$900 Billion House Health-Care Reform Bill Likely to Cost More than $900 Billion


What it feels like when you sort through health-care reform numbers.

At 1,990 pages, it's going to take a while for folks to go through the House health-care bill in its entirety. But initial analyses have already raised a number of concerns with the bill, particularly with regard to the tricks used to give the impression that the bill's total cost actually fits within the guidelines imposed by the administration. 

President Obama has stated that reform bills must come in with a price tag under $900 billion. The House bill hits the target, but only if you look only at the net cost rather than the gross. Politico explains:

There was a lot of confusion this afternoon when the CBO released its cost estimate for the House bill. Democrats had said earlier in the day that the bill would cost $894 billion—just under the $900 billion limit set by President Obama. But in the CBO analysis there were two price tags: a net cost of $894 billion and a gross cost of just over $1 trillion. Both numbers are correct, but Democrats shifted the terms of the debate and cherry picked the lower one.

Getting to either of those numbers—the $894 billion net or the $1 trillion gross—requires ignoring the cost of the so-called doctors' Medicare "fix," which would prevent $250 billion in planned Medicare cuts, but without providing revenue to cover the additional costs. The House removed this provision from the bill in order to get a lower score:

The big health-care bill House Dems backed earlier this year would have blocked planned cuts in Medicare payments to doctors. That provision is not part of the bill Nancy Pelosi rolled out today. But that doesn't mean it vanished — the Dems just made it a separate bill, also released today. 

Why bother creating a separate bill? Blocking the pay cuts will cost roughly $250 billion over 10 years. Getting rid of that provision lowers the cost of the big health-care bill. Of course, if the Medicare payment measure passes as a separate bill, the federal government will still be on the hook for the costs.

Accepting the House's plan at face value also requires one to believe that the final bill won't honor the deal made between the drug industry and Democratic leadership in the Senate and White House. That deal would've limited the financial hit taken by the drug industry to $80 billion over the next ten years. According to the Wall Street Journal, the House bill would cost the drug industry $140 billion (due to Medicare cuts). But given that the Senate is going to exert more influence over the final bill, it's unlikely that whatever legislation we end up with will extract such a hefty toll from the pharmaceutical industry. 

Nor does the bill include the cost to the states of expanding Medicaid. According to Conn Carroll at the Heritage Foundation:

Under current law the CBO projects that only 35 million Americans would be on Medicaid by 2019. The House bill massively expands the Medicaid program by raising the upper income cutoff to 150 percent of the federal poverty line (FPL). As a result, the CBO now estimates some 50 million Americans will be enrolled in the program at a ten year cost to the federal government of $425 billion. This does not include the $34 billion in increased Medicaid costs that state governments will have to spend.

In other words, $900 billion is only the beginning. 

During the summer, I wrote about the "buy now, pay later" strategy in health-care reform. 

NEXT: Bat(suit) Outta Hell

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  1. Now we get to watch most of the country’s news outlets report the $894 billion number uncritically.

    1. I’m kinda glad this one didn’t under-report the number: http://www.newsy.com/videos/ho….._approved. Time will tell how big this number will balloon. And I’m not sure about the concept of “Pay for what you use” – doesn’t that contradict the whole idea of universal coverage?

  2. Jorgen, the simple solution is to not watch America’s news outlets.

  3. As a result, the CBO now estimates some 50 million Americans will be enrolled in the program at a ten year cost to the federal government of $425 billion. This does not include the $34 billion in increased Medicaid costs that state governments will have to spend.

    I think his math is off. Under the formula for Medicaid matching funds (which varies by state), the states would have to put up around $300 billion-with-a-b or so to generate $425 billion-with-a-b in federal Medicaid funds. Maybe the $34 billion-with-a-b is the per year cost, not the ten year cost?

  4. It wasn’t that many years ago (2) that $894,000,000,000 was an incomprehensible number. Truly the Messiah has brought us change.

  5. Here’s a very simple health care fix: give eligibility to medicaid to everyone, for, lets say, 8% of income for individual coverage and 16% of income for family. That gives an affordable health option to everyone, if they want it.

  6. Here’s a very simple health care fix: let individuals pay for the health care they demand and consume, either ex-ante (via insurance) or ex-post (self-financed).

    That gives everyone the option to buy as much healthcare as they can afford, if they want it.

    1. That’s too simple! How do the special interests get their cut?

      Seriously, middle-man envy is the root of all government evil. Controlling our consumption is just a means to an end.

    2. Yes, if you want to propose something which is DOA and only 10% of the public would support.

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  8. the “buy now, pay later” strategy in health-care

    Upon which they will have finally succeeded in converting the US from a European wanna-be to a real live Euro style, stagnant socialist dump. No more government spending on anything but welfare.

    The only thing that will be at least mildly amusing, is watching western Europe come to grips with the fact that the US won’t be defending them from Russia anymore.

    Of course right now they’ll tell you that Russia really is no threat.

    Give it time.

  9. BHO, hands OFF my TriCare Standard (costs are deducted from my retirement pay) AND my TriCare supplement (that I also pay out of pocket) or we are at WAR; toe-to-toe, mano-mano, in YOUR FACE FREAKIN’ WAR!!!!!!!!!!!!

  10. conservatives and libertarians can score political points w/ Blue Dogs in the house on two points that we haven’t hit hard enough.

    1) The Capps Amendment…taxpayer funds for abortion (Pelosi insists)

    2) The 8% payroll tax on employers…a job killer.

    We only need to turn a few Blue Dogs to create a lot of havoc in the house.

    Add this to your list of problems w/ Pelosi’s garbage.

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  12. Isn’t there a plan to tax the wealthy to subsidize the needs of the not so wealthy? It is part of the health reform right?

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