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


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.