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CBO: Obama Healthcare Will Cost $1T

The first four pages of the ten page ‘Health Choices Act’ report from the Congressional Budget Office (a pdf file):

[AFP caption:] Healthcare reform activists [Code Pink] stage a protest outside the office of US Speaker of the House Nancy Pelosi in late May in San Francisco, California.

Health Choices Act

Honorable Edward M. Kennedy
Committee on Health, Education,
Labor, and Pensions
United States Senate
Washington, DC 20510

Dear Mr. Chairman:

The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) have completed a preliminary analysis of the major provisions related to health insurance coverage that are contained in title I of draft legislation called the Affordable Health Choices Act, which was released by the Senate Committee on Health, Education, Labor, and Pensions (HELP) on June 9, 2009. Among other things, that draft legislation would establish insurance exchanges (called “ gateways” ) through which individuals and families could purchase coverage and would provide federal subsidies to substantially reduce the cost of that coverage for some enrollees.

The attached table summarizes our preliminary assessment of the proposal’ s budgetary effects and its likely impact on insurance coverage. According to that assessment, enacting the proposal would result in a net increase in federal budget deficits of about $1.0 trillion over the 2010–2019 period. Once the proposal was fully implemented, about 39 million individuals would obtain coverage through the new insurance exchanges. At the same time, the number of people who had coverage through an employer would decline by about 15 million (or roughly 10 percent), and coverage from other sources would fall by about 8 million, so the net decrease in the number of people uninsured would be about 16 million.

It is important to note, however, that those figures do not represent a formal or complete cost estimate for the draft legislation, for reasons outlined below. Moreover, because expanded eligibility for the Medicaid program may be added at a later date, those figures are not likely to represent the impact that more comprehensive proposals— which might include a significant expansion of Medicaid or other options for subsidizing coverage for those with income below 150 percent of the federal poverty level— would have both on the federal budget and on the extent of insurance coverage.

A Summary of the Key Provisions of the HELP Committee’s Proposal

(As released on June 9, 2009)
Congressional Budget Office
June 15, 2009

• Most of the proposal’ s key provisions would become operative in a state when that state establishes an insurance exchange (called a “ gateway” ) through which its residents could obtain coverage; such exchanges might start offering health insurance in some states in 2012; all exchanges would be fully operational by 2014.

• The proposal is assumed to require most legal residents to have insurance (though the draft language is not explicit in this regard). In general, the government would collect a payment from uninsured people, but individuals with income below 150 percent of the federal poverty level (FPL) would be exempt and the payment would be waived in certain other cases. The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) assumed that the annual payment amount, which would be set administratively, would be relatively small (about $100 per person).

• New health insurance policies sold in the individual and group insurance markets would be subject to several requirements regarding their availability and pricing. Insurers would be required to issue coverage to all applicants, and could not limit coverage for preexisting medical conditions. In addition, premiums for a given plan could not vary because of enrollees’ health and could vary by their age to only a limited degree (under a system known as adjusted community rating). Existing policies that are maintained continuously would be “ grandfathered.”

• There would be no change from current law regarding Medicaid or the Children’ s Health Insurance Program (CHIP).

• Insurance policies covering required benefits that are sold through the exchanges would have actuarial values chosen by the Secretary of Health and Human Services from specified ranges within three tiers. (A plan’ s actuarial value reflects the share of costs for covered services that is paid by the plan.) CBO and the JCT staff assumed that the chosen actuarial values would be 95 percent (for the highest tier), 85 percent (for the middle tier), and 76 percent (for the lowest tier). Plans would be allowed to offer added coverage or benefits for an extra premium.

• The subsidies available through the exchanges would be tied to the average of the three lowest premium bids submitted by insurers in each area of the country for each tier of coverage. For people with income between 150 percent and 200 percent of the FPL, the subsidies would apply to that average bid for the highest-tier plans; for people with income between 200 percent and 300 percent of the FPL, the subsidies would apply to that average bid for the middle-tier plans; and for people with income between 300 percent and 500 percent of the FPL, the subsidies would apply to that average bid for the lowest-tier plans.

• The subsidies would cap premiums as a share of income on a sliding scale starting at 1 percent for those with income equal to 150 percent of the FPL, rising to 10 percent of income at 500 percent of the FPL. Those income caps would be indexed to medical price inflation, so that individuals would (on average) pay a higher portion of their income for exchange premiums over time. Individuals and families with income below 150 percent of the FPL would not be eligible for those subsidies. (The proposal envisions that Medicaid would be expanded to cover those individuals and families but the draft legislation does not include provisions to accomplish that goal.)

