Sticker Shock for Health Care Bills Likely Underestimated

Published December 28, 2009


The potential costs of the health care bills under consideration on Capitol Hill continue to rise as mandates, regulations, and subsidies boost the total cost to taxpayers.

Initial estimates by the Congressional Budget Office of the health care bill added up to $1.1 trillion over 10 years, but the version ultimately passed by the House of Representatives is now projected to total more than $1.7 trillion in costs.

Gregory Schneider, a policy analyst at the Flint Hills Center for Public Policy, a Kansas-based think tank, believes the total price tag could run even higher.

“The sticker price could be as much as $3.3 trillion,” said Schneider. “The accounting gimmicks in the bill are such that the great bulk of the costs come later.”

Mass. Disaster Instructive

Schneider points to Massachusetts as an example of unanticipated costs and inaccurate estimates. When Massachusetts enacted its broad health care reform package in 2006, the cost was projected at around $1.6 billion per year. The Commonwealth Care subsidies, the largest part of the plan, were projected to cost about $725 million per year.

By 2008, projections rose for Commonwealth Care to about $869 million for the following fiscal year, a 20 percent increase. Projections increased to $880 million for FY2010.

“Now, officials are saying it could be even $100 million higher than these estimates,” said Schneider. “Massachusetts has exceeded its cost estimates, and now, while having more people insured, has longer waits, rationing, and higher health care costs, which has burdened the state budget.”

Gaming the Numbers

John LaPlante, editor of StateHouseCall, recommends voters keep several facts in mind while considering the totals for the federal legislation.

“First, Congress has gamed the numbers by starting new subsidies several years after they start new taxes,” said LaPlante. “Doing that suppresses the amount of government spending within the 10 year window used for estimates, and boosts the government revenue.”

LaPlante says this makes spending look smaller than it will actually be.

“Second, limiting our estimates to a window of 10 or 20 years—or even longer—is by nature arbitrary,” said LaPlante. “Once in place, a government program is likely to have costs that go on for decades, if not longer.”

LaPlante notes the government’s record of estimating costs for new programs is not promising. Medicaid and Medicare have turned out to be significantly more expensive than estimates made at the time of their creation.

“And third, estimates of government programs are of limited value since they don’t include the value of extra spending or loss of value imposed on individuals and businesses,” said LaPlante. “State and local officials like to complain about the federal government imposing ‘unfunded mandates,’ and they’ve got a point. But few people talk about unfunded mandates imposed on the private sector, which will be the real source of unanticipated cost increases.”

Sarah McIntosh ([email protected]) teaches constitutional law and American politics at Wichita State University in Kansas.