Tag: cost estimates

A Hidden Cost of ObamaCare

Today at the Cato Institute, Duke University Prof. Chris Conover presented his estimates of the economic losses that will be created by the taxes necessary to fund ObamaCare.  This chart is taken from his presentation:

The Excess Burden of ObamaCare

Here’s Conover’s full presentation (with comments by former Congressional Budget Office director Douglas Holtz-Eakin), as well as his Cato Policy Analysis, and his op-ed.

Sen. Kennedy’s Budget-Breaking “Reform” Bill

It appears that the Obama administration has decided to disown the venerable Senator.  No wonder.  The Congressional Budget Office estimated the ten-year cost of Sen. Kennedy’s bill at $1 trillion, but admitted that its analysis was incomplete. 

Now the consulting group HSI Network, LLC comes foward with an estimate of $4 trillion:

The Senate Committee on Health, Education, Labor and Pensions (HELP) have proposed a health reform bill called the Affordable Health Choice Act (AHC) that seeks to reduce the number of uninsured and increase health system efficiency and quality. The draft legislation was introduced on June 9th, 2009. The proposal provided adequate information to suggest what the impact would be of AHC using the ARCOLA™ simulation model. AHC would include an individual mandate as well as a pay or plan provision. In addition, it would include a means-tested subsidy with premium supports available for those up to 500% of the federal poverty level. Public plan options in three tiers: Gold, Silver and Bronze are proposed in a structure similar to that of the Massachusetts Connector, except that it is called The Gateway. These public plan options would contain costs by reimbursing providers up to 10% above current reimbursement rates. There is no mention of removing the tax exclusion associated with employer sponsored health insurance. There is also no mention of changes to Medicare and Medicaid, other than fraud prevention, that could provide cost-savings for the coverage expansion proposed. Below, we summarize the impact of the proposed plan in terms of the reduction on uninsured, the 2010 cost, as well as the ten year cost of the plan in 2010 dollars.

HELP Affordable Health Choices Act

  • Uninsurance is reduced by 99% to cover approximately 47,700,000 people
  • Subsidy - Tax Recovery = Net cost:
    • $279,000,000,000 subsidy to the individual market
    • $180,000,000,000 subsidy to the ESI market with
    • Net cost: $460,500,000,000 (annual)
    • Net cost: $4,098,000,000,000 (10 year)
  • Private sector crowd out: ~79,300,000 lives

HSI figures that a lot more people will take advantage of federal health insurance subsidies, driving costs up far more than indicated by the CBO figure.  (H/t to Phil Klein at the American Spectator online.)

Of course, no one knows what the bill would really cost in operation.  But the history of social insurance and welfare programs is sky-rocketing expense well beyond original projections.  Go back and look at the initial cost estimates for Medicare and Social Security, and you will run from the room simultaneously laughing and crying.

Health care reform would be serious business at any moment of time, but especially when the country faces $10 trillion in new debt over the next decade on top of the existing $11 trillion national debt.  And with the $100 trillion Medicare/Social Security financial bomb lurking in the background, rushing to leap off the financial cliff with this sort of health care legislation would be utterly irresponsible.

Cooper vs. the Services

Congressman Jim Cooper (D-Tenn.) has a fairly radical proposal for reforming defense acquisition in Politico.

Cooper wants to put the military services’ acquisition staffs under the direct control of the Secretary of Defense. The idea is to liberate the staffs from the parochial perspectives that cause various pathologies in acquisition programs.

The oped implicitly blames large and consistent cost overruns in weapons programs on the services’ interests, which manifest in excessive requirements for platforms. For example, the Air Force’s religious attachment to the over-designed and thus wildly expensive F-22 has its origin in a peculiar self-image, one that sees the establishment of air superiority for strategic bombing as the Air Force’s main mission. You can tell a similar story about another contender in the Pentagon’s biggest white elephant sweepstakes: the Marine’s amphibious Expeditionary Fighting Vehicle.

Cooper is rejecting the more popular view that the trouble in acquisition is the lack of independent cost estimates and other failures in the contracting process. That technocratic view underlies the acquisition bill that just became law. Cooper is saying that the trouble is more what we want than how we buy it, and what we want is a consequence of the services’ power. To deal with that, you must either change the services’ conception of their interests (and note that such efforts are arguably underway, especially in the Air Force) or take power from them. He’s pushing for the latter.

The weakness in the oped is a failure to explain how moving the military’s acquisition personnel to OSD would change the incentives that cause officers to do their service’s bidding. They would still work for a service, after all, and face its promotion board. A more radical proposal would be to hand more power over acquisition to the civilians in OSD and remove redundant positions from the services.

Cooper also takes (another) shot at constant service shares – the tradition, dating to the Kennedy Administration, where the Army, Navy and Air Force all get consistent shares of the budget each year. That tradition stifles interservice competition and therefore innovation. Giving the lion’s share of defense spending to the ground forces would be a sensible outgrowth of our current defense strategy, which is manpower-intensive. The Navy and Air Force might then be forced to scramble for relevance, causing them to initiate many of the reforms to their procurement programs that Secretary Gates has proposed. (An even better tact would be to cut the defense budget massively but give more of it to the Navy, given that our current strategy encourages dumb wars).

Note that the suggestion to enhance service competition relies on decentralized institutions competing, whereas the main suggestion of the oped is to heighten the centralized authority of the Secretary. Whether these are contradictory ideas is academic, for now, because at least one is not going to happen soon. The service’s would go the mattresses to protect their control of their acquisition programs, and there is a no sign of a political constituency willing to pick that fight.