17 June 2009 - Washington, DC - Senators on the Health, Education, Labor and Pensions (HELP) Committee begins mark-up consideration on the Kennedy Health Care bill. The bill which may cost over a trillion dollars is being debated by both sides of the Senate committee.

In February 1994, the Congressional Budget Office (CBO) said that the Clinton health plan would add $74 billion to the deficit over the following six years. And that spelled the beginning of the end of the Clinton plan to have the federal government supervise the financing and delivery of health care.

Yesterday, CBO – an officially nonpartisan office whose director is appointed by the Democratic Congressional leadership – released its “preliminary” score of the Kennedy-Dodd bill. If enacted, the proposal would increase the federal budget deficit by $1 trillion over the next ten years. Over the next six years, the increase is $352 billion – almost five times the figure for the Clinton plan.

Déjà vu, anyone?

Big price tag. Although the Kennedy-Dodd estimates were not final but instead based on draft legislative text (that did not include details, including some expensive components of the bill yet to come), the figures have left some in Congress shell-shocked, scrambling to alter their proposals to lower the price tag of their plans.

CBO estimates the Kennedy-Dodd plan would result in a net decrease in the number of uninsured Americans of roughly 31% by 2015. But if it costs $1 trillion to extend coverage to them, how much will it cost to cover the remaining 62 percent or a projected 36 million people who will still be uninsured in 2019 under the Kennedy-Dodd plan?

Losing Private Coverage. Under the Kennedy-Dodd proposal, CBO projects that although there would be a net decrease of 16 million uninsured, another 23 million Americans would be unable to keep the insurance they have now, even if they like it – 15 million would lose their employer-sponsored insurance and 8 million people would lose other forms of coverage.

Poor Return on Investment. For all the money that the bill throws at the problem of the uninsured, there’s surprisingly little “bang for our buck.” By 2019, the increase in the deficit for each additional person covered would be more than double the cost of simply buying that person insurance on the individual market today.

Unknown Costs. While the estimated net cost of the bill is $1 trillion, the increase in spending would, in fact, be higher – roughly $1.3 trillion. The reason for this difference is that as employers reduce their health benefit spending, employees will receive more of their compensation in the form of taxable wages and salaries. This increases tax revenues and offsets the cost of the proposal by $257 billion. Furthermore, the CBO estimate of the cost of the Kennedy-Dodd proposal does not include the costs of expanding Medicaid to all persons whose income is under 150% of the federal poverty level (which some estimates would put at roughly $900 billion over ten years). Nor does it account for other key provisions of the bill, such as the imposition of minimum benefit requirements by a Medical Advisory Council, the introduction of a new public plan, and the effects of including employers in the gateways or exchanges. The CBO estimate also excludes interest payments on additions to the national debt, which has to be considered as part of the true cost of the plan.