What To Make Of The CBO’s New Cost Estimate Of The HELP Bill

kennedydodd1Jonathan Cohn and Tim Foley have some very good summaries of the Congressional Budget Office’s (CBO) new analysis of the more complete HELP bill. The CBO score will dispel some of the gloom surrounding the frustrating mark-up process and dissuade (intellectually honest) critics from using the CBO’s preliminary estimate to fearmonger about the costs of reform.

The HELP committee does not have jursidiction over Medicaid expansion or financing of reform. Thus, its bill only covers an additional 20 million Americans and costs approximately $600 billion. However, if we assume Medicaid expansion to about 150% FPL we expand coverage, but we also add to cost, bringing the final bill to somewhere around $1 trillion over 10 years. Cohn runs the numbers for what the final results may look like:

20 million: Number of uninsured in 2019, compared to 54 million without reform.

95 percent: Percentage of Americans with coverage in 2019.

21 million by 2019: Additional people covered through Exchange and employer mandate.

20 million by 2019: Additional people covered through Medicaid expansion of up to 150% FPL.

The preliminary CBO score of the early and incomplete HELP legislation placed the cost at $1 trillion and this latest analysis suggests that the committee has been able to find savings of some $400 billion ($1 trillion – $600 billion = $400 billion). Some of that new revenue will come from the employer mandate (an AP story suggests that the mandate will generate $52 billion over 10 years), but where do we get the rest? Lower subsidies (the original version may have provided subsides at 500% FPL, now it looks like it’s down to 400% FPL)? The public option? Only the yet-to-be released CBO score can provide those answers.

But the HELP Committee’s chairman’s mark – which, for the first time includes language on the public plan and the employer mandate – does offer some new details for how the mandate and the public plan could be structured:

Employer mandate: Large employers would have to provide coverage to their workers or pay $750 per full-time employee, $375 for each part-time employee. Businesses with less than 25 employees will receive a tax credit, on a sliding scale, based on the number of workers. Ezra Klein points out, “the CBO estimates that “a mere 150,000 will lose their coverage. That’s nothing. And it means that a lot more Americans end up insured and the government spends a lot less in subsidies.”

An employer mandate is meant to strengthen the employer-based system of coverage and reduce crowd-out into the Gateway. Crowd out (and this is what critics latch on to when they claim that Obama overstated his promise to allow Americans to keep their present coverage) is less likely if employers are required to contribute a meaningful amount “to the cost of covering their uninsured workers,” because the cost of allowing their workers to be covered through other options is not much lower.

The dear colleague letter that accompanied the new mark stated that “the completed bill virtually eliminates the dropping of currently covered employees from employer-sponsored health plans,” but some may be surprised that a modest flat fee is a sufficient deterrent to dropping coverage. The decision to charge every firm the same penalty — instead of charging firms on a sliding scale based on payroll — does not account for firm size or profitability and smaller firms and firms with lower-wage workers, could be disadvantaged.

However, it should also be noted that Massachusetts requires employers with more than ten employees to either offer a “fair and reasonable” contribution for their employees’ coverage, or “pay an annual ‘fair share’ contribution of $295 per employee.” In Massachusetts, few firms reported making changes as a result of health reform, firms reported making few changes in cost sharing or in offering more plans are a result of the mandate.

Community Health Insurance Option: Will have to compete on a level playing field with private providers and offer competitive rates and premiums. Presumably, the plan will be able to use its administrative efficiency and its market power (assuming it is able to attract a significant number of applicants and providers) to lower premiums:

– Health care providers and individuals are NOT required to participate in the new plan, it is entirely voluntary.

– The Secretary of Health and Human Services will establish the public option in every single Gateway (whether it is regional or national) and provide the national plan with start-up funds that will have to be repaid in 10 years.

– The new plan provide coverage only for the essential health benefits, but states may offer additional benefits if they choose

Premium rates should cover the expected costs of the plan

– The rates negotiated with providers shall not be higher, in aggregate, than the average reimbursement rates paid by health insurance issuers offering qualified health plans through the Gateway.