• Subsidies would be delivered by the Department of Health and Human Services via the insurance exchanges with some provisions for income verification. Subsidy amounts would be determined using a measure of income for a previous tax year, implying that subsidies received for a given year (for example, in 2013) would be based on income received two years prior (for example, in 2011). Individuals might be eligible for larger subsidies if their income declined significantly in the intervening period or if other extenuating circumstances arose. (The draft legislation’ s provisions regarding verification of income are unclear, which is reflected in the analysis.)

The proposal does not include a “ public plan” that would be offered in the exchanges, nor does it contain provisions that would require employers to offer health insurance benefits or impose a fee or tax on them if they did not offer insurance coverage to their workers.

• In general, individuals with an offer of employer-sponsored insurance would not be eligible for exchange subsidies under the proposal. However, employees with an offer from an employer that was deemed unaffordable could get those subsidies; because the exchange subsidies would limit the share of income that enrollees would have to pay (as described above), CBO and the JCT staff assumed that an “ unaffordable” offer from an employer would be one that required the employee to pay a larger share of income for that plan than he or she would have to pay for coverage in an exchange.

• The proposal would offer subsidies to small employers whose workers have low average wages and who offer health benefits to those workers. The amount of the subsidy would vary with the size of the firm (up to a limit of 50 workers), and firms that contribute larger amounts toward their workers’ health insurance would receive larger subsidies. The credit would be available indefinitely, but firms would be eligible to take the credit for only three consecutive years at a time.

Key Provisions Not Yet Taken Into Account

There are several features of the proposal that CBO and the JCT staff have not yet reflected in their budget estimates. The most significant features of the proposal that have not yet been estimated would do the following:

• Require insurers to offer dependent coverage for children of policyholders who are less than 27 years of age.

• Delegate authority to a Medical Advisory Council to establish minimum requirements for covered health benefits and to determine the level of coverage that individuals would need to obtain in order to qualify as having insurance.

• Require insurers to maintain a minimum level of medical claims paid relative to premium revenues (otherwise known as a “ medical loss ratio” ), or to repay certain amounts to policyholders; the HHS Secretary would have the authority to set the minimum medical loss ratio.

• Apply “ risk adjustment” (a process that involves shifting payments from plans with low-risk enrollees to plans with high-risk enrollees) to all health insurance policies sold in the individual and group insurance markets.

• Allow employers to buy health coverage through the exchanges.

• Require health insurance plans participating in the new exchanges to adopt measures that are intended to simplify financial and administrative transactions in the health sector (such as claims processing)…

CONGRESSIONAL BUDGET OFFICE Douglas W. Elmendorf, Director
U.S. Congress

Effects on the Federal Budget:

(Click to enlarge)

And this estimate doesn’t even include the ‘public option,’ which is by far the most expensive part of Mr. Obama’s free healthcare for all.

Even so, there’s now doubt that even the CBO’s numbers are vastly underestimated.

They always are when they talk about the projected costs of Democrat programs.

This article was posted by Steve on Tuesday, June 16th, 2009. Comments are currently closed.

16 Responses to “CBO: Obama Healthcare Will Cost $1T”

  1. Liberals Demise says:

    1 Trillion today………….100 Trillion tomorrow…………give or take a Trillion.
    “The Undoing of a Once Mighty Nation by Fools”

    • JohnMG says:

      If every member of congress extant, past and present, was forced to forego their own health care plan and enroll in this mess, we could probably fund the whole program without a tax increase.

      Why doesn’t someone ask how much Kennedy’s recent treatment cost the tax payer? Under Obama’s proposals Kennedy would have been left to cash in his chips if his only medical option was “universal health care”. Instead, we let this worthless piece of skin WRITE THE PLAN! How stupid is that??!!

    • Liberals Demise says:

      Because 46 million don’t have………255 million MUST give up what they have.
      This is a wet nightmare and totally asinine in concept!!
      Thanks to the Jackass Party!!

  2. BannedbytheTaliban says:

    “net increase in federal budget deficits of about $1.0 trillion”

    Deficits, that means the $1.0 trillion represents an unfunded liability and does not include the cost that will be covered by increase in taxes and “cuts” to Medicare. The true cost will be at least 296 billion more than that. And it would not even be effective, only resulting in “net decrease in the number of people uninsured would be about 16 million.” That just over 1/3 of the 47 million uninsured we hear about every day. That is ludicrous.

    They also can’t add, the “employer subsidies” adds to 62, not 60. But what is 2 billion dolllars among friends?

