raise a bit less than $240 billion over the same period, so the 10-year net budget cost would be slightly more than $1 trillion. The bulk of the penalties and fees — $208 billion – would be paid by employers (who would then pass on some or all of the costs to workers). The remaining fees — $29 billion — would be paid by uninsured individuals. As Keith Hennessey notes, the prospect of levying such fees on the uninsured raises some difficult political and policy questions.

4. Enrollment in the public plan would be substantial, perhaps 11 to 12 million people by 2019. The plan, operated by the Secretary of Health and Human Services, would pay providers at levels very similar to those in Medicare. As a result, CBO expects that the public plan would offer lower premiums than many private plans.

5. The analysis is preliminary in two key ways:

  • It does not include any of the potential offsets — e.g., tax increases and Medicare spending reductions — that lawmakers would need to pay for the bill.
  • The CBO estimate is based on “specifications” that the committees asked CBO to evaluate. CBO has not yet had time to analyze the actual language of the proposed bill. It’s always possible that the language would have different impacts than the less-detailed specifications.
About Donald Marron 294 Articles

Donald Marron is an economist in the Washington, DC area. He currently speaks, writes, and consults about economic, budget, and financial issues.

From 2002 to early 2009, he served in various senior positions in the White House and Congress including: * Member of the President’s Council of Economic Advisers (CEA) * Acting Director of the Congressional Budget Office (CBO) * Executive Director of Congress’s Joint Economic Committee (JEC)

Before his government service, Donald had a varied career as a professor, consultant, and entrepreneur. In the mid-1990s, he taught economics and finance at the University of Chicago Graduate School of Business. He then spent about a year-and-a-half managing large antitrust cases (e.g., Pepsi vs. Coke) at Charles River Associates in Washington, DC. After that, he took the plunge into the world of new ventures, serving as Chief Financial Officer of a health care software start-up in Austin, TX. After that fascinating experience, he started his career in public service.

Donald received his Ph.D. in Economics from the Massachusetts Institute of Technology and his B.A. in Mathematics a couple miles down the road at Harvard.

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