The day before Sunday’s health care vote, President Obama gave an unscripted talk to House Democrats. Near the end, he spoke about why his party should pass reform: “Every once in a while a moment comes where you have a chance to vindicate all those best hopes that you had about yourself, about this country, where you have a chance to make good on those promises that you made ... And this is the time to make true on that promise. We are not bound to win, but we are bound to be true. We are not bound to succeed, but we are bound to let whatever light we have shine.”
And on the other side, here’s what Newt Gingrich, the Republican former speaker of the House — a man celebrated by many in his party as an intellectual leader — had to say: If Democrats pass health reform, “They will have destroyed their party much as Lyndon Johnson shattered the Democratic Party for 40 years” by passing civil rights legislation.
Think about what it means to condemn health reform by comparing it to the Civil Rights Act. Who in modern America would say that L.B.J. did the wrong thing by pushing for racial equality? (Actually, we know who: the people at the Tea Party protest who hurled racial epithets at Democratic members of Congress on the eve of the vote.)
And that cynicism has been the hallmark of the whole campaign against reform.
Yes, a few conservative policy intellectuals, after making a show of thinking hard about the issues, claimed to be disturbed by reform’s fiscal implications (but were strangely unmoved by the clean bill of fiscal health from the Congressional Budget Office) or to want stronger action on costs (even though this reform does more to tackle health care costs than any previous legislation). For the most part, however, opponents of reform didn’t even pretend to engage with the reality either of the existing health care system or of the moderate, centrist plan — very close in outline to the reform Mitt Romney introduced in Massachusetts — that Democrats were proposing.
The $900 billion price tag is repeated with the regularity of a rooster's crow. That's a shame, as the number is, somewhat impressively, misleading in both directions.
On the one hand, that $900 billion -- or, more precisely, $940 billion in the final legislation -- is stretched over 10 years. But people don't think in 10-year increments. They don't pay taxes once a decade. Put more simply, the bill will cost an average of $94 billion a year over the first 10 years.
But that's not quite right either: The bill wouldn't really kick in until 2014. To get a more accurate annual figure, look at a year in which the bill is fully operational. In, say, 2016, the bill's spending will be about $160 billion (you can find these numbers on page 22 of the CBO report). According to the Center for Medicare and Medicaid Services, total health-care spending that year will be about $3.7 trillion. In other words, the bill's spending is equivalent to about 4 percent of what we'll spend in health care in a year, and it will be covering 30 million people.
So that's really what we're talking about here -- a large health-care expansion that's a slight fraction of overall spending. The graph on the right tells the tale (though the $175 billion refers to the Senate bill; the reconciliation fixes increase the 2018 spending to about $200 billion, which is no different for the purposes of the image).
Let's go even further: It's an expansion that most people won't notice in 10 years. According to the Congressional Budget Office, the Senate bill will change the insurance of about 40 million people by 2019, about 30 million of whom would have been otherwise uninsured. The other 10 million will come from the employer or individual markets in search of more affordable options. About 23 million people will still be uninsured, many of them illegal immigrants. About 90 percent of Americans will beexactly where they'd be if this reform had never passed.
A report by the centrist policy group Third Way estimated that the Senate legislation would save more than $800 billion over the next 15 years. That's consistent with the CBO's expectation that the Senate legislation and the reconciliation fixes would save more than a trillion dollars over the next 20 years.
That's a big number. Quite a bit more than my car cost, and I thought my car cost a lot of money. But the savings amounts to no more than a rounding error given the tens of trillions of dollars we're going to spend over that period. It's half of 1 percent of expected GDP.
Importantly, though, it's a rounding error in the right direction. The bill is thick with efforts to move toward cost control, if not efforts to actually impose cost controls. The excise tax, the Medicare Commission, the pilot programs to change how hospitals are paid and most of the other proposals are designed to bear fruit in the future. The excise tax -- which slaps a fee on high-cost plans in order to give a competitive advantage to those that hold costs down more effectively -- initially applies to very few plans but would hit more as premium costs rise. The payment reforms have to pay off as pilot programs before being considered for Medicare-wide -- much less systemwide -- use. I'll talk about all these in greater detail later today.
But the key when thinking about them is to recognize that the name of the game isn't impressive-sounding cuts. As we've already seen, such cuts are actually not that impressive when put into context. Instead, the key is changes to the growth rate in health-care spending -- even small ones.
The problem with health-care spending is not that we spent $2.3 trillion in 2008. It's that that number has been growing by 7 percent annually. It's the rate of increase, and not the level of spending, that we need to change.
Consider again the $2.3 trillion we spent in 2008. Given the current rate of growth, in 2028, we'll spend $8.9 trillion on health care. Imagine, however, that we got really serious about cost control and cut $200 billion next year. If costs were to grow at the same rate, we'd still be spending $8.1 trillion in 20 years. Imagine, then, that we didn't cut a dollar -- but got cost growth down to 5 percent (which is still faster than wage or GDP growth). In that case, that $2.3 trillion would only be $6.1 trillion in 2028 -- and we'd have saved money every year leading up to that. That's actually manageable.
As most of you know, the bulk of the bill kicks into effect in 2014. But it's become a common GOP talking point to say that there are 10 years of taxes for six years of spending. The graph above compares what the bill spends with what it raises for each year between 2010 and 2019. What you'll see is that there are two years -- 2013 and 2014 -- when the bill is raising a lot more than it spends. The GOP has painted this as some sort of rank deception. Apparently, saving up before you purchase something is no longer fiscally responsible.
But though the bill won't be spending much in its early years, it won't be entirely absent. For a full list of benefits scheduled to activate in the first year, download this document (pdf). For a full timeline of the bill's implementation, grab this one (also pdf).
I'm not going to list every quick-acting provision here, because it would be redundant. The most genuinely useful of them will be the ability to keep kids on their parents' insurance until they're 26 (that begins six months after the bill passes), the $250 rebate for Medicare enrollees who fall into the prescription drug benefit's "doughnut hole" (the bill eventually closes the hole altogether), and an end to rescission of coverage or annual limits. At the beginning of 2011, employers in the individual and small-group markets have to spend 80 percent of each premium dollar on actual medical care, or they have to rebate the difference. Oh, and the tanning-salon tax triggers in July. Sorry, Mr. Boehner.
A reader writes in:
I do not understand how this bill will affect my family and me. I am a self-employed single mother. I cannot afford health care for myself and my children. I made $38,000 last year and I expect to make less than $35,000 this year. What does this health care reform mean for me? Will I be able to get coverage for my children and myself in this first year?
Not in the first year, necessarily. But when the bill goes into effect in 2014, your situation will change dramatically. Using the Kaiser Family Foundation's premium calculator and a slightly stylized version of your situation (the calculator is not terribly flexible), here's what I can say:
First, you'll be buying insurance on the exchanges. That means no discrimination based on preexisting conditions, insurers who are being watched and regulated, lots of choices, and the buying power that comes from being part of a large risk pool rather than being on your own.
More specifically, your income would make you eligible for substantial subsidies. About $11,571 worth, to be precise (this is keyed to a family of four, I should say). The cap on your premium payments as a percentage of your income would be 4.4 percent. You'd be paying about $1,540 a year.