NCPA - National Center for Policy Analysis


July 16, 2009

Health reform bills being considered in the House and Senate include three "big-ticket items" that comprise the bulk of the bills' $1 trillion price tag: subsidies to help low- and middle-income U.S. residents purchase coverage through health insurance exchanges; a Medicaid expansion; and incentives to encourage small businesses to offer health care to workers, USA Today reports.

The biggest single cost in the health reform bills are subsidies, which would be provided on a sliding scale based on income:

  • The Congressional Budget Office scored the subsidies as costing more than $700 billion -- about two-thirds of the total estimated cost of reform; however, since CBO released its cost estimate, lawmakers have reduced the number of people who would be eligible for aid and the size of the subsidies to lower the bills' total cost.
  • Lawmakers also added language to their bills that would limit who could use the health insurance exchanges; for example, people who have the ability to purchase affordable coverage through their employers would not be able to use the exchange.
  • Without those provisions and some others, CBO estimated that the subsidies would cost nearly $1.3 trillion over a decade.

The second-largest cost item is the Medicaid expansion, possibly to include U.S. residents with incomes of up to 133 percent of the federal poverty level:

  • According to CBO, such an expansion would cost $500 billion over 10 years.
  • Governors have raised concerns that expanding the program would place additional financial burdens on states, which are already struggling amid the economic recession.
  • According to USA Today, costs to states likely will increase even if the federal government covers the cost of residents who previously were ineligible for the program because people who were eligible but not enrolled might seek benefits to comply with new individual health coverage mandates.

Another large-cost item is the subsidies or tax credits to encourage small businesses to purchase coverage for workers through the new health insurance exchanges:

  • CBO scored the incentives at more than $50 billion over a decade.
  • Under the bills, small businesses would be exempt from so-called play-or-pay employer mandates that would require companies to offer workers coverage or pay a fine.
  • The bills would target incentives toward businesses with low-wage workers.

Source: Susan Page, "How Much Health Care for $1 Trillion?" USA Today, July 15, 2009.

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