The Senate’s Health Spending Binge: Understanding the CBO

Dennis Smith / July 14, 2009

On July 2, 2009, the Congressional Budget Office produced its second preliminary analysis of title I of the “Affordable Health Choices Act,” as drafted by the Senate Committee on Health, Education, Labor, and Pensions (HELP). This CBO “score” has been used a great deal over the past few weeks in the specific analysis of the HELP version of health care reform legislation, but it also is a valuable lesson in using caution against oversimplification. It provides some, but not all of the critical answers needed to fully understand reform legislation.

“Costs” vs. “Net Costs”. To some, the bottom line shows that health care reform will “cost” $597 billion over 10 years. Actually, the “cost” is $789 billion–$723 billion for exchanges subsidies, $56 billion for Small Business Credits, and $10 billion for reinsurance for retirees. This cost is partially offset by $98 billion in increased tax revenue; $58 billion in net collections of premiums for the CLASS Act provisions; and $36 billion in lower Medicaid and SCHIP spending. The public should understand that the HELP Committee arrives at a lower net cost by collecting $156 billion more in revenue compared to current law. Furthermore, (more…)