Matthew Yglesias » CBO Says Senate Health Bill Would Cover 94 Percent of Americans, Sharply Reduce the Deficit

Nov 18th, 2009 at 5:54 pm

CBO Says Senate Health Bill Would Cover 94 Percent of Americans, Sharply Reduce the Deficit

Brian Beutler reports on the CBO’s analysis of Reid’s health care bill:

The health care bill–which includes an opt-out public option–will require $849 billion over 10 years in new spending, to be paid for with cuts to Medicare, while reducing the deficit by $127 billion.

In that time it will extend coverage to 31 million Americans–94 percent of citizens will be covered by 2019.

CBO projects that from 2020-2029 the bill would achieve around $650 billion in deficit reduction. My prediction is that the very same centrist Democrats most likely to whine about the deficit will also be most hesitant to vote for the bill. Just saying.

Comments
33

33 Responses to “CBO Says Senate Health Bill Would Cover 94 Percent of Americans, Sharply Reduce the Deficit”

Brad says:
November 18th, 2009 at 6:00 pm
Yes, because the government always calculates projected expenditures 10 years into the future completely accurately. That’s why Medicare costs no more than what its backers said it would at the time. And Medicare cuts are definitely sure to materialize.
ask2 says:
November 18th, 2009 at 6:10 pm
Brad, the point is not that the $650 billion number is completely accurate; it’s that the bill is, under our best current understanding, cheaper than the status quo for Americans.

But of course you knew that, and you’re just trolling.

This raises a point that needs to be emphasized in these discussions, though. Medicare is becoming inordinately expensive because medical care is becoming inordinately expensive (plus demographic changes), NOT because “government administered plans” are becoming inordinately expensive. That’s why many of these plans save money, on net.
scythia says:
November 18th, 2009 at 6:17 pm
Yes, because the government always calculates projected expenditures 10 years into the future completely accurately.

Brad’s right, Matt. We don’t even know the government will be here in 10 years. Hey, technically speaking the entire thing we call “reality” may just be an illusion created by our overexcited nervous system. What is it we actually know? Less than you’d think.

I hope you’ll join Brad and myself in creating a new political party that confronts the epistemological limitations of our present age. We will call it the “I Know not What I Know Except That I Know Not” Party, or “Know-Nothings” for short.
ds says:
November 18th, 2009 at 6:19 pm
Yes, because the government always calculates projected expenditures 10 years into the future completely accurately. That’s why Medicare costs no more than what its backers said it would at the time. And Medicare cuts are definitely sure to materialize.

If you bothered to look at examples that have occurred within the last 40 years, you will see that the CBO’s estimates are usually very conservative, and almost always overestimate the costs of health care legislation.

They vastly overestimated the cost of Bush’s Medicare prescription drug benefit.
Thomas says:
November 18th, 2009 at 6:20 pm
ask2, no, it isn’t cheaper. It’s cheaper if you make unrealistic assumptions, which the CBO is required to make.
Thomas says:
November 18th, 2009 at 6:24 pm
ds, if you wanted to generalize, you’d say that the CBO’s estimates are always wrong in a direction that favors the Democratic party. The one time–one time!–that they overestimated the expense it was the Bush prescription drug benefit. (Ah, the good old days when liberals screamed about the Bush administration not providing ridiculous over-estimates produced in the bowels of the bureacracy.)
Why oh why says:
November 18th, 2009 at 6:32 pm
Health care “reform”, the best policy health care lobbyists can buy:

WASHINGTON (CNNMoney.com) — The price tag to influence the health care debate in the halls of Congress has surpassed $600 million and is fast becoming a legislative record breaker.

Reaching beyond the half-billion mark, the total spent on lobbyists, television ads and political donations is enough to pay the insurance tab for about 45,000 families a year.

A third of that spending, $200 million, was raised and spent just in the past few months, as Congress has been more thoroughly ensconced in policy debates about public insurance options and taxpayer-funded abortions.
Duck says:
November 18th, 2009 at 6:39 pm
The sad thing is that it’s not about the cost for most of those opposed to health care. It’s about making absolutely certain that lazy, low-life, undeserving poor people don’t get something for free.*

*To be fair, for many politicians it’s also about shilling for insurance companies.
Chris says:
November 18th, 2009 at 6:45 pm
Is it realistic to assume that congress will ever cut Medicare at all? Let alone to the tune of several hundred billion dollars?
fostert says:
November 18th, 2009 at 6:46 pm
“The one time–one time!–that they overestimated the expense it was the Bush prescription drug benefit.”

