Health Care Overhaul May Cost About $1.5 Trillion
March 18, 2009<br />
Administration officials have pointedly avoided providing a ballpark estimate, saying it depends on details to be worked out with Congress.
"It's impossible to put a price tag on the plan before even the basics have been finalized," said White House spokesman Reid Cherlin. "Here's what we do know: The reserve fund in the president's budget is fully paid for and provides a substantial down payment on the cost of the reforming our health care system."
Still, the potential runaway costs are raising concerns among Republicans and some Democrats as Congress prepares to draft next year's budget. The U.S. spends $2.4 trillion a year on health care, more than any other advanced country. And some experts estimate that a third or more of that goes for tests and procedures that provide little or no benefit.
"We shouldn't just be throwing more money on top of the present system, because the present system is so wasteful," said Sen. Judd Gregg of New Hampshire, the ranking Republican on the Budget Committee.
The health care plan Obama offered as a candidate would have cost nearly $1.2 trillion over ten years, according to a detailed estimate last fall by the Lewin Group, a leading consulting and policy analysis firm. The campaign plan would not have covered all the uninsured, as most Democrats in Congress want to do. But it is a starting point for lawmakers.
John Sheils, a senior vice president of the Lewin Group, said about $1.5 trillion to $1.7 trillion would be a credible estimate for a plan that commits the nation to covering all its citizens. That would amount to around 4 percent of projected health care costs over the next 10 years, he added.
The cost of covering the uninsured is "a difficult hurdle to get over," Sheils said in an interview.
"I don't know where the rest of the money is going to come from," he added.
Some of the leading advocates of coverage for all are using cost estimates of around $1.5 trillion.
"Honestly...we can't do it for the $634 billion the president put in the reserve fund," John Rother, public policy director for AARP told an insurance industry meeting in Washington last week.
"In all likelihood, it will be over $1 trillion," he added, citing his own estimate of $1.5 trillion.
Economist Len Nichols, who heads the health policy project at the New America Foundation, said he calculates that guaranteeing coverage will cost $125 billion to $150 billion a year, when fully phased in.
Nichols said the Obama administration is not being "cagy" but "strategic" in refusing to be pinned down on an estimate. Taxpayers will get a better idea when congressional committees try to draft legislation later this year. "Until that gets revealed by the Congress, it would be highly premature for the president to assert that sort of number," Nichols said.
White House budget director Peter Orszag told the House Budget Committee earlier this month that the president's $634 billion fund is "likely to be the majority of the cost." Roughly half of the money would come from spending cuts, and the other half from tax increases.
But whether the $634 billion represents 50 percent, 60 percent, or 70 percent of the cost "will depend on the details of whatever is finally done...as we move through the legislative process," Orszag added.
The overall cost matters because the expansion of health coverage is meant to be a permanent reform. That means future generations will have to bear the cost.
"We are dealing with huge numbers," said David Walker, a former U.S. comptroller general and now head of the Peter G. Peterson Foundation, a group that promotes fiscal responsibility. "We need to have a much better sense of what we are talking about doing, and whether or not it's affordable and sustainable over time."
The costs could force the administration and Congress to make unpopular decisions on where to cut the nation's $2.4 trillion health care tab.
"Nobody disputes the fact that there's going to be some startup costs," said Sen. Ron Wyden, D-Ore. "But to have credibility in terms of going to the public, you've got to show you are making some savings in the existing system."
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