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CBO: More taxpayer-financed health insurance coverage won’t save money

Last December the Congressional Budget Office published a comprehensive paper that describes how they approach analysis of health insurance reform proposals.  It is a critically important (and somewhat technical) document for anyone who cares about health care legislation in the United States.

CBO is the referee for the budgetary costs of legislation.  They estimate the effects on the federal budget of a bill or amendment, and those estimates are then inputs into legislative processes that determine what bills and amendments can and cannot be considered.  In the Senate, for instance, there are many cases where an amendment can pass with a majority (51 votes) if any spending increase is offset by an equal-sized or greater spending cut, but for which you would need 60 votes if that spending increase is not fully offset.

Like a referee, CBO gets screamed at a lot by the coaches and players (Members of Congress and their staffs).  Like a referee, their judgment calls (estimates) matter.  And like a referee, what CBO says goes.  It does not matter whether the player’s foot was or was not on the three-point line.  What matters is what the referee says about whether or not his foot was on the line.

This study is a bit like a referee giving an interview before the big game, and explaining his philosophy toward refereeing certain aspects of the game.  Smart coaches and players will adjust their strategies based on this information.  At a minimum, it gives the spectators insight into what to expect as the big game approaches.

Here is one interesting thing that pops out from the Executive Summary of the report:

These problems [rising costs of health care and health insurance, and the number of uninsured] cannot be solved without making major changes in the financing or provision of health insurance and health care. In considering such changes, policymakers face difficult trade-offs between the objectives of expanding insurance coverage and controlling both federal and total costs for health care. (page ix)

They key phrase is “difficult trade-offs between.” CBO is clearly rejecting the argument made by some advocates of universal coverage, that covering more people will reduce federal spending.  CBO is saying simply that if you want taxpayers to finance more health insurance coverage, then both federal and total health care spending will go up.

Interestingly, while I hear the counter-claim frequently from some on the Left (more coverage will reduce unreimbursed emergency room and clinic care, leading to a net savings to the taxpayer), I have never heard it from the Administration.  The logic implicit in the Administration’s argument is not that “Universal coverage will pay for itself.”

It appears that the Administration’s logic is instead, “Yes, covering more people through taxpayer-financed program expansions will cost more, but we will more than offset those higher costs through other long-term reforms.” As I explained yesterday, they have yet to specify those cost-saving policy reforms.

Expanding taxpayer-financed health insurance coverage will cost taxpayers more, and will dramatically worsen our short-term and long-term budgetary problems.  This is CBO’s “difficult trade-off.”  Policymakers must either choose which problem they want to solve, or they must find so much savings through other reforms that they can more than offset the higher expenditures from the proposed new spending program.

This may seem like a trivial conclusion, but it is non-trivial in the legislative debate, and should have an important effect on legislation.  The referee has spoken.

By | 2017-01-15T09:14:52+00:00 Wednesday, 22 April 2009|