How Much Will Health Reform Really Cost?

President Obama in Portsmouth, New Hampshire:  

So it’s about a hundred billion dollars a year to cover everybody and to implement some of the insurance reforms that we’ve talked about.

Keith Hennessey:

CBO estimates the “effects on the deficit of insurance coverage provisions” in the House bill, H.R. 3200, to be $1,042 billion over a ten year period. (See page 2 of the estimate.)…

But the program is in effect for only about five of these ten years. In the House bill, the new coverage provision begins in year 4 (2013) and phase up to full effect only in year 6 (2015).  To calculate the per-year cost, therefore, you should divide by roughly six, rather than by 10.

In addition, the new spending grows really fast, so the spending in year 10 (2019) is much bigger than in year six. CBO estimates the new coverage provisions would cost $202 B in 2019, rather than the President’s $100 B annual cost figure….

So the President is off by at least a factor of two.

Comments (6)

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  1. Ken says:

    Very interesting post.

  2. Stephen C. says:

    This is very important. The information is not being reported.

  3. Boscobobb says:

    “The information is not being reported,” because Mr. Hennessey’s math is specious.

    Why doesn’t Mr. Hennessey mention the $350 billion a year you and I pay to private insurance companies that buys NO health care, that’s just their profit, overhead and bureaucracy in excess of normal payment costs.

    That’s $4 trillion over 10 years literally wasted – about $2,000 a year for each American with private insurance.

  4. Bruce says:

    Boscobobb: Hennessey’s numbers come from the CBO. That’s the nonpartisan arm of Congress that reports to the Democratic leadership.

    How do you know the $350 billion is wasted? Medicare spends far less supervising its claims and it and Medicaid have between $50 billion and $100 billion a year in fraud, waste and abuse — far higher than in the private sector. Also, profit represents the cost of capital. Just because government doesn’t report this as a line item in it’s budget doesn’t mean the cost isn’t there. Capital used by govenment agencies has a social cost.

  5. Boscobobb says:

    BTW: Spending goes up fast in the out years because…..demographics. Baby boomers.

  6. Bruce says:

    Second response to Boscobobb: spending goes up in the out years because (1) that is when the program is fully phased in and (2) because there really is no cost control, so health care costs keep right on rising.