Soaring cost estimate prompts health law doubts

RICARDO ALONSO-ZALDIVAR

Asso­ci­ated Press

WASHINGTON — Cost esti­mates for a key por­tion of Pres­i­dent Barack Obama’s health care over­haul law have bal­looned by $111 bil­lion from last year’s bud­get, and a senior Repub­li­can law­maker on Fri­day demanded an explanation.

House Ways and Means Com­mit­tee Chair­man Dave Camp, R-Mich., wants to know by Mon­day why the esti­mated cost of help­ing mil­lions of middle-class Amer­i­cans buy health insur­ance has jumped by about 30 per­cent for an eight-year period, from 2014–2021.

Admin­is­tra­tion offi­cials say the expla­na­tion lies in bud­get tech­ni­cal­i­ties and that there are no sig­nif­i­cant changes in the pro­gram that would raise concerns.

Cost esti­mates for new gov­ern­ment pro­grams can be wide off the mark. For exam­ple, the actual cost of Pres­i­dent George W. Bush’s Medicare pre­scrip­tion drug ben­e­fit came in lower than esti­mated, so it wasn’t as big a drag on fed­eral finances as ini­tially forecast.

Cost over­runs for the health care over­haul could cre­ate new polit­i­cal prob­lems for Obama by under­min­ing the law’s promise to reduce fed­eral deficits.

The revised health care num­bers, buried deep in the president’s bud­get, stumped law­mak­ers and some admin­is­tra­tion offi­cials ear­lier in the week. At a con­gres­sional hear­ing Tues­day, Health and Human Ser­vices Sec­re­tary Kath­leen Sebe­lius, who is in charge of car­ry­ing out the health care law, indi­cated she was unaware of the changes.

At issue are sub­si­dies that will be pro­vided under the health care law to help mid­dle class peo­ple buy pri­vate cov­er­age in new state insur­ance mar­kets that open in 2014.

Last year’s bud­get esti­mated the cost of the aid to be $367 bil­lion from 2014–2021. This year’s bud­get puts it at $478 bil­lion over the same period.

“This stag­ger­ing increase … can­not be explained by leg­isla­tive changes or new eco­nomic assump­tions, and there­fore must reflect sub­stan­tial changes in under­ly­ing assump­tions regard­ing … costs,” Camp wrote Fri­day in a let­ter to Trea­sury Sec­re­tary Tim Geithner.

Repub­li­cans say they’re con­cerned about two pos­si­bil­i­ties: that the esti­mated cost of the insur­ance has gone up, or that the admin­is­tra­tion has qui­etly deter­mined that more peo­ple will be los­ing employer cov­er­age as a result of Obama’s over­haul. That means they’d have to pur­chase cov­er­age in the new government-subsidized mar­kets, called exchanges.

Either of those expla­na­tions could have major con­se­quences for tax­pay­ers and the nation’s health care system.

But admin­is­tra­tion offi­cials say the big increase is no cause for alarm and that the admin­is­tra­tion is not fore­cast­ing an ero­sion of employer cov­er­age or higher insur­ance costs.

About two-thirds of the increase is due to effects of newly signed leg­is­la­tion that raises costs for one part of the health care law but still saves the gov­ern­ment money over­all. The rest is due to tech­ni­cal changes in Trea­sury assump­tions unre­lated to the health care law, cov­er­ing such mat­ters as income dis­tri­b­u­tion in America.

“The esti­mates do not assume changes in what exchanges look like, the cost of insur­ance, or the num­ber of Amer­i­cans who will get their insur­ance in this new mar­ket­place,” Trea­sury spokes­woman Sab­rina Sid­diqui said in a state­ment Friday.

That expla­na­tion has drawn skep­ti­cism from Ways and Means Com­mit­tee Republicans.

They say a big rea­son for their doubts is that the Con­gres­sional Bud­get Office — the fis­cal ref­eree for law­mak­ers — has dif­fer­ent num­bers from the Obama admin­is­tra­tion. The bud­get office is not fore­cast­ing a major impact on the health insur­ance exchanges from the same newly signed leg­is­la­tion that the admin­is­tra­tion says accounts for most of the $111 bil­lion increase.

That leg­is­la­tion fixed a glitch in the health care law that would have allowed some middle-class peo­ple to get vir­tu­ally free insur­ance from Med­ic­aid. As a result, pro­jected Med­ic­aid spend­ing under the health care law will drop sig­nif­i­cantly. But spend­ing for sub­si­dies in the exchanges will go up.

Both the admin­is­tra­tion and the bud­get office agree on a bot­tom line con­clu­sion that the fix ulti­mately saved money for the gov­ern­ment, because the Med­ic­aid sav­ings are big­ger than the new exchange costs.

But their under­ly­ing num­bers dif­fer, and Camp says he wants a full accounting.

Posted by AP News on Mar 2 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.