That’s hardly the only time. The CBO also drastically underestimated the cost of Bush’s tax cuts. They didn’t estimate the Iraq War because it was off-budget. But the Bush estimate on war costs was off by about two orders of magnitude.
James Robertson says:
November 18th, 2009 at 6:49 pm
The key problem with this theory is this:

to be paid for with cuts to Medicare

Everyone knows that those cuts will never be made. There have been proposed cuts in doctor reimbursement on the books for years now, and Congress undoes them each year. They’ll do the same here, so these “savings” are an agreed upon fiction. If Matt actually believes that these cuts will happen, he probably also believes in Unicorns.
scythia says:
November 18th, 2009 at 6:50 pm
ds, if you wanted to generalize, you’d say that the CBO’s estimates are always wrong in a direction that favors the Democratic party.

What if I wanted to ask for evidence after you made that generalization? Would you able to supply it?

After fostert’s comment @ 10 I think the number of past examples of a CBO misestimation in favor of Democratic proposals stand at -2. Your serve.
JonF says:
November 18th, 2009 at 7:00 pm
Re: Yes, because the government always calculates projected expenditures 10 years into the future completely accurately

Well, sometimes the CBO overestimates costs too. Two of the most maligned programs of the decade, TARP and Medicare Part D (note: healthcare program!) have come in significantly under their estimates
fostert says:
November 18th, 2009 at 7:01 pm
“I think the number of past examples of a CBO misestimation in favor of Democratic proposals stand at -2. Your serve.”

Umm, let’s see your list. The CBO favored Bush on taxes, and hurt him on Medicare. That’s even. On the Iraq War, they threw Bush a bone by not even scoring it. Had they scored it all, they wouldn’t have been allowed to score it as costing more than $100 Billion, which is way in favor of Bush. I can’t think of any other major items that passed during Bush’s years. But one thing is certain, the CBO pretty assumes tax cuts pay for themselves, which is clearly not the case anymore. We’re on the wrong side of the Laffer Curve now, so tax cuts cost a lot.
joejoejoe says:
November 18th, 2009 at 7:03 pm
Re: cutting Medicare

The cuts are to Medicare Advantage. Medicare Advantage is a program for INSURERS, not people. It was first offered as a free market cost savings solution to the commie real Medicare by idiot moderates and Republicans. Medicare Advantage is the Underpants Gnomes of Medicare.

Step 1 – Administer Medicare privately to save money.
Step 1A – Offer free gym memberships.
Step 2 – ????
Step 3 – Profit! Uhh…I mean savings.

The savings never showed up but the profits sure did so screw Medicare Advantage. My Mom is on it and she never uses any of it’s provisions, nor do her friends. It’s simply a huge boondoggle for private insurance.
Mike says:
November 18th, 2009 at 7:43 pm
My comment is awaiting moderation. Here it is again with fewer links:

joejoejoe: “The cuts are to Medicare Advantage. Medicare Advantage is a program for INSURERS, not people.”

When the subsidies for MA were raised, more MA plans became available for cheaper prices. What do you think will happen when the subsidies are cut? I’ve written more on the subject here: http://sovereignmind.wordpress.com/2009/08/29/i-think-we-all-know-where-its-coming-from/

Furthermore, the cuts are not just from MA. They are from provider reimbursement, which is a joke because everyone knows that the congress will undo those cuts as soon as the bill is passed.

As other’s have noted, the CBO practically admitted in their analysis of the house bill that their numbers were unlikely to be correct, but they are constrained to make assumptions that are almost certain to not be true. I will wait until the report is published and we’ll see if the same language is there.
DTM says:
November 18th, 2009 at 7:53 pm
I assume all those concerned about the CBO’s cost estimates are in favor of incorporating more effective cost control measures in the bill, such as a Medicare-rate-based version of the public option.
scythia says:
November 18th, 2009 at 8:04 pm
@fostert: note the negative sign before the number.
charles says:
November 18th, 2009 at 8:08 pm
unfortunatly i dont think most of our country believes a word anybody associatted in the formation of this health care bill says.—and why should they?–i gotta say harry is a little more realistic then nancy -but dang nobody is gettin into this at all -i think if you had hillary instead of nancy it might be more believable-but even then it would be a long shot.-by the time the bill gets to where it is going it will be picked apart into a million pieces—and then it will be used against the people that crafted it –and it should be.
Mike says:
November 18th, 2009 at 8:20 pm
DTM: “such as a Medicare-rate-based version of the public option.”

