Commentary

Give True Account of Health Plan’s Cost

Senate Finance Committee Chairman Max Baucus (D-Mont.) recently told reporters that the bipartisan health reform bill he’s negotiating would cost just $900 billion over 10 years. Don’t bet on it.

Democrats are using smoke and mirrors to hide the impact of their health plans. Existing estimates, therefore, reflect only a fraction of the total cost. With a little hustle, however, fiscally responsible members of Congress can bring the full costs to light.

First, Congress should ensure that the nonpartisan Congressional Budget Office includes all new state and private-sector spending, as well as new federal spending, in the total cost of each bill.

In 2006, Massachusetts snuck a health care boondoggle past the voters by pushing 20 percent of the cost on to the federal government and 60 percent onto private individuals and employers, according to data from the Massachusetts Taxpayers Foundation.

President Barack Obama’s plan would commit states to increase Medicaid spending (governors are furious) and require individuals and employers to spend more on health insurance (Obama’s top economist, Larry Summers, says those mandates “are like public programs financed by benefit taxes”).

The CBO should include all such costs (including any additional coverage that already insured Americans would be forced to purchase) in the total-cost figure for each bill.

Second, with those totals in hand, the CBO should assume that all new spending would be fully implemented in 2010, and then calculate the 10-year cost from that baseline.

House Democrats kept the (on-budget) cost of their plan to a mere $1.2 trillion by delaying implementation until the second half of the 10-year budget window.

It’s an age-old budget gimmick that makes huge new programs appear smaller. Assuming immediate implementation would reveal the (on-budget) cost of the House plan to be 50 percent greater than current projections suggest.

Third, the CBO should calculate the cost of covering each previously uninsured person.

It costs Massachusetts about $6,700 to cover each previously uninsured resident, or about $27,000 to cover a family of four. Democrats should justify why they want to tax us that much when the average employer-sponsored family policy costs just $12,680.

Fourth, the CBO should conduct a “Ryan score” for each health reform bill, so named for Rep. Paul Ryan (R-Wis.).

The CBO projects that under current law, federal spending will grow from 20 percent of the economy today to nearly 40 percent by the end of this century, mainly because of Medicare and Medicaid.

At the request of Ryan, the CBO estimated that federal income-tax rates would nearly have to double by midcentury (top rate: 66 percent) and more than double by 2082 (top rate: 88 percent), just to pay for those existing federal commitments.

Americans deserve to know whether Obama’s plan would push tax rates higher than 66 percent. The CBO fulfilled Ryan’s original request in just four days. That doesn’t seem too long to wait before mortgaging your children’s future.

Finally, the CBO should estimate whether the insured would be winners or losers under individual and employer mandates.

The Urban Institute estimates that cost-shifting from the uninsured increases private insurance premiums by “at most 1.7 percent.” Supporters claim that individual and employer mandates would benefit the insured by reducing cost-shifting.

But mandates also require already insured people to pay higher taxes to help others buy insurance. As in Massachusetts, many already insured people would have to pay higher premiums to comply with the mandate. The 180 million Americans with private insurance deserve to know whether those mandates would actually save them money.

As our third president wrote to our first president, “Delay is preferable to error.” Congress should not vote on health reform until the American people have all the facts.

Michael F. Cannon is director of health policy studies at the Cato Institute and co-author of Healthy Competition: What’s Holding Back Health Care and How to Free It.