The Congressional Budget Office recently released preliminary estimates on the cost of the proposed, “Affordable Health Choices Act.”

Some highlights are as follows:

  • Increases the federal budget deficit by $1.042 trillion over ten years.
  • Health care subsidies for individuals and employers are projected to cost $1.339 trillion.
  • Increases tax revenues by $257 billion (due to a decline in employer based coverage).
  • Spends $38 billion less on the Children’s Health Insurance Program (CHIP) – but the plan spends the same amount and more in other areas in order to generate this “savings.”
  • Raises $2 billion in revenue from penalties paid by uninsured individuals and families via a “shared responsibility” penalty for choosing to go without health insurance.

Other statistics include:

  • The act will only cover about 16 million of the current 46 million uninsured population.
  • Fifteen million people would lose or drop their employer based coverage.

Looking at the Numbers

Our review of the Act indicates some of the estimated revenue and expense numbers above may be somewhat problematic.  For example, the proposed bill directs the government to calculate a penalty (called shared responsibility) to be levied on those who elect to go without health insurance.  This penalty is intended to encourage maximum participation in health insurance programs, but the Act does not specify the  amount of the penalty.  Instead, the Act leaves the penalty range wide open - making revenue estimations in this area difficult.

Further, it is very difficult to determine how many individuals may elect to go without coverage.  For example, 7% of the current uninsured population is made up of higher income individuals who are freely choosing not to participate in a health insurance program.  Due to the lack of real-number details in the proposed plan, there is no reliable way to determine whether those individuals will elect to participate or not.

Premium Subsidy Estimates

Calculating potential subsidies is very difficult, as well.  Basing estimates on the current number of citizens that fall below 150% of federal poverty guidelines (i.e. that’s a $38,685 income for a family of five – one of the plan’s benchmarks for having 99% of your health insurance premiums paid for by the government) does not take into account how many citizens would actively seek to reduce their incomes in order to qualify for such a large subsidy.

Additionally, employer subsidies are stipulated to be paid for no longer than a three consecutive year period and are reduced substantially due to changes in the total number of covered employees.  Estimating employer subsidy amounts is extremely difficult due to current fluctuations in employment statistics. Basing employer subsidy amounts on historical employment figures may miss the impact of currently deteriorating employment numbers.

Leaving 30 Million People Uninsured

Perhaps the most staggering statistic in all of the numbers above is that the proposed plan still leaves 30 million people uninsured.  When the Clintons proposed  nationalized health care in the early 1990’s, there were around 22 million individuals considered to be uninsured in the country.  One reason the numbers have increased substantially since then is due to increases in the immigrant population.

  • Between  1994 and 1998, about 33% of the increase in the uninsured population was due to immigrants. 
  • Between 1998 and 2003, immigrants accounted for 86% of the increase in the uninsured population.
  • In 2006, immigrants made up over 26% of the country’s uninsured population (source www.covertheuninsured.org).

However one accounts for the make-up of the nation’s uninsured, one of the key rationales for health care reform in the first place was to cover the nation’s uninsured population.  That the country should go through so much expense and turmoil – to only gain a net 16 million new insured’s out of the 46 million - is not much of an endorsement for this proposed legislation.

Filed under: Health Care Reform

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