Health Care Reform Costs: Real, Potential, & Imaginary

[unlawflcombatnt]

Much has been said about the potential "costs" of health care reform, in reference to HR 3200 now pending in Congress. Despite the discussion, there is little in the way of specific costs mentioned in the bill. And this has allowed both detractors and proponents to make unsubstantiated claims about the costs. Worse still, it has allowed detractors to incorrectly assign those costs to the "public option."

In fact, the only new costs would be the new subsidization of private insurance company premiums. As stated in other posts, the public option costs taxpayers nothing, as it is currently written. The only taxpayer costs described in HR 3200 come from the subsidization of private insurance company premiums.

But even if the public option were later to become subsidized by taxpayers, the costs would be much lower than detractors claim. These potential costs, that aren't even part of the current legislation, {U}can{U} be estimated. This can be done by using current Medicare payouts. (Here I'll use information provided by the Kaiser Family Foundation.)

The current cost for covering 45 million Medicare enrollees (including patients' portion) is estimated to be $484 billion in 2009. Since enrollees pay a 20% co-pay for most services, the total government-payout will be 80% of that total, or $387 billion for 2009. (This is consistent with the Treasury Department's $390 billion figure for Medicare for fiscal year 2008 in Table 9.) This total includes Parts A, B, C, & D.

Here is a breakdown of the different components of Medicare:

Part A covers inpatient hospital care.
Part B covers outpatient physician & hospital care. (for the 35 million not covered by Part C)
Part C covers the Medicare Advantage program (with 10 million enrollees)
Part D covers prescription drugs.

So if 45 million uninsured Americans were instantly given Medicare-type insurance, with 80% government funding, it would cost taxpayers no more than $387 billion, since the new patients would be younger and healthier.

But $387 billion is a gross overestimation of the predicted cost, given the much smaller costs of covering healthier, under-65 year-old patients (as opposed to Medicare's sicker, predominantly over-65 patients).

In fact, the greatly reduced average age would reduce the cost of Part A (inpatient hospital care) to a small fraction of its cost for those over 65.

In fact, the majority of costs for the under-65 population would be completely covered by Part B. To put this in proper perspective, even for the sicker, over-65 population, total Part B payments in 2009 were only $135.5 billion. And the government paid only 80% of that, or only $108 billion. Thus even for the over-65 population, the government cost is only $3,085/patient per year. Thus, this would be the maximum that Part B would cost for the 45 million new enrollees. (And with the currently-described public option, it's the maximum amount enrollees would have to pay for Part B if it was entirely cash-pay).

But needless to say, with an actuarial adjustment for age, the cost would be less still.

As stated earlier, the Part A cost would be a fraction of the $201 billion, or $5,756/enrollee, that the government currently pays. In fact, it's likely that costs for Part A would be no more than 1/4 of that amount, since inpatient hospitalization for the healthier, under-65 population is far less frequent. One-quarter of $5,756 would be $1,439 per enrollee. Adding this to the $3,085 maximum described above would be $4,524/year per enrollee. But again, Part B would cost less for those under 65, dropping the cost even lower. It's likely that the total premium cost would be in the $4,000/person/year range, (or about $204 billion total if the government picked up 80% of the cost--which again, is not what is stated in the bill)

I haven't included Part D in this calculation, because I'd strongly urge that it be kept separate. And I'd urge enrollees to pay for drugs out of pocket if possible, since the premiums for Part D are much higher than average costs, if generics are used whenever possible.

If patients pay out-of-pocket for prescription drugs, Big Pharma would have to compete for customers, thus drastically cutting prices which are hyperinflated at present. This is due to the Bush Administration preventing Medicare from negotiating for lower prices, the way private insurers do.

In summary, even if the government were to pay the 80% share for a Medicare-type program, the costs would be nowhere near the $600 billion to $1,200 billion estimated by the government. Those estimates are based exclusively on the extensive subsidization of private insurance company premiums, not on the public option.

It appears that it would be 3 to 6 times more expensive to taxpayers to enroll the uninsured in private insurance plans, than it would be to extend Medicare to cover them, even if taxpayers paid for this public option.

And once again, as is currently written in HR 3200, the "public option" contributes absolutely $0.00 to any cost estimate. That's because the public option is 100% enrollee-paid for.

It's the Corporate Welfare for the health insurance companies that accounts for the ENTIRE cost of the bill, not the public option.

[eridani]

1. Good arguments

Biggest problem with public option vs expanding Medicare is, IMO, the fact than Medicare can be expanded right now, whereas the public option AND the insurance exchange must wait until 2013.

We have two election cycles to get through before anyone at all notices any improvement in health care delivery. Insurance companies will continue to jack premiums, people will still lose jobs and coverage, employers will still reduce benefits and constantly change their preferred providet lists, etc. The majority who don't pay a lot of attention to policy wonkery will be highly susceptible to Repuke and MSM arguments that Dems passed a big, messy expensive bill that hasn't changed anything--and it won't have until 2013.

UNLESS-- the Kucinich ERISA waiver remains, giving states the option of implenting single payer. (The Weiner amendment allowing a floor vote on single payer is going to fail, but it will help us to see who our real frienda are.)

OR-- we can get an amendment allowing anyone to buy into Medicare, or at least allowing some people to buy into Medicare. The obvious advantage is that Medicare is already a going concern, and will not have to be invented from scratch like the exchange and the public option. The original Medicare was implemented within a year, and this proposed amendment would just expand it. It could be implemented fast enough to provide visible benefits to a critical mass of people.

Please send this info to Kucinich and Weiner and ask them to propose such an amendment, as they are the single payer advocates who have demonstrated a willingess to amend the current bill.

Dennis Kucinich [phone]; [phone]
Anthony Weiner [phone]; [phone]

[ejpoeta]

4. i totally agree!! i don't understand this thing about creating some separate and new thing

when we already have something right now that we could just expand. it's not perfect, but instead of creating some separate 'public option' just opening up medicare to more people would be less costly and something people would understand. I may be cynical, but to me the reason this is being done so half assed is because people don't want it to succeed. they want to sabotage anything that would cut into their campaign contributions. it is very disheartening to see the people who are supposed to be representing us seem to not care less about what they are doing because it doesn't affect them. i wish the discussion on healthcare reform was not in regards to public vs private, but instead regarding expanding medicare to allow everyone in and what the benefits are.

[pinto]

2. Thanks for the post. And good point about Part D, for those on a set routine

of generically available medications. Many pharmacies are offering them at reasonable prices. Self pay may not work for everyone, but for some it would seem the better choice over using Part D.

:kick:

[eridani]

3. Also, send this to Thom Hartmann, who has suggested expanding Medicare n/t