HELP! IS THE CBO GETTING SUCKERED?

In a THCB comment on my previous post on the Senate Health, Education, Labor, and Pensions reform bill, tcoyote explained some of the political thinking behind what seem like totally spurious cost projections. While I can readily accept tcoyote’s explanation of the pols’ efforts to ignore reality, I’m still innocent enough to want to know what the HELP bill might really cost. So I spent some time looking at the Congressional Budget Office report on the bill.

Here are a few things I noticed:

1. The “ten-year projection” starts in 2010, although the bill does not require insurance exchanges to be implemented until 2014. The result is that the projection includes only six years of reform (plus a lengthy transition period), NOT ten years.

2. The CBO projections include a $58 billion “credit” for the impact of the HELP bill’s proposed new long-term care program (the so-called CLASS Act). However, the “credit” accounts for the difference between premiums and benefits over the 2010-2019 period on a cash basis only. If conventional accrual accounting were used, CLASS would show a net cost for the period.

3. The number of individuals eligible for the proposed Medicaid expansion is projected to be 26 million, not the 20 million implied by Senator Dodd in his news conference on behalf of the HELP Committee.

4. The CBO estimates include no allowance for medical inflation, except in terms of increased subsidies for lower-income exchange participants.

5. The CBO assumption that the absurdly low levy for play-or-pay “payers” will not cause any significant migration from employer sponsorship to the exchanges seems wildly unrealistic (as I’ve already commented).

The bottom line is that a realistic ten-year projection of the costs of the fully-implemented HELP bill plus Medicaid expansion would be somewhere between one and a half trillion and two trillion dollars. (And still with eight million or more uninsured).

It’s disappointing to see the CBO apparently getting suckered into putting a favorable slant on the numbers (Senator Dodd noted that he’d put a lot of pressure on CBO Director Doug Elmendorf). Hopefully, CBO’s subsequent scoring of the HELP Committee’s efforts (along with Senate Finance’s Medicaid expansion) will provide a more realistic picture.

Meanwhile, how about looking at ways to control costs other than the public plan (which as envisioned by the HELP bill will depend on the willingness of providers to participate, at government-set payment rates, potentially creating another version of Medicaid)?