Out of Control Policy Blog

Sticker Shock Over ObamaCare: Part 2

Talking about  sticker shock over the Congressional Budget Office's estimate that ObamaCare will end up costing more than $1 trillion over 10 years, as it turns out even this figure is almost certainly too low. The Wall Street Journal reminds us this morning that Congressional actuaries have a history of under-estimating the ultimate cost of such programs.

"[They] expected Medicare to cost $3.1 billion in 1970. In 1969, that estimate was pushed to $5 billion, and it really came in at $6.8 billion. House Ways and Means analysts estimated in 1967 that Medicare would cost $12 billion in 1990. They were off by a factor of 10-actual spending was $110 billion-even as its benefits coverage failed to keep pace with standards in the private market. Medicare spending in the first nine months of this fiscal year is $314 billion and growing by 10%," the WSJ notes.

Nor is the CBO likely to break its streak of low-ball predictions this time. In fact, according to Stephen T. Parente in the City Journal, the CBO estimate is off by - hold on to your wallets - about one trillion dollars! That means that ObamaCare might cost twice as much as the CBO claims -- or two trillion dollars.

Parente was John McCain's health care advisor so ObamaCare supporters are likely to dismiss his claims. But Parente is a principal of Health Systems Innovations that routinely provides health care estimates to both Republican and Democratic members of Congress. He is also director of the Medical Industry Leadership Institute and an associate professor in the finance department at the Carlson School of Management at the University of Minnesota so there is reason to think that he knows what he is talking about.

His contention is that the CBO under-estimates the final price tag of both the House and Senate versions of ObamaCare because it under-estimates the number of people who will switch from a private to a public option. Like the Urban Institute - no bastion of right-wing misinformation on the issue -- Parente estimates that large and small employers would collectively dump roughly 40 million people on to the subsidized public option. But the CBO assumes that large employers would use the public plan only sparingly and that only 11 million people would move from private to public insurance.

Why the difference in these estimates? Parente believes that this is because the CBO uses simulation models of health-insurance plans based on much older health-plan data-typically from 2001 or even 2000. His estimates are grounded in 2006 commercial-insurance data to which the CBO doesn't have access (the data are not publicly available and the CBO didn't make provisions to purchase them). "These data reflect the advent of much cheaper, high-deductible health plans and limited-provider network plans. If the government modeled its public option on these inexpensive plans, the result would be cheap enough to lure far more people away from private health insurance than the CBO estimates," he notes.

He could be wrong, but he claims that his model has a good track record. "The last time government introduced a major health-insurance innovation was 2004, which saw the introduction of Health Savings Accounts. We [HSI] used the same model to predict that 3 million people would adopt these HSAs by the beginning of 2006. Our estimate, which we published in the peer-reviewed journal Health Affairs, was spot-on, predicting the market response more accurately than most other models, which produced adoption-rate estimates at least one-third lower," he notes.

I think I am getting heart burn in addition to sticker shock. Will someone please stop Parente by reporting him to the flag@whitehouse.gov before I have to pop another Malox. When it comes to ObamaCare, all unfavorable predictions are by definition lies!

Shikha Dalmia is Senior Analyst


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Comments to "Sticker Shock Over ObamaCare: Part 2":

Randy P. | August 7, 2009, 5:23am | #

It is clearer now to me why many are not in favor of this. This is one of the hottest issue on town. Well it would really be unfair for people not to have medicare just because some are not in favor of this. What is the truth behind this thing? On August 4th, Jack in the Box is giving away two free tacos – all you have to do is download the free coupon from the Jack in the Box website, take it to a participating location, and receive two free Jack in the Box tacos, but only for August the 4th. It's also Obama's birthday, but that isn't the reason why – a lot of fast food restaurants are running free food or severely reduced prices promotional runs, which stimulate business, important during a recession. So, if you want to save yourself payroll loans (though the tacos are cheap) get to Jack in the Box.

jacksmith | August 7, 2009, 2:59pm | #

LEAD, FOLLOW, OR GET OUT OF THE WAY. (Thomas Paine)

We have the 37th worst quality of healthcare in the developed world. Conservative estimates are that over 120,000 of you dies each year in America from treatable illness that people in other developed countries don't die from. Rich, middle class, and poor a like. Insured and uninsured. Men, women, children, and babies. This is what being 37th in quality of healthcare means.

