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The Great CBO Debate: Does Reform Bill Cut or Create Costs?

Janice Simmons, for HealthLeaders Media, December 1, 2009

The Congressional Budget Office (CBO) on Monday released its latest analysis of the Senate healthcare reform bill, the Patient Protection and Affordable Care Act, and depending on what side of the aisle you listen to, it will either reduce—or increase—health insurance premiums in several years.

The CBO was responding to a request from Sen. Evan Bayh (D-IN) about how health reform proposals would impact premiums paid for health insurance in various markets.

At the White House and on the floor of the Senate on Monday, the CBO analyses was cited for showing that while the bill would increase premiums in 2016, for instance, among people who buy their own insurance, most people in that market would see an overall decline—compared to the costs anticipated under current regulations. This would be the result of government subsidies—which would cover almost two thirds of their premiums—would mean lower costs.

The legislation would have much smaller effects on premiums for employment based coverage, CBO Director Douglas Elmendorf said in his blog. Among the small group market, which is defined in this analysis as consisting of employers with 50 or fewer workers, CBO estimated that the change in the average premium per person resulting from the legislation could range from an increase of 1% to a reduction of 2% in 2016.

Among the larger group market, which is defined as consisting of employers with more than 50 workers, "the legislation would yield an average premium per person that is zero to 3% in 2016—relative to current law," he said.

In her blog, White House Health Care Reform Director Nancy-Ann DeParle wrote on Monday: "Contrary to what many thought when this process began, the health reform bills represent the biggest deficit reduction legislation since the 1997 Balanced Budget Act."

However, Republicans saw a different message from the CBO. CBO has indicated that the bill "will actively increase premiums for Americans and their families," Senate Minority Leader Mitch McConnell (R-KY) said on the floor of the Senate Monday shortly after debate on the reform bill began. "So a bill that is being sold as reducing costs is actually driving them up."

Industry groups also saw a different message as well. "This is the latest report to confirm that the current healthcare reform proposal fails to bend the healthcare cost curve and will result in double digit premium increases for millions of Americans," said Robert Zirkelbach, America's Health Insurance Plan press representative, in a statement.

AHIP added that subsidies will not lower premiums. "Subsidies are essential to helping low and moderate income families afford healthcare coverage ... but in the same way that Pell Grants do not lower the cost of college tuition, subsidies do not reduce underlying medical costs."


Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at jsimmons@healthleadersmedia.com.

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