How Does The New HELP Bill Save $400 Billion?

save_money2A comparison between the newly released table of the CBO’s analysis of Title I of the HELP Committee bill and CBO’s initial score, reveals that in order to reduce the overall costs of the bill from $1 trillion to $600 billion, the committee relied (in part) on shared responsibility, Medicaid savings, lower subsidies within the Exchange (Gateways), and new revenue from the CLASS Act.

Here is a partial comparison of how the committee reduced the price tag (all numbers are over a ten-year period):

New HELP Estimate Old HELP Estimate Net Change
Subsidies In The Exchange $723 billion $1279 billion $556 billion from old version
Tax Credit To Small Employers $56 billion $60 billion $4 billion from old version
Employer Mandate $52 billion $52 billion from old version
Individual Mandate $36 billion $2 billion $36 billion from old version
CLASS Act $59 billion $59 billion from old version

The most interesting saving came from the reduction in subsidies. The original language allowed for $1,279 billion in subsidies, but the new bill scored a $723 billion price tag with the CBO, a 40 percent reduction. What happened? Well, the CBO concluded that by implementing an employer mandate more Americans would retain their work-place insurance and fewer would have to purchase coverage from the Exchange. As a result, the government would have to spend less money subsidizing coverage (since the employer contribution would be preserved); employers who don’t offer coverage would pay a penalty of $750 per full-time employee, $375 for each part-time employee, that would bring in an extra $52 billion for health care reform!

The bill also saves money by reducing the subsidy eligibility from 500% FPL to 400% FPL. Now, American families of four with incomes between 400% FPL ($88,000) and 150% FPL ($33,000) would receive government assistance when purchasing insurance, but the subsidies do not kick in for a family of four at $400% FPL until they have spent more than 12.5% (or $11,000) of their gross adjusted income on health insurance — a percentage that’s substantially higher than the 6% threshold most affordability experts recommend.

The bill also finds approximately $59 billion in new revenues from premiums collected for long term care paid by individuals purchasing disability insurance through the Community Living Assistance Services and Supports (CLASS) Act, legislation currently under consideration that would create an insurance program for adults who become functionally disabled. The CLASS Act establishes “a national insurance program to be financed by voluntary payroll deductions to provide benefits to adults who become severely functionally impaired.” All working adults will be automatically enrolled in the program, unless they choose not to be.