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CBO’s Initial Reaction To Kennedy Plan

By June 18, 2009November 2nd, 2009Commentary

The Congressional Budget Office provided its initial assessment of Senator Kennedy’s Affordable Health Choices Act. (CBO Assessment) The bottom line of the assessment is that it would projects the bill would increase deficits by about one trillion dollars over the next ten years, but only increase the number of covered citizens by a net 16 million people.  The primary mechanism in the Kennedy bill appears to be an individual mandate coupled with subsidies for people with incomes up to 500% of the federal poverty level.  The subsidies account for the great bulk of the deficit increase.

The surprising thing about the bill and the CBOs analysis is how many uninsured persons will remain.  The bill is vague about an absolute individual mandate.  If there were a firm one, it is hard to believe that there would still be 37 million uninsured Americans by 2019, as CBO projects.  So CBO must not view it as a true mandate.  In any event, one of the trade-offs that appears to occur in the CBO analysis is that as exchanges become available to offer coverage to individuals, either fewer employers offer coverage or fewer employees enroll in employment-based plans.   The former would likely occur because employers would feel less of a need to offer health coverage and the latter because individual coverage with a subsidy might be cheaper than paying the employee share of employment-based coverage.

In any event, the analysis is disheartening on both the cost and coverage points.  To only cover an additional 16 million people for an average of a $100 billion dollars a year doesn’t get close to a goal of universal coverage or of making health reform affordable in the context of our ravaged national finances.  A simplistic view may be that it appears it would cost over $300 billion a year to get full universal coverage, in the absence of meaningful cost reforms.  Not a pretty picture and the CBO analysis has given significant ammunition to opponents of reform.

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