That is not a “cost control”, that is a “price control”.
Patrick C says:
November 18th, 2009 at 8:20 pm
There is a lot of loose talk about the quality of CBO estimates and not a lot of data. People should know the CBO publishes analyses of its accuracy and bias for economic indicators and compares to other sources of information(corporate,executive branch).

http://www.cbo.gov/doc.cfm?index=8713
http://www.cbo.gov/ftpdocs/78xx/doc7837/03-05-Uncertain.pdf

If I were to pick a number to summarize the above documents, it would be +- 5% RMS. So what this estimate tells us is that we can expect a 10 year cost between $800 B & $900 B, and that we can expect a 20 year savings between $600 B and 700 B

The take-away, is that the CBO estimate is really a good indication of how much the healthcare will cost. You just can’t be rational, have a solid understanding of statistical methods, and spin this into a claim that the healthcare bill won’t save money.

Thus we can deduce that if someone tells you that this bill won’t save money, you can infer that they are irrational or don’t understand statistics.
fostert says:
November 18th, 2009 at 8:25 pm
“@fostert: note the negative sign before the number.”

Got it. I seem to be having sign problems today. For some reason, I interpreted that like a football spread.

That said, when Bill Clinton gave his first speech as president, he promised to accept the CBO analysis rather than his own administration’s analysis. This, of course, drew a lot of laughs. But he pointed out that the CBO has historically been better than the White House at estimating costs.
Mike says:
November 18th, 2009 at 8:34 pm
Patrick, looking at past accuracy is good, but in this case we have a specific instance where the CBO is constrained to make an estimate which it acknowledges is based on assumptions that are very likely to not be true: http://gregmankiw.blogspot.com/2009/11/assuming-can-opener.html (I provided this link in a previous comment that is in moderation, so I apologize if this ends up being the second time)
Thomas says:
November 18th, 2009 at 9:21 pm
fostert, scythia, this is the bit I responded to: “you will see that the CBO’s estimates are usually very conservative, and almost always overestimate the costs of health care legislation.” And what you will see is that the CBO’s estimates almost always underestimate the costs of health care legislation, with the one exception being the Bush prescription drug benefit. Jon F–yes, Part D has been mentioned, thanks. And TARP isn’t done, and you should expect that the money will disappear, because the Obama administration is like a guy at the slots, and they’ll plug the winnings right back into the program until they lose it all (if you can say that giving it to GM counts as “losing” it; it’s closer to stealing).

Patrick, for someone who sounds like he knows what he’s talking about, you really don’t. If someone says this bill won’t save money, you can expect that they don’t believe politicians will cut Medicare reimbursement rates, which is an entirely rational and well-founded belief to have.
DTM says:
November 18th, 2009 at 9:29 pm
That is not a “cost control”, that is a “price control”.

Nonsense. A “price control” is when the government imposes prices on market transactions to which it is not a party. When the government limits the prices that it will be willing to pay in voluntary transactions on itself, that is in fact a cost control.
Mike says:
November 18th, 2009 at 11:34 pm
DTM, if the public option rates were tied to Medicare, the provider reimbursement would be much less than the reimbursement from private insurance companies which must pay the market price. Therefore, the public option would be cheaper and more consumers would favor it. Therefore, the provider has a choice: refuse to take patients who are on the public option and lose business, or else take the patients and accept the payments that are below what the market would pay. Therefore, it is *in effect* a price control.

Now, I understand that it is not technically a price control (just one in effect), but even so neither is it a cost control. A cost control would find ways to lessen the overall cost of health care. This would only lessen the cost of health care *to the government*, but those costs would just be shifted to other consumers and therefore I wouldn’t consider it a cost control.

Furthermore, even if the public option rates were tied to Medicare, as the President has said the public option is paid for my premiums, not tax-dollars. Therefore, such a plan would reduce the premiums that people on the public option would pay, but it would not have any effect on the cost to tax-payers. So the cost of the bill would be as high as it is now, even with a more “robust” public option.
DTM says:
November 19th, 2009 at 12:20 am
Therefore, the provider has a choice: refuse to take patients who are on the public option and lose business, or else take the patients and accept the payments that are below what the market would pay. Therefore, it is *in effect* a price control.

This is more nonsense. A voluntary transaction that occurs between a provider and the public option at the public option’s offered price which happens because the provider wants the public option’s business even at that price IS a market transaction. Again, a price control is when the government imposes prices on other market participants, not when the government gets business at good prices because market participants want that business.

Now, I understand that it is not technically a price control (just one in effect)

It isn’t a price control in any way.

This would only lessen the cost of health care *to the government*, but those costs would just be shifted to other consumers.

Yet more nonsense. If providers had the power to just unilaterally impose higher prices on other consumers, they would be doing that already, public option or not. Rather, if they accept the public option’s business, it will be because they think they can profit by doing so, not because it will magically give them some new power to unilaterally increase their other reimbursement rates.