I know that many of you are angry and frustrated that REPUBLICANS! In congress are dragging their feet and trying to block TRUE healthcare reform. What republicans want is just a taxpayer bailout of the DISGRACEFUL GREED DRIVEN PRIVATE FOR PROFIT health insurance industry, and the DISGRACEFUL GREED DRIVEN PRIVATE FOR PROFIT healthcare industry. A trillion dollar taxpayer funded private health insurance bailout is all you really get without a robust government-run public option available on day one. Co-OP's ARE NOT A SUBSTITUTE FOR A GOVERNMENT-RUN PUBLIC OPTION. They are a fraud being pushed by the GREED DRIVEN PRIVATE FOR PROFIT health insurance industry that is KILLING YOU!

YOU CANT HAVE AN INSURANCE MANDATE WITHOUT A ROBUST PUBLIC OPTION. MANDATING PRIVATE FOR PROFIT HEALTH INSURANCE AS YOUR ONLY CHOICE WOULD BE A DISASTER AND UNETHICAL, CORRUPT, AND MORALLY REPUGNANT. AND PROBABLY UNCONSTITUTIONAL AS WELL.

These industries have been slaughtering you and your loved ones like cattle for decades for profit. Including members of congress and their families. These REPUBLICANS are FOOLS!

Republicans and their traitorous allies have been trying to make it look like it's President Obama's fault for the delays, and foot dragging. But I think you all know better than that. President Obama inherited one of the worst government catastrophes in American history from these REPUBLICANS! And President Obama has done a brilliant job of turning things around, and working his heart out for all of us.

But Republicans think you are just a bunch of stupid, idiot, cash cows with short memories. Just like they did under the Bush administration when they helped Bush and Cheney rape America and the rest of the World.

But you don't have to put up with that. And this is what you can do. The Republicans below will be up for reelection on November 2, 2010. Just a little over 13 months from now. And many of you will be able to vote early. So pick some names and tell their voters that their representatives (by name) are obstructing TRUE healthcare reform. And are sellouts to the insurance and medical lobbyist.

Ask them to contact their representatives and tell them that they are going to work to throw them out of office on November 2, 2010, if not before by impeachment, or recall elections. Doing this will give you something more to do to make things better in America. And it will make you feel better too.

There are many resources on the internet that can help you find people to call and contact. For example, many social networking sites can be searched by state, city, or University. Be inventive and creative. I can think of many ways to do this. But be nice. These are your neighbors. And most will want to help.

I know there are a few democrats that have been trying to obstruct TRUE healthcare reform too. But the main problem is the Bush Republicans. Removing them is the best thing tactically to do. On the other hand. If you can easily replace a democrat obstructionist with a supportive democrat, DO IT!

You have been AMAZING!!! my people. Don't loose heart. You knew it wasn't going to be easy saving the World. :-)

God Bless You

jacksmith — Working Class

I REST MY CASE (http://krugman.blogs.nytimes.com/2009/07/25/why-markets-cant-cure-healthcare/)

Republican Senators up for re-election in 2010.

* Richard Shelby of Alabama
* Lisa Murkowski of Alaska
* John McCain of Arizona
* Mel Martinez of Florida
* Johnny Isakson of Georgia
* Mike Crapo of Idaho
* Chuck Grassley of Iowa
* Sam Brownback of Kansas
* Jim Bunning of Kentucky
* David Vitter of Louisiana
* Kit Bond of Missouri
* Judd Gregg of New Hampshire
* Richard Burr of North Carolina
* George Voinovich of Ohio
* Tom Coburn of Oklahoma
* Jim DeMint of South Carolina
* John Thune of South Dakota
* Kay Bailey Hutchison of Texas
* Bob Bennett of Utah

gereg | August 9, 2009, 5:04am | #

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