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The CBO Tells People to Calm Down About the Public Plan

Jon Cohn reports that preliminary Congressional Budget Office estimates suggest that a "strong" public insurance option would save $150 billion over 10 years. His sources think the CBO will find the same thing when they score the House health-care reform bill. If so, that would be good news for supporters of the public-insurance option.

It's important to remember, though, that this really is preliminary. As I understand it, this is an expected score of the public option on its own. The final score will go up or down depending on the interactions between the public option and other elements of the final bill. If the Health Insurance Exchange is open to only the uninsured and small businesses, for instance, then fewer people will have access to the public option, and so there will be less savings. Conversely, if the exchange is large, and dominated by the public option, then CBO might decide to put all dollars spent in the exchange on the federal budget. That could increase the "cost" of health-care reform by trillions of dollars, making it look like the public insurance option is expensive, even as it's actually saving $150 billion. Thus does budgetary accounting rule our world.

If the $150 billion estimate is accurate, however, it's interesting proof of another point: the public insurance option is not the End of Days for private health insurers nor eternal salvation for consumers. Saving $150 billion over 10 years is saving $15 billion a year. On Wednesday, the hospitals voluntarily agreed to provide $155 billion in savings from reduced Medicare reimbursements. No one thought that a particularly big deal. It was probably a good thing, but it wasn't proof of final success or ultimate failure for health-care reform.

So too with the public plan. Conservatives saying that a policy that will save $15 billion a year will end American health care -- or, as Rep. Paul Broun would have it, "kill people" -- have jumped off the deep end. Liberals who have invested all their hopes in the public plan might also be a bit disappointed. The CBO score seems to imply the likeliest of all possible outcomes: The addition of a public insurance option is a good, but modest, change to the health-care system.

By Ezra Klein  |  July 10, 2009; 4:57 PM ET
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I think your brain could use some more calories.

Paul Krugman

Posted by: fallsmeadjc | July 10, 2009 5:12 PM | Report abuse

It saves the government $150 billion but it means an individuals premiums would be around 15% cheaper. That is reform you can feel.

Posted by: JonWa | July 10, 2009 5:17 PM | Report abuse

What will it cost ME and what will I get? And is someone balanced on the knife-edge of COBRA really insured?

I liked this post at TNR:

"My first reaction was to react as Jerry Seinfeld would: The cost estimate is not $1.5 trillion...not that there's anything wrong with that! After all, the House proposal looks to be the one that would extend better help to more people while providing a lot more value to health care consumers. If doing health care right costs $1.5 trillion, then that's money worth spending. As Paul Krugman indicated, it's still less than the Bush tax cuts-which were $1.8 trillion, without any of the same health and economic benefit."


"Every time we mention the impact of a health reform proposal on the federal budget with a CBO score, we should also give an estimate of how the proposal impacts a family budget. Call it the Consumer Budget Impact--the CBI. It would indicate how a family's premiums would go up or down--and how much their exposure to significant medical debt would decline."

I'd REALLY like it if there could be a public discussion of the impact a so-called strong-public-plan could have on people and our budgets and health care:

Could I go to MD Anderson? I can't now and my policy costs $872/mo for my husband and me. A plan that would let our do that (and maybe, just maybe with a deductible of our current $3,000/each) could save our life.

But, no one wants to talk about what WE'LL get or how much it will cost US.

Posted by: katiebird36 | July 10, 2009 5:25 PM | Report abuse

Right, the $150 billion is only how much money it saves the government. There will be savings to consumers as well.

Posted by: SteveCA1 | July 10, 2009 5:39 PM | Report abuse

That is the important difference with the hospital announcement. That would probably end up costing the consumer more. The public option should save consumers hundreds of billions.

Posted by: JonWa | July 10, 2009 5:48 PM | Report abuse

This is kind of silly. First of all, the public option will become more effective later at restraining costs.

Secondly, the public option is the only thing we have so far that actually seems to restrain costs. Oh, sure, everyone is going to look at effectiveness and link their computer records, but without some reason to restrain costs, the stuff they do will not become less expensive.

Third, in terms of access the public option is huge and, again, the only game in town. In Washington state the legislature is cutting Medicaid and getting ready to throw people off the plan. If you don't write in coverage for the poorest and indigent people you got nothing- and it doesn't take a crystal ball to see where the private companies would leave us if they could.

How "good", and how "modest", the change will be is largely dependent on the emerging nature of the public option.

Posted by: serialcatowner | July 12, 2009 5:09 PM | Report abuse

It's interesting how the CBO people are geniuses when they say what Ezra wants to hear, and fools when they don't.

Posted by: tomtildrum | July 13, 2009 11:42 AM | Report abuse

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