Therefore, such a plan would reduce the premiums that people on the public option would pay, but it would not have any effect on the cost to tax-payers.

First, very likely other insurance companies in the exchanges would lower their premiums on at least some plans in order to remain competitive with the public option, and if they didn’t, that would just mean more people in the exchanges would end up with the public option. Second, if you reduce the price people in the exchanges pay for their coverage–as would happen either if other companies lowered premiums to compete or the public option gained greater participation–you can reduce the subsidies in the exchanges, which would reduce the cost to the government of achieving a given level of coverage through the exchanges.
Duncan Kinder says:
November 19th, 2009 at 1:25 am
Who are the left out 6%?
“CBO Issues Report On Senate Health Bill: Costs $849B/10 Years And Reduces Deficit By $127B” and related posts « Twitter says:
November 19th, 2009 at 2:04 am
[...] CBO Says Senate Health Bill Would Cover 94 Percent of Americans, Sharply Reduce the Deficit - Matthew Yglesias See all 112 blogs. November 19th, 2009 | Category: Uncategorized [...]
Mike says:
November 19th, 2009 at 9:45 am
“If providers had the power to just unilaterally impose higher prices on other consumers, they would be doing that already, public option or not.”

I take it then, that you don’t believe that hospitals providing uncompensated care to the uninsured ends up costing the insured more. It is not as simple as the doctor saying “this patient paid me less, so I’ll charge this patient more”. It is more complicated than that which I’ll get into in my next point.

“First, very likely other insurance companies in the exchanges would lower their premiums on at least some plans in order to remain competitive with the public option, and if they didn’t, that would just mean more people in the exchanges would end up with the public option.”

From what I understand, you are making the argument that the public option is just another market player, and therefore if it sets it’s rates lower than other insurers then it is just making a decision within the market of which it is a part. That decision will result in lower market prices, but it is not a “price control”. If that’s your argument, I see your point and so I’ll concede that it is not a price control.

However, I will not concede that it is a cost control. As you pointed out, the effect of the lower rates paid by the public option would be to drive the market price down. So, from the perspective of a health care provider, they will see the price for their services go down, but the cost of providing those services is unaffected. Therefore, the result is lost profits for health care providers. Profits are the incentive to provide a good or service, so if the profit is less then there is less of an incentive to provide the service. Therefore, there will be less supply, which in the long run means either a shortage or higher prices, making it increasingly difficult for the public option and insurers to maintain the low reimbursement rates. Affecting the price (whether through true “price controls” or using leverage to lower the market price) doesn’t address the problem of high costs and therefore is an unsustainable way to lower prices for consumers.
joe from Lowell says:
November 19th, 2009 at 7:08 pm
And TARP isn’t done, and you should expect that the money will disappear, because

…hmm, this could be interesting. I wonder what structural problems in the design or implementation of TARP, or ideological beliefs about the operations of government, lead Thomas to this conclusion? I can’t wait to see what he has to say.

…the Obama administration is like a guy at the slots…

Oh, fer chrissakes, you’re a tool.
joe from Lowell says:
November 19th, 2009 at 7:18 pm
The wingnuts have been citing CBO figures about health care reform increasing the deficit for months on end.

Now, however, they’ve decided that CBO figures are unreliable.

These people are like Marxist-Leninists: truth is whatever helps the Party, and the Movement.
Mike says:
November 19th, 2009 at 11:05 pm
Joe, I cited a specific part of the CBO report (see comment #23) in which the CBO admits that their analysis is based on certain assumptions, including the cuts to Medicare reimbursement rates, that are very unlikely to remain in place. In fact, in appears the house has already passed a bill that undoes them: http://www.google.com/hostednews/ap/article/ALeqM5ip_3G2TO8uvc1WknXFCob6L9VlLgD9C303V00

From the article:

The Obama administration has sought a permanent solution to avoid the uncertainty of one-year payment patches, and House Democrats obliged by including it in their 10-year health overhaul bill.

But before passing the overhaul bill earlier this month they took out the doctor payment measure, in part to keep the cost of the overall bill low enough to meet Obama’s target price tag. Democratic Rep. Pete Stark of California acknowledged as much during Thursday’s debate.

“The reason it was separated, I would have to admit, was purely political,” Stark said. “We had to abide by the president’s request that we not exceed certain costs.”

I guess the AP is just a bunch of wingnuts.

It is obvious that those who want this health care bill don’t care that it adds to the deficit. That’s fine, as long your honest about it. Instead, they are using blatant accounting tricks to claim it doesn’t add to the deficit. Talk about “truth is whatever helps the Party, and the Movement.”