    Somebody please stop the madness! Democratic voters have to be the dumbest people on the planet to buy into this BS.

  3. proreason says:

    $1 Trillion is nothing.

    The bottom line is many people over 50 who read this website will die before their time. They won’t be able to get medical treatment unless they bankrupt their families…..and even then, maybe not.

    And the only reason I cut it at 50 is that this tragedy will be reversed in 20 years when people see how many of their loved ones have been killed so that illegal aliens can have free (for them) health care.

  4. bronzeprofessor says:

    I don’t know if any of you guys caught the speech Obama gave before the AMA yesterday, but it was truly disturbing. Even the physicians are now getting distracted with shiny objects. All he had to do was say malpractice reform, and they started cheering their own demise.

    • caligirl9 says:

      Yeah, but he also said he didn’t plan to pursue tort reform … which turned the cheers into boos.

      If I’d been a physician in attendance, I’d have gotten up and walked out.

      That speech was disturbing and the arrogance shines through.

    • bronzeprofessor says:

      Caligirl, I love your cat avatar. How do I get an avatar?

    • caligirl9 says:

      Hi BP
      Go to this page> http://sweetness-light.com/questions
      You’ll be directed to a site called Gravitar.com.
      It’s so easy a caveman can do it! Or me!
      The feline pictured is my boy Ryan, who was born in ‘da hood region of San Jose, and was likely headed to be pit bull bait. He’s quite the gangsta … Ryan is named for Ryan Getzlaf, a professional hockey player in Anaheim.

  5. Reality Bytes says:

    How long before waiting rooms at the vet start fillin’ up with folks’ elderly parents?!

  6. GetBackJack says:

    Local CBS affiliate interviewed a physician formerly from the Ukraine who stated directly and clearly ….

    “In the Ukraine we had state mandated national health care system and it doesn’t work. In US Medicare is the most expensive program and the least effective medical program available. What are they thinking?”

    • proreason says:

      I think Workman’s Comp has Medicare beat in the slow-mo race for worst Government medical program.

      Actually, there is quite a bit of competition for the bottom of the government medical program barrel.

      – Medicare
      – Medicaid
      – Workman’s Comp
      – VA
      – numerous federal and state programs for low-income health insurance

      Medicare and VA are probably the “best” but is a dubious honor.

      Why don’t Republicans publicize some of those disasters? (asked and answered….because they are equally responsible for them.)

    • caligirl9 says:

      Worker’s Comp just drags its feet, hoping you will undergo a spontaneous cure or die.

      I waited five months for a procedure on my back. In the meantime, I could not drive or work much, and pretty much ate pain pills.
      I plan to complain about the pain, which will return, BEFORE it comes back. Because it will come back, probably around Christmastime.

      I used to work in that industry. No gray area, a person is either totally legit or a total scam artist, and I believe most are taking advantage of the system and having a good time about it.

    • proreason says:

      I had a good experience with Workman’s Comp 15 years ago, but about 5 year’s ago, my wife broke her shoulder in another work-related incident.

      The doctor who was assigned fell asleep twice while she was at his clinic. It took 4 months to get a new doctor and the only way I was able to do it was to call my local state representative and ask whether I was living in Russia.

  7. take_no_prisoners says:

    Want a more realistic estimate of the cost? Take the CBO estimate and triple it.

  8. Gila Monster says:

    The AP says the cost for Obamacare is $1.6 trillion. From my local fish-wrap;

    Sources: Senate health overhaul costs top $1.6T

    WASHINGTON – The latest cost estimates for health care legislation in Congress are around $1.6 trillion over 10 years, two Senate sources said Tuesday as concerns mounted over the price tag for the sweeping overhaul.

    Two Senate staffers, one Democratic and one Republican, said Congressional Budget Office estimates put the cost of the Finance Committee version of the bill at around $1.6 trillion.

    On Monday, the budget office said the Senate Health, Education, Labor and Pensions Committee version would cost $1 trillion over ten years and only cover about one-third of the nearly 50 million uninsured.

    The staffers who disclosed the latest estimates spoke on condition of anonymity because of the sensitivity of negotiations over the legislation.


    It appears the CBO is stating that this bill will increase the deficit by $1 trillion but the total estimated cost will be the $1.6 trillion figure. The proposed taxes in the bill will only fund $600 billion of it.

    In a nutshell, the Messiah and his minions want to spend $1.6 trillion to reduce the number of people that have no medical insurance by 16 million, that’s $100,000 per person. As above posters have stated, this estimate is likely well below what the actual cost will end up being.

    The a**clowns currently in charge of the asylum have completely lost their minds..!!

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